10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                        to

Commission file number 001-10865

AMAG Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware			04-2742593
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)
1100 Winter Street,	Waltham,	Massachusetts	02451
(Address of Principal Executive Offices)			(Zip Code)

(617) 498-3300

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	AMAG	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

As of October 28, 2019, there were 33,915,766 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.

AMAG PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2019

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION (Unaudited)	3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	4
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018	5
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2019 and 2018	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months ended September 30, 2019 and 2018	7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2019 and 2018	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	47
PART II.	OTHER INFORMATION	48
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 6.	Exhibits	51
Signatures		52

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements:

3

AMAG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(Unaudited)

	September 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	119,800		$	253,256
Marketable securities	71,744			140,915
Accounts receivable, net	77,588			75,347
Inventories	28,644			26,691
Prepaid and other current assets	43,063			18,961
Note receivable	—			10,000
Total current assets	340,839			525,170
Property and equipment, net	7,912			7,521
Goodwill	422,513			422,513
Intangible assets, net	187,577			217,033
Operating lease right-of-use asset	6,642			—
Deferred tax assets	630			1,260
Restricted cash	495			495
Other long-term assets	—			1,467
Total assets	$	966,608		$	1,175,459
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	26,554		$	14,487
Accrued expenses	172,285			129,537
Current portion of convertible notes, net	—			21,276
Current portion of operating lease liability	3,994			—
Current portion of deferred revenue	1,128			—
Current portion of acquisition-related contingent consideration	113			144
Total current liabilities	204,074			165,444
Long-term liabilities:
Convertible notes, net	273,124			261,933
Long-term operating lease liability	3,344			—
Long-term deferred revenue	5,171			—
Long-term acquisition-related contingent consideration	180			215
Other long-term liabilities	87			1,212
Total liabilities	485,980			428,804
Commitments and contingencies (Note P)
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 2,000,000 shares authorized; none issued	—			—
Common stock, par value $0.01 per share, 117,500,000 shares authorized; 33,915,509 and 34,606,760 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	339			346
Additional paid-in capital	1,292,458			1,292,736
Accumulated other comprehensive loss	(3,199		)	(3,985		)
Accumulated deficit	(808,970		)	(542,442		)
Total stockholders’ equity	480,628			746,655
Total liabilities and stockholders’ equity	$	966,608		$	1,175,459

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

AMAG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Product sales, net	$	84,107		$	122,238		$	237,812		$	385,806
Other revenues	24			—			231			75
Total revenues	84,131			122,238			238,043			385,881
Costs and expenses:
Cost of product sales	21,105			46,489			63,871			187,176
Research and development expenses	15,330			10,133			48,377			32,635
Acquired in-process research and development	—			12,500			74,856			32,500
Selling, general and administrative expenses	65,720			72,451			217,727			161,780
Impairment of intangible assets	—			—			77,358			—
Restructuring expenses	—			—			7,420			—
Total costs and expenses	102,155			141,573			489,609			414,091
Operating loss	(18,024		)	(19,335		)	(251,566		)	(28,210		)
Other income (expense):
Interest expense	(6,419		)	(13,366		)	(19,199		)	(45,400		)
Loss on debt extinguishment	—			(35,922		)	—			(35,922		)
Interest and dividend income	840			1,612			3,650			3,207
Gains on marketable securities, net	263			—			263			—
Other income (expense)	(45		)	(19		)	298			(63		)
Total other expense, net	(5,361		)	(47,695		)	(14,988		)	(78,178		)
Loss from continuing operations before income taxes	(23,385		)	(67,030		)	(266,554		)	(106,388		)
Income tax expense (benefit)	232			(2,352		)	(26		)	42,204
Net loss from continuing operations	$	(23,617	)	$	(64,678	)	$	(266,528	)	$	(148,592	)
Discontinued operations:
Income from discontinued operations	$	—		$	5,838		$	—		$	18,873
Gain on sale of CBR business	—			89,581			—			89,581
Income tax (benefit) expense	—			(98		)	—			3,346
Net income from discontinued operations	$	—		$	95,517		—			$	105,108
Net (loss) income	$	(23,617	)	$	30,839		$	(266,528	)	$	(43,484	)
Basic and diluted net (loss) income per share:
Loss from continuing operations	$	(0.70	)	$	(1.88	)	$	(7.83	)	$	(4.33	)
Income from discontinued operations	—			2.77			—			3.06
Basic and diluted net (loss) income per share	$	(0.70	)	$	0.89		$	(7.83	)	$	(1.27	)
Weighted average shares outstanding used to compute net (loss) income per share (basic and diluted)	33,906			34,492			34,058			34,339

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

AMAG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(IN THOUSANDS)

(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
Net (loss) income	$	(23,617	)	$	30,839	$	(266,528	)	$	(43,484	)
Other comprehensive loss:
Holding (losses) gains associated with marketable securities arising during period, net of tax	(167		)	134		786			(253		)
Total comprehensive (loss) income	$	(23,784	)	$	30,973	$	(265,742	)	$	(43,737	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

AMAG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(IN THOUSANDS, EXCEPT SHARES)

(Unaudited)

	Common Stock
	Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders' Equity
Balance at June 30, 2019	33,899,954	$	339	$	1,287,553		$	(3,032	)	$	(785,353	)	$	499,507
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings	15,555	—		(69		)	—			—			(69		)
Non-cash equity based compensation	—	—		4,974			—			—			4,974
Unrealized losses on securities, net of tax	—	—		—			(167		)				(167		)
Net loss	—	—		—			—			(23,617		)	(23,617		)
Balance at September 30, 2019	33,915,509	$	339	$	1,292,458		$	(3,199	)	$	(808,970	)	$	480,628

	Common Stock
	Shares		Amount			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders' Equity
Balance at December 31, 2018	34,606,760		$	346		$	1,292,736		$	(3,985	)	$	(542,442	)	$	746,655
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings	278,474		3			(1,790		)	—			—			(1,787		)
Issuance of common stock under employee stock purchase plan	105,075		1			850			—			—			851
Repurchase of common stock pursuant to the share repurchase program	(1,074,800	)	(11		)	(13,719		)	—			—			(13,730		)
Non-cash equity based compensation	—		—			14,381			—			—			14,381
Unrealized gains on securities, net of tax	—		—			—			786			—			786
Net loss	—		—			—			—			(266,528		)	(266,528		)
Balance at September 30, 2019	33,915,509		$	339		$	1,292,458		$	(3,199	)	$	(808,970	)	$	480,628

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

AMAG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(IN THOUSANDS, EXCEPT SHARES)

(Unaudited)

	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders' Equity
Balance at June 30, 2018	34,390,068	$	344	$	1,281,858	$	(4,295	)	$	(551,004	)	$	726,903
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings	132,889	1		892		—			—			893
Non-cash equity based compensation	—	—		3,477		—			—			3,477
Unrealized gains on securities, net of tax	—	—		—		134			—			134
Net loss	—	—		—		—			30,839			30,839
Balance at September 30, 2018	34,522,957	$	345	$	1,286,227	$	(4,161	)	$	(520,165	)	$	762,246

	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders' Equity
Balance at December 31, 2017	34,083,112	$	341	$	1,271,628	$	(3,908	)	$	(477,817	)	$	790,244
ASC 606 adoption adjustment, net of tax	—	—		—		—			1,136			1,136
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings	439,845	4		—		—			—			4
Non-cash equity based compensation	—	—		14,599		—			—			14,599
Unrealized losses on securities, net of tax	—	—		—		(253		)	—			(253		)
Net loss	—	—		—		—			(43,484		)	(43,484		)
Balance at September 30, 2018	34,522,957	$	345	$	1,286,227	$	(4,161	)	$	(520,165	)	$	762,246

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

AMAG PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(Unaudited)

	Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(266,528	)	$	(43,484	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	13,871			158,002
Impairment of intangible assets	77,358			—
Provision for bad debt expense	(12		)	754
Amortization of premium/discount on purchased securities	(64		)	96
Write-down of inventory	4,872			—
Gain on disposal of fixed assets	—			(99		)
Non-cash equity-based compensation expense	14,381			14,599
Non-cash IPR&D expense	18,029			—
Loss on debt extinguishment	—			35,922
Amortization of debt discount and debt issuance costs	11,332			11,824
Gains on marketable securities, net	(263		)	(1		)
Change in fair value of contingent consideration	(16		)	(49,175		)
Deferred income taxes	408			43,747
Gain on sale of the CBR business	—			(89,581		)
Transaction costs	—			(14,111		)
Changes in operating assets and liabilities:
Accounts receivable, net	(2,229		)	7,175
Inventories	(6,824		)	3,587
Prepaid and other current assets	(24,075		)	1,101
Accounts payable and accrued expenses	53,092			(4,280		)
Deferred revenues	(101		)	8,658
Other assets and liabilities	1,038			159
Net cash (used in) provided by operating activities	(105,731		)	84,893
Cash flows from investing activities:
Proceeds from sales or maturities of marketable securities	85,321			60,146
Purchase of marketable securities	(14,815		)	(64,400		)
Milestone payment for Vyleesi developed technology	(60,000		)	—
Proceeds from the sale of the CBR business	—			519,303
Capital expenditures	(2,098		)	(1,913		)
Net cash provided by investing activities	8,408			513,136
Cash flows from financing activities:
Long-term debt principal payments	—			(475,000		)
Payments to settle convertible notes	(21,417		)	—
Payment of premium on debt extinguishment	—			(28,054		)
Payments of contingent consideration	(50		)	(87		)
Payments for repurchases of common stock	(13,730		)	—
Proceeds from the issuance of common stock under the ESPP	851			—
Proceeds from the exercise of common stock options	30			2,635
Payments of employee tax withholding related to equity-based compensation	(1,817		)	(2,632		)
Net cash used in financing activities	(36,133		)	(503,138		)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(133,456		)	94,891
Cash, cash equivalents, and restricted cash at beginning of the period	253,751			192,770
Cash, cash equivalents, and restricted cash at end of the period	$	120,295		$	287,661
Supplemental data for cash flow information:
Cash paid for taxes	$	456		$	5,041
Cash paid for interest	$	5,467		$	43,546
Non-cash investing and financing activities:
Settlement of note receivable in connection with Perosphere acquisition	$	10,000		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

9

AMAG PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

A.     DESCRIPTION OF BUSINESS

AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a pharmaceutical company focused on bringing innovative products to patients with unmet medical needs by leveraging our development and commercial expertise to invest in and grow our pharmaceutical products across a range of therapeutic areas. Our currently marketed products support the health of patients in the areas of maternal and women’s health, anemia management and cancer supportive care, including Feraheme^® (ferumoxytol injection) for intravenous use, Makena^® (hydroxyprogesterone caproate injection) auto-injector, Intrarosa^® (prasterone) vaginal inserts and MuGard^® Mucoadhesive Oral Wound Rinse. On June 21, 2019, Vyleesi™ (bremelanotide injection) was approved by the U.S. Food and Drug Administration (the “FDA”) for the treatment of acquired, generalized hypoactive sexual desire disorder (“HSDD”) in premenopausal women and became commercially available in September 2019. In addition to our approved products, our portfolio includes two product candidates, AMAG-423 (digoxin immune fab (ovine)), which is being studied for the treatment of severe preeclampsia, and ciraparantag, which is being studied as an anticoagulant reversal agent.

In January 2019, we acquired Perosphere Pharmaceuticals Inc. (“Perosphere”) through the merger of our wholly-owned subsidiary, Magellan Merger Sub, Inc., a Delaware corporation, with and into Perosphere, with Perosphere continuing as the surviving entity and our wholly-owned subsidiary (the “Merger”). As a result of the acquisition of Perosphere, we acquired the global rights to ciraparantag, an anticoagulant reversal agent, which is being investigated for patients treated with novel oral anticoagulants or low molecular weight heparin when reversal of the anticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. See Note Q, “Acquisitions, Collaboration, License and Other Strategic Agreements” for further details on the Perosphere acquisition.

Throughout this Quarterly Report on Form 10-Q, AMAG Pharmaceuticals, Inc. and our consolidated subsidiaries are collectively referred to as “the Company,” “AMAG,” “we,” “us,” or “our.”

B.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments necessary for a fair statement of our financial position and results of operations for the interim periods presented. Such adjustments consisted only of normal recurring items. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).

In accordance with GAAP for interim financial reports and the instructions for Form 10-Q and the rules of the Securities and Exchange Commission, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. Our accounting policies are described in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018 (our “Annual Report”). Interim results are not necessarily indicative of the results of operations for the full year. These interim financial statements should be read in conjunction with our Annual Report.

In August 2018, we completed the sale of our wholly-owned subsidiary, CBR Acquisition Holdings Corp, and the Cord Blood Registry^® (“CBR”) business to GI Partners (“GI”), a private equity investment firm, pursuant to the June 14, 2018 Stock Purchase Agreement between us and affiliates of GI. As of June 30, 2018, our CBR business met the criteria for classification as a discontinued operation. All historical operating results for CBR are therefore reflected within discontinued operations in the consolidated statements of operations for the three and nine months ended September 30, 2018. For additional information, see Note C, “Discontinued Operations.”

Principles of Consolidation

The accompanying condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

10

Use of Estimates and Assumptions

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. The most significant estimates and assumptions are used to determine amounts and values of, but are not limited to: revenue recognition related to product and collaboration revenue; product sales allowances and accruals; allowance for doubtful accounts; marketable securities; inventory; acquisition date fair value and subsequent fair value estimates used to assess impairment of long-lived assets, including goodwill, in-process research and development (“IPR&D”) and other intangible assets; contingent consideration; debt obligations; certain accrued liabilities, including clinical trial accruals; income taxes, inclusive of valuation allowances; and equity-based compensation expense. Actual results could differ materially from those estimates.

Restricted Cash

We classified $0.5 million of our cash as restricted cash, a non-current asset on the balance sheet, as of September 30, 2019 and December 31, 2018. This amount represented the security deposit delivered to the landlord of our Waltham, Massachusetts headquarters in the form of an irrevocable letter of credit.

Concentrations and Significant Customer Information

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities, and accounts receivable. We currently hold our excess cash primarily in institutional money market funds, corporate debt securities, U.S. treasury and government agency securities and certificates of deposit. As of September 30, 2019, we did not have a material concentration in any single investment.

Our operations are located entirely within the U.S. We focus primarily on developing, manufacturing, and commercializing our products and product candidates. We perform ongoing credit evaluations of our customers and generally do not require collateral. The following table sets forth customers who represented 10% or more of our total revenues for the three and nine months ended September 30, 2019 and 2018:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
McKesson Corporation	38	%	25	%	37	%	26	%
AmerisourceBergen Drug Corporation	28	%	24	%	28	%	26	%
Cardinal Health	11	%	<10%		12	%	<10%

Our net accounts receivable primarily represent amounts due for products sold directly to wholesalers, distributors, specialty pharmacies, and our former authorized generic partner. Accounts receivable for our products are recorded net of reserves for estimated chargeback obligations, prompt payment discounts and any allowance for doubtful accounts. At September 30, 2019 and December 31, 2018, two and three customers, respectively, accounted for 10% or more of our accounts receivable balances, representing approximately 70% and 73% in the aggregate of our total accounts receivable, respectively.

We are currently dependent on a single supplier for Feraheme drug substance (produced in two separate facilities) as well as a single supplier for our Makena auto-injector product. We have been and may continue to be exposed to a significant loss of revenue from the sale of our products in the event that our suppliers and/or manufacturers are not able to fulfill demand for any reason.

Revenue Recognition

Product revenues

Effective January 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

a.Identify the contract(s) with a customer;

b.Identify the performance obligations in the contract;

c.Determine the transaction price;

d.Allocate the transaction price to the performance obligations in the contract; and

11

e.Recognize revenue when (or as) the performance obligations are satisfied.

We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, if the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Collaboration Revenues

When we enter into collaboration agreements, we assess whether the agreements fall within the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”) based on whether the arrangements involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. To the extent that the arrangement falls within the scope of ASC 808, we assess whether the payments between us and our collaboration partner fall within the scope of other accounting literature. If we conclude that payments from the collaboration partner to us represent consideration from a customer, such as license fees and contract research and development activities, we account for those payments within the scope of ASC 606. However, if we conclude that our collaboration partner is not a customer for certain activities and associated payments, such as for certain collaborative research, development, manufacturing and commercial activities, we present such payments as a reduction of research and development expense or general and administrative expense, based on where we present the related underlying expense.

Leases

Effective January 1, 2019, we adopted ASC Topic 842, Leases (“ASC 842”), and chose to apply the provisions of ASC 842 as of the effective date with no restatement of prior periods or cumulative adjustment to retained earnings. Upon adoption, we elected to utilize the package of transition practical expedients, which allowed us to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. We also made accounting policy elections to not separate lease and non-lease components for our real estate lease and to not recognize leases with an initial term of twelve months or less within our condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis on our condensed consolidated statements of income over the lease term. We did not have any material short-term leases accounted for under this policy during the six months ended September 30, 2019.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liability, and long-term operating lease liability on our condensed consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Our incremental borrowing rate is determined based on an evaluation of our creditworthiness and the prevailing market rates for collateralized debt with maturity dates commensurate with the term of each lease. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The lease payments used to determine our ROU assets may include lease incentives, stated rent increases, and escalation clauses linked to rates of inflation when determinable and are recognized in our ROU assets on our condensed consolidated balance sheet. In addition, certain lease agreements contain lease and non-lease components. With the exception of our real estate leases, we separate lease payments for the identified assets from any non-lease payments included in the agreement. For our real estate leases, we account for the lease and non-lease components as a single lease component. Additionally, for vehicle and certain equipment leases, we apply a portfolio approach to effectively account for the related ROU assets and operating lease liabilities.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

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C.    DISCONTINUED OPERATIONS

On August 6, 2018, we completed the sale of our CBR business to GI Partners pursuant to the CBR Purchase Agreement. We determined that the sale of CBR represented a strategic shift that would have a major effect on our business and therefore met the criteria for classification as discontinued operations at June 30, 2018. All historical operating results for CBR were reflected within discontinued operations in the condensed consolidated statement of operations for the three and nine months ended September 30, 2018.

The following is a summary of net income from discontinued operations for the three and nine months ended September 30, 2018:    

	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Service revenues, net	$	12,163		$	71,217
Costs and expenses:
Cost of services	1,576			12,559
Selling, general and administrative expenses	4,749			39,899
Total costs and expenses	6,325			52,458
Operating income	5,838			18,759
Other income	—			114
Income from discontinued operations	5,838			18,873
Gain on sale of CBR business	89,581			89,581
Income tax (benefit) expense	(98		)	3,346
Net income from discontinued operations	$	95,517		$	105,108

The cash flows related to discontinued operations have not been segregated and are included in the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2018. For the nine months ended September 30, 2018, capital expenditures related to the CBR business were $1.6 million. Depreciation and amortization expense related to the CBR business for the same period was $8.4 million. Excluding the gain of $89.6 million recognized on the sale of the CBR business and the related transaction expenses of $14.1 million presented in the Condensed Consolidated Statement of Cash Flows, there were no other significant operating or investing non-cash items related to the CBR business for the nine months ended September 30, 2018.

D.     REVENUE RECOGNITION

Our major sources of revenue during the reporting periods were product revenues from Makena, Feraheme, and Intrarosa.

Product Revenue and Allowances and Accruals

The following table provides information about disaggregated revenue by products for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Product sales, net
Feraheme	$	44,205	$	36,963	$	126,294	$	99,796
Makena	34,272		80,221		96,464		275,377
Intrarosa	5,607		4,925		14,898		10,331
Other	23		129		156		302
Total product sales, net	$	84,107	$	122,238	$	237,812	$	385,806

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Total gross product sales were offset by product sales allowances and accruals for the three and nine months ended September 30, 2019 and 2018 as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Gross product sales	$	254,073	$	238,856	$	704,976	$	776,458
Provision for product sales allowances and accruals:
Contractual adjustments	144,108		93,213		381,633		290,896
Governmental rebates	25,858		23,405		85,531		99,756
Total	169,966		116,618		467,164		390,652
Product sales, net	$	84,107	$	122,238	$	237,812	$	385,806

The following table summarizes the product revenue allowance and accrual activity for the three and nine months ended September 30, 2019 (in thousands):

	Contractual			Governmental
	Adjustments			Rebates			Total
Balance at December 31, 2018	$	57,199		$	29,114		$	86,313
Provisions related to current period sales	233,305			44,539			277,844
Adjustments related to prior period sales	4,200			15,134			19,334
Payments/returns relating to current period sales	(176,392		)	(11,909		)	(188,301		)
Payments/returns relating to prior period sales	(40,538		)	(36,362		)	(76,900		)
Balance at June 30, 2019	$	77,774		$	40,516		$	118,290
Provisions related to current period sales	139,697			27,296			166,993
Adjustments related to prior period sales	4,475			(1,438		)	3,037
Payments/returns relating to current period sales	(117,780		)	(4,899		)	(122,679		)
Payments/returns relating to prior period sales	(20,239		)	(2,611		)	(22,850		)
Balance at September 30, 2019	$	83,927		$	58,864		$	142,791

We receive payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional.

During the three and nine months ended September 30, 2019, we recorded adjustments of $(1.4) million and $13.7 million, respectively, for Medicaid rebates received that related to prior period sales and $4.5 million and $8.7 million, respectively, for contractual adjustments related to prior period sales. We concluded that these adjustments represented changes in estimate during the three and nine months ended September 30, 2019 due to higher Medicaid and payer utilization and subsequent rebate obligations than anticipated based on our historical experience.

Variable Consideration

Under ASC 606, we are required to make estimates of the net sales price, including estimates of variable consideration (such as rebates, chargebacks, discounts, copay assistance and other deductions), and recognize the estimated amount as revenue, when we transfer control of the product to our customers. In addition, we estimated variable consideration related to our share of net distributable profits from our former authorized generic partner, Prasco LLC (“Prasco”). We estimate variable consideration for our product revenues using an “expected value” method. No amounts recognized as part of our product revenues were constrained as of September 30, 2019.

Collaboration Revenue

During the first quarter of 2019, in conjunction with the Perosphere transaction, we assumed responsibility for a clinical trial collaboration agreement with a pharmaceutical company. This agreement provides for milestone payments to us, provided we meet certain clinical obligations in connection with our ciraparantag program. We also acquired $6.4 million of deferred revenue related to this agreement, which represents the fair value of upfront milestone payments received by Perosphere under this agreement prior to acquisition. During the quarter ended September 30, 2019, we were informed by the pharmaceutical

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company of its intention to terminate the clinical trial collaboration agreement. Although we do not believe this company has grounds for termination, we are engaged in discussions with such partner to come to a mutually agreeable resolution.

In accordance with ASC 808, we considered the nature and contractual terms of the arrangement and the nature of our business operations to determine the classification of payments under this agreement and concluded that the pharmaceutical company meets the definition of a customer. As a result, this agreement was accounted for under ASC 606. We determined that the promises to perform various research and development activities related to our ciraparantag program are not distinct because they are all necessary and highly interdependent with one another for the purpose of pursuing regulatory approval of ciraparantag. As such, these promises are combined into a single performance obligation, which is the submission for regulatory approval of ciraparantag in the U.S. and the European Union.

In order to evaluate the appropriate transaction price, we considered that the remaining $34.8 million of potential milestone payments relate to activities which cannot progress until FDA clearance is received for a device needed to conduct the future clinical trials. As a result, these amounts were excluded from the transaction price and fully constrained based on the probability of achievement, which is outside of our control. In addition, as of September 30, 2019, the transaction price is limited to the $6.3 million of deferred revenue acquired. We will reevaluate the transaction price, including all constrained amounts, at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust our estimate of the transaction price.

We will recognize revenue based on the transaction price determined at the end of each reporting period based on an input method in the form of research effort relative to expected research effort at the completion of the performance obligation. This is based on the relative costs of the research and development activities incurred and expected to be incurred in the future to satisfy the performance obligation, which is estimated to be completed over approximately two years. The estimated period of performance to satisfy the performance obligation and project cost is reviewed quarterly and adjusted, as needed, to reflect our current expectations regarding the costs and timing of the deliverable and will be updated in the event the agreement is terminated. These estimates are subject to a number of assumptions and actual results could differ materially from our assumptions in future periods.

As of September 30, 2019, deferred revenue related to the agreement amounted to $6.3 million, of which $1.1 million was included in current liabilities. No milestone payments were received during the nine months ended September 30, 2019. 

E.    MARKETABLE SECURITIES

As of September 30, 2019 and December 31, 2018, our marketable securities were classified as available-for-sale in accordance with accounting standards which provide guidance related to accounting and classification of certain investments in marketable securities. Available-for-sale marketable securities are those securities which we view as available for use in current operations, if needed. We generally classify our available-for-sale marketable securities as short-term investments on our condensed consolidated balance sheets even though the stated maturity date may be one year or more beyond the current balance sheet date. We report realized gains and losses as a separate line within the condensed consolidated statements of operations on a specific identification basis.

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The following is a summary of our marketable securities as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Short-term marketable securities:*
Corporate debt securities	$	41,596	$	130	$	(9	)	$	41,717
Certificates of deposit	3,500		—		—			3,500
U.S. treasury and government agency securities	6,247		—		(3		)	6,244
Commercial paper	—		—		—			—
Total short-term marketable securities	$	51,343	$	130	$	(12	)	$	51,461
Long-term marketable securities:**
Corporate debt securities	$	20,076	$	207	$	—		$	20,283
Total long-term marketable securities	20,076		207		—			20,283
Total marketable securities	$	71,419	$	337	$	(12	)	$	71,744

* Represents marketable securities with a remaining maturity of less than one year.

** Represents marketable securities with a remaining maturity of one to three years classified as short-term on our condensed consolidated balance sheets.

	December 31, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Short-term marketable securities:*
Corporate debt securities	$	51,184	$	—	$	(236	)	$	50,948
U.S. treasury and government agency securities	7,647		—		(34		)	7,613
Commercial paper	3,995		—		—			3,995
Certificates of deposit	12,000		—		—			12,000
Total short-term marketable securities	$	74,826	$	—	$	(270	)	$	74,556
Long-term marketable securities:**
Corporate debt securities	$	62,530	$	52	$	(433	)	$	62,149
U.S. treasury and government agency securities	2,742		—		(32		)	2,710
Certificates of deposit	1,500		—		—			1,500
Total long-term marketable securities	66,772		52		(465		)	66,359
Total marketable securities	$	141,598	$	52	$	(735	)	$	140,915

* Represents marketable securities with a remaining maturity of less than one year.

** Represents marketable securities with a remaining maturity of one to three years classified as short-term on our condensed consolidated balance sheets.

Impairments and Unrealized Gains and Losses on Marketable Securities

We did not recognize any other-than-temporary impairment losses on our condensed consolidated statements of operations related to our marketable securities during the three and nine months ended September 30, 2019 and 2018. We considered various factors, including the length of time that each security was in an unrealized loss position and our ability and intent to hold these securities until the recovery of their amortized cost basis occurs. As of September 30, 2019, we had no material losses in an unrealized loss position for more than one year. Future events may occur, or additional information may become available, which may cause us to identify credit losses where we do not expect to receive cash flows sufficient to recover the entire amortized cost basis of a security and may necessitate the recording of future realized losses on securities in our portfolio. Significant losses in the estimated fair values of our marketable securities could have a material adverse effect on our earnings in future periods.

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F.     FAIR VALUE MEASUREMENTS

The following tables represent the fair value hierarchy as of September 30, 2019 and December 31, 2018, for those assets and liabilities that we measure at fair value on a recurring basis (in thousands):

	Fair Value Measurements at September 30, 2019 Using:
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents	$	25,047	$	25,047	$	—	$	—
Marketable securities:
Corporate debt securities	62,000		—		62,000		—
U.S. treasury and government agency securities	6,244		—		6,244		—
Certificates of deposit	3,500		—		3,500		—
Commercial paper	—		—		—		—
Total marketable securities	$	71,744	$	—	$	71,744	$	—
Total assets	$	96,791	$	25,047	$	71,744	$	—
Liabilities:
Contingent consideration - MuGard	$	293	$	—	$	—	$	293
Total liabilities	$	293	$	—	$	—	$	293

	Fair Value Measurements at December 31, 2018 Using:
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents	$	71,568	$	71,568	$	—	$	—
Corporate debt securities	113,097		—		113,097		—
U.S. treasury and government agency securities	10,323		—		10,323		—
Certificates of deposit	13,500		—		13,500		—
Commercial paper	3,995		—		3,995		—
Total assets	$	212,483	$	71,568	$	140,915	$	—
Liabilities:
Contingent consideration - MuGard	359		—		—		359
Total liabilities	$	359	$	—	$	—	$	359

Cash Equivalents

Our cash equivalents are classified as Level 1 assets under the fair value hierarchy as these assets have been valued using quoted market prices in active markets and do not have any restrictions on redemption. As of September 30, 2019 and December 31, 2018 cash equivalents were primarily comprised of funds in money market accounts.

Marketable Securities

Our marketable securities are classified as Level 2 assets under the fair value hierarchy as the values of these assets are primarily determined from independent pricing services, which normally derive security prices from recently reported trades for identical or similar securities, making adjustments based upon other significant observable market transactions. At the end of each reporting period, we perform quantitative and qualitative analysis of prices received from third parties to determine whether prices are reasonable estimates of fair value. After completing our analysis, we did not adjust or override any fair value

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measurements provided by our pricing services as of September 30, 2019. In addition, there were no transfers or reclassifications of any securities between Level 1 and Level 2 during the nine months ended September 30, 2019.

Contingent Consideration

We recorded contingent consideration related to the November 2014 acquisition of Lumara Health Inc (“Lumara Health”) for our Makena product and related to our June 2013 license agreement for MuGard (the “MuGard License Agreement”) with Abeona Therapeutics, Inc., under which we acquired the U.S. commercial rights for the management of oral mucositis and stomatitis (the “MuGard Rights”).

During the nine months ended September 30, 2018, we reduced the fair value of our Makena-related contingent consideration liability by approximately $49.2 million based primarily on actual Makena net sales to date and our expectations for future performance, which indicated that achievement of future milestones was not probable. This adjustment was based on our estimates, which were reliant on a number of external factors as well as the exercise of judgment.

The fair value measurements of contingent consideration obligations and the related intangible assets arising from business combinations are classified as Level 3 estimates under the fair value hierarchy as these items have been valued using unobservable inputs. These inputs include: (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of the factors on which the contingency is based; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement.

The fair value of the contingent royalty payments payable by us to Abeona under the MuGard License Agreement was determined based on various market factors, including an analysis of estimated sales using a discount rate of approximately 13%. As of September 30, 2019, we estimated that the undiscounted royalty amounts we could pay under the MuGard License Agreement, based on current projections, may range from approximately $0.3 million to $0.6 million over the remainder of the ten year period, which commenced on June 6, 2013, the acquisition date, which is our best estimate of the period over which we expect the majority of the asset’s cash flows to be derived.

We believe the estimated fair value of contingent consideration obligations is based on reasonable assumptions; however, our actual results may vary significantly from the estimated results.

Debt

We estimate the fair value of our debt obligations by using quoted market prices obtained from third-party pricing services, which are classified as Level 2 inputs. As of September 30, 2019, the estimated fair value of our 2022 Convertible Notes (as defined below) was $265.6 million, which differed from its carrying value. See Note R, “Debt” for additional information on our debt obligations.

G.     INVENTORIES

Our major classes of inventories were as follows as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Raw materials	$	8,814	$	9,388
Work in process	5,784		5,932
Finished goods	14,046		11,371
Total inventories	$	28,644	$	26,691

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H.     PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019			December 31, 2018
Computer equipment and software	$	1,672		$	1,637
Furniture and fixtures	1,705			1,737
Leasehold improvements	4,859			2,938
Laboratory and production equipment	6,538			6,000
Construction in progress	125			420
	14,899			12,732
Less: accumulated depreciation	(6,987		)	(5,211		)
Property and equipment, net	$	7,912		$	7,521

I.     GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

We test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Events that could indicate impairment and trigger an interim impairment assessment include, but are not limited to, an adverse change in current economic and market conditions, including a significant prolonged decline in market capitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverse action or assessment by a regulator, such as an adverse FDA decision related to Makena in light of the discussions and votes at the recent Advisory Committee meeting. Our annual impairment test date is October 31. We have determined that we operate in a single operating segment and have a single reporting unit.

During 2019, as a result of a number of business factors, including our market capitalization being below our carrying value, we performed qualitative interim impairment assessments of our goodwill balance as of each of the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019. We determined that it was not more likely than not that the fair value of our reporting unit was less than its carrying value and therefore, did not perform a further quantitative interim impairment test for any period. Our qualitative assessments were based on management’s estimates and assumptions, a number of which are dependent on external factors. To the extent actual results differ materially from these estimates and we experience negative developments in the areas discussed above in subsequent periods, an interim impairment assessment could be triggered, which could result in an impairment of goodwill.

Intangible Assets

Our developed technology intangible assets are related to certain of our commercial products. We assess intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. Events that could result in an impairment, or trigger an interim impairment assessment, include an adverse action or assessment by a regulator (such as an adverse FDA decision related to Makena, as discussed above), an adverse change in current economic and market conditions, or significant adverse changes in the long-range forecasts for a commercial product. When events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable, we calculate the excess of an intangible asset's carrying value over its undiscounted future cash flows. If the carrying value is not recoverable, an impairment loss is recognized based on the amount by which the carrying value exceeds the fair value. The inputs used in the fair value analysis fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value.

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As of September 30, 2019 and December 31, 2018, our intangible assets consisted of the following (in thousands):

	September 30, 2019								December 31, 2018
			Accumulated		Cumulative						Accumulated		Cumulative
	Cost		Amortization		Impairments		Net		Cost		Amortization		Impairments		Net
Finite-lived intangible assets:
Makena base technology	$	797,100	$	400,496	$	396,604	$	—	$	797,100	$	400,495	$	319,246	$	77,359
Makena auto-injector developed technology	79,100		13,716		—		65,384		79,100		6,952		—		72,148
Intrarosa developed technology	77,655		15,193		—		62,462		77,655		10,129		—		67,526
Vyleesi developed technology	60,000		269		—		59,731		—		—		—		—
Total intangible assets	$	1,013,855	$	429,674	$	396,604	$	187,577	$	953,855	$	417,576	$	319,246	$	217,033

During the second quarter of 2019, Vyleesi received FDA approval, which triggered a $60.0 million milestone payment, which was capitalized as developed technology.

Late in the second quarter of 2019, we were notified that an additional manufacturing site for the Makena intramuscular (“IM”) products, which relates to the Makena base technology intangible asset, received FDA approval. However, the approval was received later than expected and the extended period of the stock-out caused our authorized generic partner to lose additional customers and market share, resulting in no shipments of IM to our authorized generic partner during that quarter. As a result of this loss of market share, we deemed it probable as of the end of the second quarter of 2019 that we would terminate the Distribution and Supply Agreement with our authorized generic partner. We do not expect to generate any future revenues from shipments of the IM products. Accordingly, we eliminated the Makena IM products from our long-term revenue forecast during the second quarter of 2019. These business factors were considered indicators of potential impairment for the Makena base technology intangible asset during the second quarter of 2019. We determined that the fair value of the Makena base technology intangible asset was zero at June 30, 2019, and as a result, we recorded an impairment charge for the full remaining value of the asset of $77.4 million, which was recorded within a separate operating expense line item on our condensed consolidated statements of operations. The Distribution and Supply Agreement with our authorized generic partner was terminated in August 2019.

As of September 30, 2019, the weighted average remaining amortization period for our finite-lived intangible assets was approximately 8.6 years. Total amortization expense for the nine months ended September 30, 2019 and 2018 was $12.1 million and $144.7 million, respectively. Amortization expense is recorded in cost of product sales on our condensed consolidated statements of operations. We expect amortization expense related to our finite-lived intangible assets to be as follows (in thousands):

	Estimated
	Amortization
Period	Expense
Remainder of Year Ending December 31, 2019	$	5,557
Year Ending December 31, 2020	22,229
Year Ending December 31, 2021	22,229
Year Ending December 31, 2022	22,229
Year Ending December 31, 2023	22,229
Thereafter	93,104
Total	$	187,577

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J.     CURRENT LIABILITIES

Accrued expenses consisted of the following as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Commercial rebates, fees and returns	$	127,138	$	80,520
Professional, license, and other fees and expenses	18,964		23,242
Salaries, bonuses, and other compensation	17,498		22,482
Research and development expense	4,020		2,226
Interest expense	3,467		1,067
Restructuring expense	1,198		—
Total accrued expenses	$	172,285	$	129,537

K.     INCOME TAXES

The following table summarizes our effective tax rate and income tax expense (benefit) from continuing operations for the three and nine months ended September 30, 2019 and 2018 (in thousands except for percentages):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Effective tax rate	(1		)%	4		%	—		%	(40		)%
Income tax expense (benefit)	$	232		$	(2,352	)	$	(26	)	$	42,204

For the three and nine months ended September 30, 2019, we recognized an income tax expense of $0.2 million and an immaterial income tax benefit, respectively, representing an effective tax rate of (1)% and 0% respectively. The difference between the statutory federal tax rate of 21% and the effective tax rate for the three and nine months ended September 30, 2019, was primarily attributable to the valuation allowance established against our current period losses generated and the non-deductible IPR&D expense related to the Perosphere acquisition. We have established a valuation allowance on our deferred tax assets other than refundable alternative minimum tax (“AMT”) credits to the extent that our existing taxable temporary differences would not be available as a source of income to realize the benefits of those deferred tax assets. The income tax expense for the three months ended September 30, 2019 primarily related to state taxes. The income tax benefit for the nine months ended September 30, 2019 primarily related to the offset of the recognition of the income tax expense recorded in other comprehensive loss associated with the increase in the value of available-for-sale securities that we carried at fair market value during the period, partially offset by state income taxes.

For the three and nine months ended September 30, 2018, we recognized an income tax benefit of $2.4 million and an income tax expense of $42.2 million, respectively, representing an effective tax rate of 4% and (40)%, respectively. The difference between the statutory federal tax rate of 21% and the effective tax rates for the three and nine months ended September 30, 2018 was primarily attributable to the establishment of a valuation allowance on net deferred tax assets other than refundable AMT credits, the impact of non-deductible stock compensation and other non-deductible expenses, partially offset by a benefit from contingent consideration, state income taxes and orphan drug credits.

The primary driver of the increase in tax expense for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018 was state income taxes. The primary driver of the decrease in tax expense for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018 was the valuation allowance established.

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L.     ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in the accumulated balances of other comprehensive loss during the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Beginning balance	$	(3,032	)	$	(4,295	)	$	(3,985	)	$	(3,908	)
Holding (losses) gains associated with marketable securities arising during period, net of tax	(167		)	134			786			(253		)
Ending balance	$	(3,199	)	$	(4,161	)	$	(3,199	)	$	(4,161	)

M.     EARNINGS PER SHARE

The components of basic and diluted earnings per share for the three and nine months ended September 30, 2019 and 2018 were as follows (in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss from continuing operations	$	(23,617	)	$	(64,678	)	$	(266,528	)	$	(148,592	)
Net income from discontinued operations	—			95,517			—			105,108
Net (loss) income	$	(23,617	)	$	30,839		$	(266,528	)	$	(43,484	)
Weighted average common shares outstanding	33,906			34,492			34,058			34,339
Basic and diluted net (loss) income per share:
Loss from continuing operations	$	(0.70	)	$	(1.88	)	$	(7.83	)	$	(4.33	)
Income from discontinued operations	—			2.77			—			3.06
Basic and diluted net (loss) income per share	$	(0.70	)	$	0.89		$	(7.83	)	$	(1.27	)

The following table sets forth the potential common shares issuable upon the exercise of outstanding options, the vesting of restricted stock units (“RSUs”), and the conversion of the Convertible Notes, which were excluded from our computation of diluted net loss per share because their inclusion would have been anti-dilutive (in thousands):

	Nine Months Ended September 30,
	2019	2018
Options to purchase shares of common stock	3,988	3,700
Shares of common stock issuable upon the vesting of RSUs	1,645	1,135
Warrants	—	1,008
2022 Convertible Notes	11,695	11,695
2019 Convertible Notes	—	790
Total	17,328	18,328

In connection with the issuance of the 2019 Convertible Notes in February 2014, we entered into convertible bond hedges. The convertible bond hedges are not included for purposes of calculating the number of diluted shares outstanding, as their effect would be anti-dilutive. The convertible bond hedges were terminated in February 2019 in connection with the maturity of the 2019 Convertible Notes.

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N.     EQUITY‑BASED COMPENSATION

We currently maintain three equity compensation plans; our 2019 Equity Incentive Plan (the “2019 Plan”), which was approved by our stockholders at our 2019 annual meeting and replaced our Fourth Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”), the Lumara Health Inc. Amended and Restated 2013 Incentive Compensation Plan (the “Lumara Health 2013 Plan”) and our 2015 Employee Stock Purchase Plan (“2015 ESPP”). All outstanding stock options granted under each of our equity compensation plans other than our 2015 ESPP have an exercise price equal to the closing price of a share of our common stock on the grant date.

Stock Options

The following table summarizes stock option activity for the nine months ended September 30, 2019:

	2019 Equity	2007 Equity		2013 Lumara		Inducement
	Plan	Plan		Equity Plan		Grants		Total
Outstanding at December 31, 2018	—	2,781,786		124,450		810,343		3,716,579
Granted	344,208	465,009		34,700		80,366		924,283
Exercised	—	(2,025	)	—		—		(2,025	)
Expired or terminated	—	(585,312	)	(26,275	)	(131,250	)	(742,837	)
Outstanding at September 30, 2019	344,208	2,659,458		132,875		759,459		3,896,000

Restricted Stock Units

The following table summarizes RSU activity for the nine months ended September 30, 2019:

	2019 Equity		2007 Equity		2013 Lumara		Inducement
	Plan		Plan		Equity Plan		Grants		Total
Outstanding at December 31, 2018	—		1,041,141		2,101		85,293		1,128,535
Granted	123,228		1,023,847		1,100		29,385		1,177,560
Vested	—		(354,563	)	(1,034	)	(44,909	)	(400,506	)
Expired or terminated	(1,800	)	(250,968	)	—		(7,500	)	(260,268	)
Outstanding at September 30, 2019	121,428		1,459,457		2,167		62,269		1,645,321

In February 2019, we granted RSUs under our 2007 Plan to certain members of our senior management covering a maximum of 365,591 shares of common stock. These performance-based RSUs will vest, if at all, on February 24, 2022, based on our total shareholder return performance measured against the median total shareholder return of a defined group of companies over a three-year period. As of September 30, 2019, the maximum shares of common stock that may be issued under these awards is 347,591. The maximum aggregate total fair value of these RSUs is $4.5 million, which is being recognized as expense over a period of three years from the date of grant, net of any actual forfeitures.

Equity-Based Compensation Expense

Equity-based compensation expense for the three and nine months ended September 30, 2019 and 2018 consisted of the following (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Cost of product sales	$	225	$	281	$	626	$	588
Research and development	691		568		2,051		1,896
Selling, general and administrative	4,058		4,202		11,039		12,149
Total equity-based compensation expense	4,974		5,051		13,716		14,633
Income tax effect	—		—		—		—
After-tax effect of equity-based compensation expense	$	4,974	$	5,051	$	13,716	$	14,633

In addition to the equity-based compensation expense presented in the table above, we incurred $0.7 million of equity-based compensation expense related to the restructuring activities during the first quarter of 2019, which is classified within restructuring expense on our condensed consolidated statement of operations for the nine months ended September 30, 2019.

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O.     STOCKHOLDERS’ EQUITY

As of January 1, 2019, we had $20.5 million available under our previously approved share repurchase program to repurchase up to $60.0 million in shares of our common stock. In March 2019, our Board authorized additional repurchases of shares in an amount up to $20.0 million under this program. During the nine months ended September 30, 2019, we repurchased and retired 1,074,800 shares of common stock for $13.7 million. As of September 30, 2019, $26.8 million remains available for future repurchases under this program. 

P.     COMMITMENTS AND CONTINGENCIES

Commitments

Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business. These include commitments related to our facility, vehicle and equipment leases, purchases of inventory, debt obligations, and other purchase obligations.

Operating Lease Obligations

As of January 1, 2019, we had operating leases for our corporate headquarters and vehicles utilized by sales employees. Accordingly, we recorded operating lease liabilities of $8.5 million and related ROU assets of $7.6 million as of January 1, 2019 in connection with our adoption of ASC 842. During the first quarter of 2019, we acquired a lease for office space in conjunction with the Perosphere transaction, entered into a new lease for office equipment and terminated certain vehicle leases in conjunction with our restructuring activities. There was no material gain or loss recognized on the early termination of the vehicle leases. As of September 30, 2019, we had operating lease liabilities of $7.3 million and related ROU assets of $6.6 million. As of September 30, 2019, our leases have remaining terms of one to four years. The weighted average remaining lease term and discount rate for our operating leases was 2.1 years and 4.63% at September 30, 2019, respectively.

Lease costs for our operating leases were $1.4 million and $3.9 million for the three and nine months ended September 30, 2019, respectively. Operating cash outflows for operating leases were $4.2 million for the nine months ended September 30, 2019 and ROU assets obtained in exchange for lease obligations were $1.0 million during the nine months ended September 30, 2019.

Future minimum payments under our non-cancelable operating leases as of September 30, 2019 are as follows (in thousands):

Period	Future Minimum Lease Payments
Remainder of Year Ending December 31, 2019	$	1,073
Year Ending December 31, 2020	4,081
Year Ending December 31, 2021	1,881
Year Ending December 31, 2022	583
Year Ending December 31, 2023	53
Thereafter	—
Total	$	7,671
Less: Interest	333
Operating lease liability	$	7,338

Under the prior lease guidance, future minimum payments under our non-cancellable leases as of December 31, 2018 were as follows (in thousands):

Period	Future Minimum Lease Payments
Year Ending December 31, 2019	$	5,119
Year Ending December 31, 2020	4,075
Year Ending December 31, 2021	1,034
Year Ending December 31, 2022	—
Year Ending December 31, 2023	—
Total	$	10,228

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Purchase Obligations

Purchase obligations primarily represent minimum purchase commitments for inventory. As of September 30, 2019, our minimum purchase commitments totaled $50.5 million.

Contingent Consideration Related to Business Combinations

In connection with our acquisition of Lumara Health in November 2014, we agreed to pay up to $350.0 million based on the achievement of certain sales milestones, of which $150.0 million has been paid to date. During the second quarter of 2018, we reversed the accrual for a $50.0 million milestone payment based on actual Makena net sales to date and our expectations for future performance, which indicated that achievement of the future milestone was not probable. As we update our analysis in future periods, actual results may vary significantly from the estimated results, which are reliant on a number of external factors as well as the exercise of judgment.

Contingent Regulatory and Commercial Milestone Payments

In January 2019, we acquired Perosphere, a privately-held biopharmaceutical company focused on developing ciraparantag, a small molecule anticoagulant reversal agent. Under and subject to the terms and conditions set forth in the Perosphere Agreement (described below), we are obligated to pay future contingent consideration of up to an aggregate of $365.0 million (the “Milestone Payments”), including (a) up to an aggregate of $140.0 million that becomes payable upon the achievement of specified regulatory milestones for ciraparantag (the “Regulatory Milestone Payments”), including a $40.0 million milestone payment upon approval of ciraparantag by the European Medicines Agency and (b) up to an aggregate of $225.0 million that becomes payable conditioned upon the achievement of specified sales milestones (the “Sales Milestone Payments”). If the final label approved for ciraparantag in the U.S. includes a boxed warning, the Regulatory Milestone Payments shall no longer be payable, and any previously paid Regulatory Milestone Payments shall be credited against 50% of any future Milestone Payments that otherwise becomes payable. The first Sales Milestone Payment of $20.0 million will be payable upon annual net sales of ciraparantag of at least $100.0 million. For more information on the Perosphere acquisition, see Note Q, “Acquisitions, Collaboration, License and Other Strategic Agreements.”

In September 2018, we exercised our option to acquire the global rights to AMAG-423 pursuant to an option agreement entered into in July 2015 with Velo Bio, LLC, a privately-held life-sciences company (“Velo”), the terms of which were amended at the time of exercise. In connection with the exercise of the option and consummation of the acquisition, we are responsible for completing the Phase 2b/3a clinical study that Velo initiated in the second quarter of 2017 and will incur all of the clinical, regulatory and other costs required to pursue FDA approval. We are obligated to pay Velo a $30.0 million milestone payment upon FDA approval of AMAG-423. In addition, we are obligated to pay sales milestone payments of up to $240.0 million in the aggregate, triggered at various annual net sales thresholds between $300.0 million and $900.0 million and low-single digit royalties based on net sales. Further, we have assumed additional obligations under a previous agreement entered into by Velo with a third-party, including a $5.0 million milestone payment upon regulatory approval and $10.0 million following the first commercial sale of AMAG-423, payable in quarterly installments as a percentage of quarterly gross commercial sales until the obligation is met. We are also obligated to pay the third-party low-single digit royalties based on net sales.

In connection with a license agreement we entered into with Endoceutics, Inc. (“Endoceutics”) in February 2017 (the “Endoceutics License Agreement”), we are required to pay Endoceutics certain sales milestone payments, including a first sales milestone payment of $15.0 million, which would be triggered when Intrarosa annual net U.S. sales exceed $150.0 million, and a second milestone payment of $30.0 million, which would be triggered when annual net U.S. sales of Intrarosa exceed $300.0 million. If annual net U.S. sales of Intrarosa exceed $500.0 million, there are additional sales milestone payments totaling up to $850.0 million, which would be triggered at various sales thresholds. We are also obligated to pay tiered royalties equal to a percentage of net U.S. sales of Intrarosa ranging from mid-teens for calendar year net sales up to $150.0 million to mid twenty percent for any calendar year net sales that exceed $1.0 billion for the commercial life of Intrarosa, with deductions (a) after the later of (i) the expiration date of the last to expire of a licensed patent containing a valid patent claim or (ii) ten years after the first commercial sale of Intrarosa for the treatment of vulvar and vaginal atrophy (“VVA”) or female sexual dysfunction (“FSD”) in the U.S. (as applicable), (b) for generic competition and (c) for third party payments, subject to an aggregate cap on such deductions of royalties otherwise payable to Endoceutics. For more information on the Endoceutics License Agreement, see Note Q, “Acquisitions, Collaboration, License and Other Strategic Agreements.”

In connection with a license agreement we entered into with Palatin Technologies, Inc. (“Palatin”) in January 2017 (the “Palatin License Agreement”), we were required to pay Palatin $60.0 million upon FDA approval of Vyleesi, which was paid in July 2019. We are also required to pay up to $300.0 million of aggregate sales milestone payments upon the achievement of

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certain annual net sales milestones over the course of the license. The first sales milestone payment of $25.0 million will be triggered when Vyleesi annual net sales exceed $250.0 million. We are also obligated to pay tiered royalties on annual net sales in North America of the Vyleesi Products, on a product-by-product basis, in the Palatin Territory ranging from the high-single digits to the low double-digits. The royalties will expire on a product-by-product and country-by-country basis upon the latest to occur of (a) the earliest date on which there are no valid claims of Palatin patent rights covering such Vyleesi Product in such country, (b) the expiration of the regulatory exclusivity period for such Vyleesi Product in such country and (c) 10 years following the first commercial sale of such Vyleesi Product in such country. These royalties are subject to reduction in the event that: (x) we must license additional third-party intellectual property in order to develop, manufacture or commercialize a Vyleesi Product or (y) generic competition occurs with respect to a Vyleesi Product in a given country, subject to an aggregate cap on such deductions of royalties otherwise payable to Palatin. After the expiration of the applicable royalties for any Vyleesi Product in a given country, the license for such Vyleesi Product in such country would become a fully paid-up, royalty-free, perpetual and irrevocable license. For more information on the Palatin License Agreement, see Note Q, “Acquisitions, Collaboration, License and Other Strategic Agreements.”

In connection with a development and license agreement (the “Antares License Agreement”) with Antares Pharma, Inc. (“Antares”), we are required to pay royalties to Antares on net sales of the Makena auto-injector commencing on the launch of the Makena auto-injector in a particular country until the Makena auto-injector is no longer sold or offered for sale in such country or the Antares License Agreement is terminated (the “Antares Royalty Term”). The royalty rates range from high single digit to low double digits and are tiered based on levels of net sales of the Makena auto-injector and decrease after the expiration of licensed patents or where there are generic equivalents to the Makena auto-injector being sold in a particular country. Antares is also entitled to sales-based milestone payments upon the achievement of certain annual net sales. For more information on the Antares License Agreement, see Note Q, “Acquisitions, Collaboration, License and Other Strategic Agreements.”

Contingencies

Legal Proceedings

We accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonably estimate the amount of the loss. We review these accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. For certain matters referenced 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 any matters in which the likelihood of material loss is at least reasonably possible, we will provide disclosure of the possible loss or range of loss. If a reasonable estimate cannot be made, however, we will provide disclosure to that effect. We expense legal costs as they are incurred.

On August 29, 2019, Lunar Representative, LLC (“Plaintiff”), on behalf of the former equityholders of Lumara Health Inc. (“Lumara”), filed a complaint against us in the Delaware Court of Chancery, captioned Lunar Representative, LLC v. AMAG Pharmaceuticals, Inc. (No. 2019-0688-JTL). Plaintiff alleges that we did not exercise commercially reasonable efforts to market and sell the drug product Makena, and failed to achieve sales milestones for Makena, in breach of certain provisions of the September 28, 2014 Agreement and Plan of Merger between, among other parties, us and Lumara. On September 25, 2019, we filed a motion to dismiss the complaint. Plaintiff is seeking damages of $50.0 million, together with pre- and post-judgment interest, as well as attorneys’ fees and costs. At this time, based on available information, we are unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, of potential losses. We believe this lawsuit is without merit and intend to vigorously defend against the allegations.  

On or about April 6, 2016, we received Notice of a Lawsuit and Request to Waive Service of a Summons in a case entitled Plumbers’ Local Union No. 690 Health Plan v. Actavis Group et. al. (“Plumbers’ Union”), which was filed in the Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania and, after removal to federal court, is now pending in the United States District Court for the Eastern District of Pennsylvania (Civ. Action No. 16-65-AB). Thereafter, we were also made aware of a related complaint entitled Delaware Valley Health Care Coalition v. Actavis Group et. al. (“Delaware Valley”), which was filed with the Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania District Court of Pennsylvania (Case ID: 160200806). The complaints name K-V Pharmaceutical Company (“KV”) (Lumara Health’s predecessor company), certain of its successor entities, subsidiaries and affiliate entities (the “Subsidiaries”), along with a number of other pharmaceutical companies. We acquired Lumara Health in November 2014, a year after KV emerged from bankruptcy protection, at which time it, along with its then existing subsidiaries, became our wholly-owned subsidiary. We have not been served with process or waived service of summons in either case. The actions are being brought alleging unfair and deceptive trade practices with regard to certain pricing practices that allegedly resulted in

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certain payers overpaying for certain of KV’s generic products. On July 21, 2016, the Plaintiff in the Plumbers’ Union case dismissed KV with prejudice to refiling and on October 6, 2016, all claims against the Subsidiaries were dismissed without prejudice. We are in discussions with Plaintiff’s counsel to similarly dismiss all claims in the Delaware Valley case. Because we have not been served with process in the Delaware Valley case, we are currently unable to predict the outcome or reasonably estimate the range of potential loss associated with this matter, if any.

On July 20, 2015, the Federal Trade Commission (the “FTC”) notified us that it was conducting an investigation into whether Lumara Health or its predecessor engaged in unfair methods of competition with respect to Makena or any hydroxyprogesterone caproate product. As previously disclosed, we provided the FTC with a response in August 2015. We believe we have fully cooperated with the FTC and we have had no further interactions with the FTC on this matter since our response in August 2015. For further information on this matter, see Note P, “Commitments and Contingencies” to our Annual Report.

We may periodically become subject to other legal proceedings and claims arising in connection with ongoing business activities, including claims or disputes related to patents that have been issued or that are pending in the field of research on which we are focused. Other than the above actions, we are not aware of any material claims against us as of September 30, 2019.

Q.     ACQUISITIONS, COLLABORATION, LICENSE AND OTHER STRATEGIC AGREEMENTS

Our commercial strategy includes expanding our portfolio through the in-license or acquisition of additional pharmaceutical products or companies, including revenue-generating commercial products and development assets as well as forming alliances with other companies to facilitate the sale and distribution of our products. During the nine months ended September 30, 2019, we were a party to the following agreements:

Perosphere

On January 16, 2019, we acquired Perosphere pursuant to the Agreement and Plan of Merger (the “Perosphere Agreement”), dated as of December 12, 2018 between AMAG and Perosphere. Pursuant to the Perosphere Agreement, in January 2019, we paid approximately $50.0 million (the “Upfront Merger Consideration”), subject to adjustments for working capital, cash, transaction expenses and specified indebtedness. Of the Upfront Merger Consideration, approximately $40.0 million was funded from our available cash and approximately $10.0 million was deemed paid in connection with the cancellation of a convertible note in the principal amount of $10.0 million issued to us by Perosphere in October 2018. The purchase price was subject to customary post-closing adjustments under the Perosphere Agreement. In addition to the Upfront Merger Consideration, we used available cash to repay $12.0 million of Perosphere’s term loan indebtedness and approximately $6.2 million of Perosphere’s other liabilities. We are also required to pay regulatory and sales milestone payments to Perosphere as described in more detail above in Note P, “Commitments and Contingencies.” Further, we are a party to a clinical trial collaboration agreement with a pharmaceutical company, which we acquired through the Perosphere transaction, which provided for partial funding of the Phase 3 program for ciraparantag if certain clinical milestones are met. In August 2019, the pharmaceutical company informed us that it intends to terminate the agreement. Although we do not believe this company has grounds for termination, we are engaged in discussions with such partner to come to a mutually agreeable resolution.

Substantially all of the fair value of the assets acquired in conjunction with the Perosphere transaction was concentrated in the IPR&D asset. As a result, we accounted for this transaction as an asset acquisition under ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). The acquired IPR&D was charged to expense at acquisition, as it relates to a development stage compound with no alternative future use. A summary of the assets and liabilities acquired in exchange for cash consideration of $60.8 million and $10.0 million that was deemed paid in connection with the cancellation of the convertible note, described above, is presented in the following table (in millions):

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Assets:
Cash	$	2.6
Operating lease right-of-use asset	0.8
Property and equipment	1.4
IPR&D	74.9
	$	79.7
Liabilities:
Accrued severance liabilities	$	(1.7	)
Deferred revenue	(6.4		)
Operating lease liability	(0.8		)
	$	(8.9	)

Excluded from the table above are contingent payments associated with achievement of potential regulatory and sales milestones as described in Note P “Commitments and Contingencies,” which were not deemed probable at the date of acquisition. The fair values of certain of the assets and liabilities acquired are classified as Level 3 estimates under the fair value hierarchy as they have been valued using unobservable inputs. These inputs include: (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of key development and regulatory objectives; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. The fair values of the assets and liabilities acquired were initially valued and recorded based on various market factors, including an analysis of estimated sales using a discount rate of approximately 34%.

Velo

In September 2018, we exercised our option to acquire the global rights to the AMAG-423 program, which we accounted for as an asset acquisition under ASU No. 2017-01. For more information on the AMAG-423 acquisition, see Note P, “Commitments and Contingencies.”

Prasco

In December 2017, we entered into a Distribution and Supply Agreement (the “Prasco Agreement”) with Prasco, LLC (“Prasco”), under which Prasco was granted an exclusive, non-sublicensable, nontransferable license to purchase, distribute and sell a generic version of the Makena IM product in the U.S. (the “Makena authorized generic”). In July 2018, Prasco launched the Makena authorized generic of both the single-dose and multi-dose IM injections and in August 2019, we and Prasco terminated the Prasco Agreement based on our determination that it was not commercially viable to continue the relationship and, therefore, we do not expect to ship any further authorized generic product to Prasco. Under the Prasco Agreement, we were responsible for the manufacture and supply of the Makena authorized generic to be sold to Prasco at a predetermined supply price. Prasco was also required to pay us a certain percentage of the net distributable profits from the sale of the Makena authorized generic. We accounted for revenue recognized under the Prasco Agreement in accordance with ASC 606. Pursuant to the terms of the Prasco Agreement, in certain circumstances we have reimbursed and may be required to reimburse Prasco for additional penalties incurred by Prasco as a result of our failure to supply a certain percentage of product ordered by Prasco in a prespecified timeframe. During the nine months ended September 30, 2019, we incurred $3.5 million of failure to supply penalties, the majority of which were incurred in the first quarter of 2019.

Antares

We are party to the Antares License Agreement, which grants us an exclusive, worldwide, royalty-bearing license, with the right to sublicense, to certain intellectual property rights, including know-how, patents and trademarks, to develop, use, sell, offer for sale and import and export the Makena auto-injector. Under the terms of the Antares License Agreement, as amended in March 2018, we are responsible for the clinical development and preparation, submission and maintenance of all regulatory applications in each country where we desire to market and sell the Makena auto-injector, including the U.S. We are also required to pay royalties to Antares as described in more detail above in Note P, “Commitments and Contingencies.” The Antares License Agreement terminates at the end of the Antares Royalty Term, but is subject to early termination by us for convenience and by either party upon an uncured breach by or bankruptcy of the other party. In March 2018, the Antares License Agreement was amended to, among other things, transfer the agreement to AMAG from our subsidiary, amend certain confidentiality provisions, and to provide for co-termination with the Antares Manufacturing Agreement (described below).

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We are also party to a Manufacturing Agreement with Antares (the “Antares Manufacturing Agreement”) that sets forth the terms and conditions pursuant to which Antares agreed to sell to us on an exclusive basis, and we agreed to purchase, the fully packaged Makena auto-injector for commercial distribution. Antares remains responsible for the manufacture and supply of the device components and assembly of the Makena auto-injector. We are responsible for the supply of the drug to be used in the assembly of the finished auto-injector product. The Antares Manufacturing Agreement terminates at the expiration or earlier termination of the Antares License Agreement, but is subject to early termination by us for certain supply failure situations, and by either party upon an uncured breach by or bankruptcy of the other party or our permanent cessation of commercialization of the Makena auto-injector for efficacy or safety reasons.

Endoceutics

In February 2017, we entered into the Endoceutics License Agreement. Pursuant to the Endoceutics License Agreement, Endoceutics granted us the right to develop and commercialize pharmaceutical products containing dehydroepiandrosterone (“DHEA”), including Intrarosa, at dosage strengths of 13 mg or less per dose and formulated for intravaginal delivery, excluding any combinations with other active pharmaceutical ingredients, in the U.S. for the treatment of VVA and FSD. We accounted for the Endoceutics License Agreement as an asset acquisition under ASU 2017-01.

Upon the closing of the Endoceutics License Agreement, we made an upfront payment of $50.0 million and issued 600,000 shares of unregistered common stock to Endoceutics, which had a value of $13.5 million, as measured on April 3, 2017, the date of closing. In addition, we paid Endoceutics $10.0 million in 2017 upon the delivery by Endoceutics of Intrarosa launch quantities and $10.0 million in 2018 following the first anniversary of the closing. In 2017, we recorded a total of $83.5 million of consideration, of which $77.7 million was allocated to the Intrarosa developed technology intangible asset and $5.8 million was recorded as IPR&D expense based on their relative fair values. In addition, we are required to pay royalties and sales milestone payments to Endoceutics as described in more detail above in Note P, “Commitments and Contingencies.”

In the third quarter of 2017, Endoceutics initiated a clinical study with Intrarosa for the treatment of HSDD in post-menopausal women. Upon review of the full data set, Endoceutics recently determined not to pursue an additional clinical trial to support an HSDD indication. We had agreed to share the direct costs related to such studies based upon a negotiated allocation with us funding up to $20.0 million, of which we have paid approximately $6.0 million, which was recorded as research and development expense as incurred.

We have the exclusive right to commercialize Intrarosa for the treatment of VVA and FSD in the U.S., subject to the terms of the Endoceutics License Agreement. We have agreed to use commercially reasonable efforts to market, promote and otherwise commercialize Intrarosa for the treatment of VVA and, if approved, FSD in the U.S. Endoceutics has the right to directly conduct additional commercialization activities for Intrarosa for the treatment of VVA and FSD in the U.S. and has the right to conduct activities related generally to the field of intracrinology, in each case, subject to our review and approval and our right to withhold approval in certain instances. Each party’s commercialization activities and budget are described in a commercialization plan, which is updated annually.

In April 2017, we entered into an exclusive commercial supply agreement with Endoceutics pursuant to which Endoceutics, itself or through affiliates or contract manufacturers, agreed to manufacture and supply Intrarosa to us (the “Endoceutics Supply Agreement”) and is our exclusive supplier of Intrarosa in the U.S., subject to certain rights for us to manufacture and supply Intrarosa in the event of a cessation notice or supply failure (as such terms are defined in the Endoceutics Supply Agreement). Under the Endoceutics Supply Agreement, Endoceutics has agreed to maintain at all times a second source supplier for the manufacture of DHEA and the drug product. The Endoceutics Supply Agreement will generally remain in effect until the termination of the Endoceutics License Agreement.

The Endoceutics License Agreement expires on the date of expiration of all royalty obligations due thereunder unless earlier terminated in accordance with the Endoceutics License Agreement.

Palatin

In January 2017, we entered into the Palatin License Agreement under which we acquired (a) an exclusive license in all countries of North America (the “Palatin Territory”), with the right to grant sub-licenses, to research, develop and commercialize the Vyleesi products, a product for the treatment of acquired, generalized HSDD in pre-menopausal women, (b) a worldwide non-exclusive license, with the right to grant sub-licenses, to manufacture the Vyleesi Products, and (c) a non-exclusive license in all countries outside the Palatin Territory, with the right to grant sub-licenses, to research and develop (but not commercialize) the Vyleesi Products. The transaction closed in February 2017 and was accounted for as an asset acquisition under ASU 2017-01.

Under the terms of the Palatin License Agreement, in February 2017 we paid Palatin $60.0 million as a one-time upfront payment and subject to agreed-upon deductions reimbursed Palatin approximately $25.0 million for reasonable, documented,

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out-of-pocket expenses incurred by Palatin in connection with the development and regulatory activities necessary to submit an NDA in the U.S. for Vyleesi for the treatment of HSDD in pre-menopausal women. During 2017, we fulfilled these payment obligations to Palatin. The $60.0 million upfront payment made in February 2017 to Palatin was recorded as IPR&D expense as the product candidate had not received regulatory approval. In June 2018, our NDA submission to the FDA for Vyleesi was accepted, which triggered a $20.0 million milestone payment, which we paid in the second quarter of 2018 and recorded as an IPR&D expense in the first quarter of 2018 when acceptance was deemed probable. In June 2019, the FDA approval of Vyleesi triggered a $60.0 million milestone payment to Palatin, which we paid in July 2019 and recorded as a developed technology intangible asset in the second quarter of 2019. In addition, we are required to pay royalties and regulatory and sales milestone payments to Palatin as described in more detail above in Note P, “Commitments and Contingencies.”

The Palatin License Agreement expires on the date of expiration of all royalty obligations due thereunder, unless earlier terminated in accordance with the Palatin License Agreement.

R.     DEBT

Our outstanding debt obligations as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30, 2019		December 31, 2018
2022 Convertible Notes	$	273,124	$	261,933
2019 Convertible Notes	—		21,276
Total long-term debt	273,124		283,209
Less: current maturities	—		21,276
Long-term debt, net of current maturities	$	273,124	$	261,933

 

Convertible Notes

The outstanding balance of our 2022 Convertible Notes as of September 30, 2019 consisted of the following (in thousands):

	2022 Convertible Notes
Liability component:
Principal	$	320,000
Less: debt discount and issuance costs, net	46,876
Net carrying amount	$	273,124
Gross equity component	$	72,576

In accordance with accounting guidance for debt with conversion and other options, we separately account for the liability and equity components of our 2022 Convertible Notes by allocating the proceeds between the liability component and the embedded conversion option (the “Equity Component”) due to our ability to settle the 2022 Convertible Notes in cash, common stock or a combination of cash and common stock, at our option. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation was performed in a manner that reflected our non-convertible debt borrowing rate for similar debt. The Equity Component of the 2022 Convertible Notes was recognized as a debt discount and represents the difference between the proceeds from the issuance of the 2022 Convertible Notes and the fair value of the liability of the 2022 Convertible Notes on the date of issuance. The excess of the principal amount of the liability component over its carrying amount is amortized to interest expense using the effective interest method over five years. The Equity Component is not remeasured as long as it continues to meet the conditions for equity classification.

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2022 Convertible Notes

In the second quarter of 2017, we issued $320.0 million aggregate principal amount of convertible senior notes due in 2022 (the “2022 Convertible Notes”) and received net proceeds of $310.4 million from the sale of the 2022 Convertible Notes, after deducting fees and expenses of $9.6 million. The approximate $9.6 million of debt issuance costs primarily consisted of underwriting, legal and other professional fees, and we allocated these costs to the liability and equity components based on the allocation of the proceeds. Of the total $9.6 million of debt issuance costs, $2.2 million was allocated to the Equity Component and recorded as a reduction to additional paid-in capital and $7.4 million was allocated to the liability component and is now recorded as a reduction of the 2022 Convertible Notes on our condensed consolidated balance sheets. The portion allocated to the liability component is amortized to interest expense using the effective interest method over five years.

The 2022 Convertible Notes are governed by the terms of an indenture between us, as issuer, and Wilmington Trust, National Association, as the trustee. The 2022 Convertible Notes are senior unsecured obligations and bear interest at a rate of 3.25% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2017. The 2022 Convertible Notes will mature on June 1, 2022, unless earlier repurchased or converted. Upon conversion of the 2022 Convertible Notes, such 2022 Convertible Notes will be convertible into, at our election, cash, shares of our common stock, or a combination thereof, at a conversion rate of 36.5464 shares of common stock per $1,000 principal amount of the 2022 Convertible Notes, which corresponds to an initial conversion price of approximately $27.36 per share of our common stock.

The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of stock dividends and payment of cash dividends. At any time prior to the close of business on the business day immediately preceding March 1, 2022, holders may convert their 2022 Convertible Notes at their option only under the following circumstances:

1) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2022 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or

3) upon the occurrence of specified corporate events.

On or after March 1, 2022, until the close of business on the business day immediately preceding the maturity date, holders may convert all or any portion of their 2022 Convertible Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. The 2022 Convertible Notes were not convertible as of September 30, 2019.

We determined the expected life of the debt was equal to the five-year term on the 2022 Convertible Notes. The effective interest rate on the liability component was 9.49% for the period from the date of issuance through September 30, 2019. As of September 30, 2019, the “if-converted value” did not exceed the remaining principal amount of the 2022 Convertible Notes.

2019 Convertible Notes

In February 2014, we issued $200.0 million aggregate principal amount of the 2019 Convertible Notes. During 2017, we entered into privately negotiated transactions with certain investors to repurchase approximately $178.5 million aggregate principal amount of the 2019 Convertible Notes for an aggregate repurchase price of approximately $192.7 million, including accrued interest. The remaining $21.4 million of 2019 Convertible Notes matured on February 15, 2019 and were settled with cash.

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Convertible Notes Interest Expense

The following table sets forth total interest expense recognized related to the Convertible Notes during the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Contractual interest expense	$	2,600	$	2,734	$	7,867	$	8,202
Amortization of debt issuance costs	353		355		1,051		1,040
Amortization of debt discount	3,466		3,391		10,281		9,942
Total interest expense	$	6,419	$	6,480	$	19,199	$	19,184

Convertible Bond Hedge and Warrant Transactions

In February 2014, we entered into convertible bond hedge transactions and separate warrant transactions of our common stock underlying the aggregate principal amount of the 2019 Convertible Notes with certain financial institutions (the “call spread counterparties”). In connection with the 2017 repurchases of the 2019 Convertible Notes, as discussed above, we entered into agreements with the call spread counterparties to terminate a portion of the then existing convertible bond hedge transactions in an amount corresponding to the amount of such 2019 Convertible Notes repurchased and to terminate a portion of the then-existing warrant transactions. In February 2019, the 2019 Convertible Notes matured and were settled with cash and the remaining bond hedge and warrant transactions expired.

2023 Senior Notes

In August 2015, we completed a private placement of $500.0 million aggregate principal amount of 7.875% Senior Notes due 2023 (the “2023 Senior Notes”). The 2023 Senior Notes were issued pursuant to an Indenture, dated as of August 17, 2015 (the “Indenture”), by and among us, certain of our subsidiaries acting as guarantors of the 2023 Senior Notes and Wilmington Trust, National Association, as trustee. In October 2017, we repurchased $25.0 million of the 2023 Senior Notes in a privately negotiated transaction, resulting in a loss on extinguishment of debt of $1.1 million. In September 2018, we repurchased the remaining $475.0 million of the 2023 Senior Notes at a premium of $28.1 million using the proceeds from the CBR sale, which resulted in a loss on extinguishment of debt of $35.9 million, inclusive of the premium paid.

Future Payments

Future annual principal payments on our long-term debt as of September 30, 2019 were as follows (in thousands):

Period	Future Annual Principal Payments
Remainder of Year Ending December 31, 2019	$	—
Year Ending December 31, 2020	—
Year Ending December 31, 2021	—
Year Ending December 31, 2022	320,000
Year Ending December 31, 2023	—
Thereafter	—
Total	$	320,000

S.     RESTRUCTURING EXPENSES

In February 2019, we completed a restructuring to combine our women’s health and maternal health sales forces into one integrated sales team, which will promote Intrarosa, the Makena auto-injector and Vyleesi. Approximately 110 employees were displaced through this workforce reduction. We recorded one-time restructuring charges of $7.4 million primarily related to severance and related benefits on our condensed consolidated statement of operations for the nine months ended September 30, 2019. We expect the restructuring charges incurred to date under this program to be substantially paid in cash by the end of the first quarter of 2020.

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The following table displays charges taken related to restructuring activities during the nine months ended September 30, 2019 and a rollforward of the changes to the accrued balances as of September 30, 2019 (in thousands): 

	Workforce reduction			Contract termination			Other			Total
Balance accrued at December 31, 2018	$	—		$	—		$	—		$	—
2019 restructuring charges	7,034			229			157			7,420
Payments	(5,257		)	(229		)	(157		)	(5,643		)
Balance accrued at June 30, 2019	1,777			—			—			1,777
Payments	(579		)	—			—			(579		)
Balance accrued at September 30, 2019	$	1,198		$	—		$	—		$	1,198

T.     RECENTLY ISSUED AND PROPOSED ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by FASB or other standard setting bodies that are adopted by us as of the specified effective date.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This standard eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods and early adoption is permitted. We are currently evaluating the impact of our adoption of ASU 2018-13 on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 will be effective for us for fiscal years beginning on or after January 1, 2020, including interim periods within those annual reporting periods and early adoption is permitted. We are currently evaluating the impact of our adoption of ASU 2016-13 on our condensed consolidated financial statements.

U.     RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASC 842”). This standard requires an entity to recognize on its balance sheet assets and liabilities associated with the rights and obligations created by leases with terms greater than twelve months. We adopted the standard effective January 1, 2019. We chose to apply the provisions of ASC 842 as of the effective date with no restatement of prior periods or cumulative adjustment to retained earnings. Upon adoption, we elected to utilize the package of transition practical expedients, which allowed us to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. We also made accounting policy elections to not separate lease and non-lease components for our real estate lease and to not recognize leases with an initial term of twelve months or less within our condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis on our condensed consolidated statements of income over the lease term.

In preparation for adoption of the standard, we implemented internal controls to enable the preparation of financial information. The adoption of this standard resulted in the recognition of operating lease liabilities of $8.5 million and related ROU assets of $7.6 million on our condensed consolidated balance sheets as of January 1, 2019, but did not have an impact on our condensed consolidated statements of operations.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). This standard clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. We adopted ASU 2018-18 during the first quarter of 2019 and applied the provisions of this update retrospectively to all contracts that were not completed as of the date of our initial adoption of ASC 606. The adoption of ASU 2018-18 did not have a material impact on our financial position or results of operations.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations:

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018 (our “Annual Report”). Except for the historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q terminology such as “may,” “will,” “could,” “should,” “would,” “expect,” “anticipate,” “continue,” “believe,” “plan,” “estimate,” “intend” or other similar words and expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.

Examples of forward-looking statements contained in this report include, without limitation, statements regarding the following:

• our plans regarding the growth potential of our portfolio and our ability to identify additional product candidates;

• beliefs regarding the expenses, challenges and timing of our preclinical studies and clinical trials, including expectations regarding the clinical trial results for ciraparantag and AMAG-423;

• beliefs regarding our commercial strategies and efforts, including the recent commercial launch of Vyleesi and the impact of our efforts to promote prescriptions of the Makena auto-injector;

• our estimates and beliefs regarding the market opportunities for each of our products and product candidates;

• beliefs about and expectations for our commercialization, marketing and manufacturing of our products and product candidates, if approved, (which may be conducted by third parties);

• expectations related to potential FDA regulatory actions for the Makena product following the recent meeting of its Advisory Committee;

• plans to work with the FDA and beliefs that there may be a path forward for continued commercialization of Makena;

• expectations and plans with respect to litigation matters and contract disputes, including the merits thereof;

• the timing and amounts of milestone and royalty payments;

• expectations related to development milestone payments from a development partner in light of such partner’s notice of intent to terminate the related agreement;

• expectations and plans as to recent and upcoming regulatory and commercial developments and activities, including requirements, initiatives and timelines for clinical trials and post-approval commitments for our products and product candidates, and their impact on our business and competition;

• expectations for our intellectual property rights covering our product candidates and technology and the impact of generics and other competition could have on each of our products and our business generally, including the timing and number of generic entrants;

• developments relating to our competitors and our industry, including the impact of government regulation;

• expectations regarding third-party reimbursement and the behaviors of payers, healthcare providers, patients and other industry participants, including with respect to product price increases and volume-based and other rebates and incentives;

• expectations regarding the contribution of revenues from our products to the funding of our on-going operations and costs to be incurred in connection with revenue sources to fund our future operations;

• expectations regarding customer returns and other revenue-related reserves and accruals;

• expectations as to the manufacture of drug substances, drug and biological products and key materials for our products and product candidates;

• expectations as to our effective tax rate and our ability to realize our net operating loss carryforwards and other tax attributes;

• the impact of accounting pronouncements;

• expectations regarding our financial performance and our ability to implement our strategic plans for our business;

• estimates and beliefs related to our 2022 Convertible Notes and the manner in which we intend or are required to settle the 2022 Convertible Notes;

• estimates, beliefs and judgments related to the valuation of certain intangible assets, goodwill, contingent consideration, debt and other assets and liabilities, including our impairment analysis and our methodology and assumptions regarding fair value measurements; and

• beliefs regarding the impact of our February 2019 restructuring initiative, including the impact of the combination of our women’s and maternal health sales forces and the related reduction in head count.

 Any forward-looking statement should be considered in light of the factors discussed in Part II, Item 1A below under “Risk Factors” in this Quarterly Report on Form 10-Q and in Part I, Item 1A in our Annual Report. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the U.S. Securities and Exchange Commission, to publicly update or revise any such statements to reflect any change in company expectations or in events, conditions or circumstances

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on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

AMAG Pharmaceuticals^®, the logo and designs and Feraheme^® are registered trademarks of AMAG Pharmaceuticals, Inc. Vyleesi^TM is a trademark of AMAG Pharmaceuticals, Inc. Makena^® is a registered trademark of AMAG Pharma USA, Inc. Intrarosa^® is a registered trademark of Endoceutics, Inc. Other trademarks referenced in this report are the property of their respective owners.

Overview

AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a pharmaceutical company focused on bringing innovative products to patients with unmet medical needs by leveraging our development and commercial expertise to invest in and grow our pharmaceutical products across a range of therapeutic areas. Our currently marketed products support the health of patients in the areas of maternal and women’s health, anemia management and cancer supportive care, including Feraheme^® (ferumoxytol injection) for intravenous use, Makena^® (hydroxyprogesterone caproate injection) auto-injector, Intrarosa^® (prasterone) vaginal inserts and MuGard^® Mucoadhesive Oral Wound Rinse. On June 21, 2019, Vyleesi™ (bremelanotide injection) was approved by the U.S. Food and Drug Administration (the “FDA”) for the treatment of acquired, generalized hypoactive sexual desire disorder (“HSDD”) in premenopausal women and became commercially available in September 2019. In addition to our approved products, our portfolio includes two product candidates, AMAG-423 (digoxin immune fab (ovine)), which is being studied for the treatment of severe preeclampsia, and ciraparantag, which is being studied as an anticoagulant reversal agent.

We intend to continue to expand the impact of our current and future products for patients by delivering on our growth strategy, which includes collaborating on and acquiring promising therapies at various stages of development, and advancing them through the clinical and regulatory process to deliver new treatment options to patients. Our primary sources of revenue are currently from sales of the Feraheme, the Makena auto-injector and Intrarosa. Except as otherwise stated below, the following discussions of our results of operations reflect the results of our continuing operations, excluding the results related to the CBR business, which we sold in August 2018. The historical results of our CBR business has been separated from continuing operations and reflected as a discontinued operation. See Note C, “Discontinued Operations,” to our condensed consolidated financial statements included in this Quarterly Report on Form-10-Q.

AMAG’s Portfolio of Products and Product Candidates

Feraheme

Feraheme received approval from the FDA in June 2009 for the treatment of iron deficiency anemia (“IDA”) in adult patients with chronic kidney disease (“CKD”). In February 2018, the FDA approved a supplemental New Drug Application (“NDA”) to expand the Feraheme label to include all eligible adult IDA patients who have intolerance to oral iron or have had unsatisfactory response to oral iron in addition to patients who have CKD. IDA is prevalent in many different patient populations, such as patients with CKD, gastrointestinal diseases or disorders, inflammatory diseases, chemotherapy-induced anemia and abnormal uterine bleeding. For many of these patients, treatment with oral iron is unsatisfactory or is not tolerated. It is estimated that approximately five million people in the U.S. have IDA and we estimate that a small fraction of the patients who are diagnosed with IDA regardless of the underlying cause are currently being treated with IV iron.

The expanded Feraheme label was supported by two positive pivotal Phase 3 trials, which evaluated Feraheme versus iron sucrose or placebo in a broad population of patients with IDA and positive results from a third Phase 3 randomized, double-blind non-inferiority trial that evaluated the incidence of moderate-to-severe hypersensitivity reactions (including anaphylaxis) and moderate-to-severe hypotension with Feraheme compared to Injectafer^® (ferric carboxymaltose injection) (the “Feraheme comparator trial”). The Feraheme comparator trial demonstrated comparability to Injectafer^® based on the primary composite endpoint of the incidence of moderate-to-severe hypersensitivity reactions (including anaphylaxis) and moderate-to-severe hypotension (Feraheme incidence 0.6%; Injectafer^® incidence 0.7%). Adverse event rates were similar across both treatment groups; however, the incidence of severe hypophosphatemia (defined by blood phosphorous of <0.2 mg/dl at week 2) was less in the patients receiving Feraheme (0.4% of patients) compared to those receiving Injectafer^® (38.7% of patients).

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Makena

Makena is indicated to reduce the risk of preterm birth in women pregnant with a single baby who have a history of singleton spontaneous preterm birth. We acquired the rights to Makena in connection with our acquisition of Lumara Health Inc. (“Lumara Health”) in November 2014.

Makena was approved by the FDA in February 2011 as an intramuscular (“IM”) injection (the “Makena IM product”) packaged in a multi-dose vial and in February 2016 as a single-dose preservative-free vial. In February 2018, the Makena auto-injector was approved by the FDA for administration via a pre-filled subcutaneous auto-injector, a drug-device combination product (the “Makena auto-injector”). In mid-2018, as the first generic competitors to the Makena IM product entered the market, we launched our own authorized generic of both the single- and multi-dose vials through our generic partner, Prasco, LLC (the “Makena authorized generic”). As previously disclosed, in August 2019, we and Prasco determined it was not commercially viable to continue the relationship and mutually terminated our distribution and supply agreement. We do not expect to ship any further Makena authorized generic product to Prasco. Further, as a result of the loss of substantial market share, we revised our long-term Makena IM products forecast resulting in the recording of a $77.4 million impairment charge and a $4.8 million inventory write-down on the Makena IM products during the second quarter of 2019, as discussed in Note I, “Goodwill and Intangible Assets, Net” to the condensed consolidated financial statements included in this quarterly report on Form 10-Q.

In March 2019, we announced topline results from the Progestin’s Role in Optimizing Neonatal Gestation clinical trial (“PROLONG” or “Trial 003”), a randomized, double-blinded, placebo-controlled clinical trial evaluating Makena in patients with a history of a prior spontaneous singleton preterm delivery. The PROLONG trial was conducted post-approval under the FDA’s “Subpart H” accelerated approval process. The approval of Makena was based on the Meis trial (“Trial 002”), which was conducted by the National Institute of Child Health and Human Development and the Maternal-Fetal Medicine Units Network. The PROLONG trial did not demonstrate a statistically significant difference between the treatment and placebo arms for the co-primary endpoints: the incidence of preterm delivery at less than 35 weeks (Makena treated group 11.0% vs. placebo 11.5%, p=.72) and the percentage of patients who met criteria for the pre-specified neonatal morbidity and mortality composite index (Makena treated group 5.4% vs 5.2%, p=.84). The adverse event profile between the two arms was comparable. Adverse events of special interest, including miscarriage and stillbirth, were infrequent and similar between the treatment and placebo groups. The PROLONG trial enrolled approximately 1,700 pregnant women, over 75% of whom were enrolled outside the U.S. On October 29, 2019, the FDA’s Bone, Reproductive and Urologic Drugs Advisory Committee (the “Advisory Committee”) met to discuss the results of the PROLONG trial to inform the FDA’s regulatory decision making for Makena. Following various presentations by experts and discussion at the meeting, the Advisory Committee voted as follows: (a) in response to the question “Do the findings from Trial 003 verify the clinical benefits of Makena on neonatal outcomes?”, 16 members voted “No” and no members voted “Yes”; (b) in response to the question “Based on the findings from Trial 002 and Trial 003, is there substantial evidence of effectiveness of Makena in reducing the risk of recurrent preterm birth?”, 13 members voted “No” and three members voted “Yes”; and (c) in response to the question, “Should the FDA (A) pursue withdrawal of approval for Makena, (B) leave Makena on the market under accelerated approval and require a new confirmatory trial, or (C) leave Makena on the market without requiring a new confirmatory trial?”, nine members voted for (A), seven members voted for (B) and no members voted for (C). The FDA is not required to follow the advice of its Advisory Committees but will take them into consideration in deciding what regulatory steps to take with respect to Makena. Future adverse developments related to the Advisory Committee’s advice, or our assessment of the likelihood of such developments, could negatively impact the carrying value of certain Makena-related reserves or assets, including inventory, intangible assets, or our goodwill balance. We remain committed to working collaboratively with the FDA to seek a path forward to ensure eligible pregnant women continue to have access to Makena.

Intrarosa

In February 2017, we entered into a license agreement (the “Endoceutics License Agreement”) with Endoceutics, Inc. (“Endoceutics”) pursuant to which Endoceutics granted us the U.S. rights to Intrarosa, an FDA-approved product for the treatment of moderate to severe dyspareunia (pain during sexual intercourse), a symptom of vulvar and vaginal atrophy (“VVA”), due to menopause. Intrarosa was approved by the FDA in November 2016 and was launched commercially in July 2017.

Intrarosa is the only FDA-approved vaginal non-estrogen treatment indicated for the treatment of moderate to severe dyspareunia, a symptom of VVA, due to menopause. Intrarosa contains prasterone, a synthetic form of dehydroepiandrosterone, which is an inactive endogenous (i.e. occurring in the body) sex steroid. Prasterone is converted by enzymes in the body into androgens and estrogens to help restore the vaginal tissue as indicated by improvements in the percentage of superficial cells, parabasal cells, and pH. The mechanism of action of Intrarosa is not fully established. The effectiveness of Intrarosa on

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moderate to severe dyspareunia in post-menopausal women was examined in two primary 12-week placebo-controlled efficacy trials. Women who used Intrarosa in these trials experienced a significant reduction in moderate to severe dyspareunia, as well as statistically significant improvements in the percentage of vaginal superficial cells, parabasal cells and vaginal pH. In these trials, vaginal discharge and atypical pap smears were the most common adverse reactions. Intrarosa is contraindicated in women with undiagnosed abnormal genital bleeding. The label for Intrarosa contains a precaution that it has not been studied in women with a history of breast cancer.

In the third quarter of 2017, Endoceutics initiated a clinical study with Intrarosa for the treatment of HSDD in post-menopausal women. Upon review of the full data set, Endoceutics recently determined not to continue to pursue an additional clinical trial for an HSDD indication. We have agreed to share the direct costs related to such studies based upon a negotiated allocation with us funding up to $20.0 million, of which we have paid approximately $6.0 million, and we currently do not expect to incur any significant further costs for these studies.

Vyleesi

On June 21, 2019, the FDA approved Vyleesi for the treatment of acquired, generalized HSDD in premenopausal women, and which became commercially available in September 2019 through two specialty pharmacies. Vyleesi was acquired in January 2017 pursuant to a license agreement (the “Palatin License Agreement”) entered into with Palatin Technologies, Inc. (“Palatin”). Based on the June 2019 approval, we were obligated to make a $60.0 million milestone payment to Palatin, which we paid in July 2019 and recorded as a developed technology intangible asset during the second quarter of 2019.

Vyleesi, a melanocortin 4 receptor agonist is an as needed therapy used in anticipation of sexual activity and self-administered by premenopausal women with HSDD in the thigh or abdomen via a single-use subcutaneous auto-injector. The FDA approval of Vyleesi was supported by data from approximately 1,200 women in two pivotal, identically-designed Phase 3 studies conducted by Palatin, which evaluated the safety and efficacy of Vyleesi for the treatment of HSDD in premenopausal women as compared to placebo. Both trials consisted of a 24-week double-blind, placebo-controlled, randomized parallel group core study phase, comparing a subcutaneous dose of 1.75 mg Vyleesi versus placebo, self-administered via an auto-injector, on demand, and patients were equally randomized (1:1 ratio) to either Vyleesi or placebo. The co-primary endpoints for these trials were evaluated using patient self-reported scores from Question One and Two of the Female Sexual Function Index: Desire Domain (“FSFI-D”) and Question 13 from the Female Sexual Distress Scale-Desires/Arousal/Orgasm (“FSDS-DAO”). Women who completed the randomized control core study phase of either study had the option to continue in a voluntary open-label safety extension phase of the study for an additional 12 months, which gathered additional data on the safety of long-term and repeated use of Vyleesi. Nearly 80% of patients who completed the Phase 3 trials elected to remain in the open-label portion of the study, in which all of the patients received Vyleesi.

Both studies met the pre-specified co-primary efficacy endpoints of improvement in low sexual desire and decrease in related distress as measured using validated patient-reported outcome instruments and demonstrated statistically significant improvement with Vyleesi in both median and mean measures of desire. The change in the number of satisfying sexual events, a key secondary endpoint, was not significantly different from placebo in either clinical trial.

In the Phase 3 clinical trials and the extension study, the most common adverse events were nausea, flushing, injection site reactions, headache and vomiting. Approximately 18% of patients discontinued participation in the Vyleesi arm due to adverse events in both studies versus 2% in placebo. In addition, in the clinical trials, Vyleesi caused (i) small, transient increases in blood pressure and is contraindicated in women with uncontrolled high blood pressure or known cardiovascular disease and (ii) darkening of the skin on certain parts of the body (focal hyperpigmentation), including the face, gums (gingiva) and breast.

AMAG-423

In September 2018, we acquired the global rights to AMAG-423 pursuant to an option agreement entered into in July 2015 with Velo Bio, LLC, a privately-held life sciences company (“Velo”). AMAG-423 is a polyvalent antibody currently in development for the treatment of severe preeclampsia in pregnant women and has been granted both orphan drug and Fast Track designations by the FDA. AMAG-423 is intended to bind to endogenous digitalis-like factors (“EDLFs”) and remove them from the circulation. EDLFs appear to be elevated in preeclampsia and may play an important role in the pathogenesis of preeclampsia. By decreasing EDLFs, AMAG-423 is believed to improve vascular endothelial function and lead to better post-delivery outcomes in affected mothers and their babies.

We have assumed responsibility to complete the Phase 2b/3a clinical study that Velo initiated in the second quarter of 2017 and will incur all of the future clinical, regulatory and other costs required to pursue FDA approval. Approximately 200 antepartum women with severe preeclampsia between 23 and 32 weeks gestation will be enrolled in the multi-center,

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randomized, double-blind, placebo-controlled, parallel-group Phase 2b/3a study. We re-initiated the study as the sponsor, and, as of January 2019, began enrolling new patients and continue to initiate new sites. Participants in the study receive either AMAG-423 or placebo intravenously four times a day over a maximum of four days. The study’s primary endpoint is to demonstrate a reduction in the percentage of babies who develop severe intraventricular hemorrhage (bleeding in the brain), necrotizing enterocolitis (severe inflammation of the infant bowels) or death by 36 weeks corrected gestational age between the AMAG-423 and placebo arms. Secondary endpoints include the change from baseline in maternal creatinine clearance, maternal incidence of pulmonary edema during treatment and the period of time between treatment and delivery. As with previous clinical trials conducted for treatments of preeclampsia, enrollment is challenging and while we continue to implement strategies to enhance enrollment, the nature of the patient population makes it difficult to predict the timing of enrollment completion. 

Ciraparantag

On January 16, 2019, we acquired ciraparantag with our acquisition of Perosphere Pharmaceuticals Inc. (“Perosphere”), a privately-held biopharmaceutical company. Ciraparantag is an anticoagulant reversal agent in development as a single dose solution that is delivered intravenously to reverse the effects of certain novel oral anticoagulants (“NOACs”) (Xarelto^®(rivaroxaban), Eliquis^®(apixaban), and Savaysa^®(edoxaban) as well as Lovenox^® (enoxaparin sodium injection), a low molecular weight heparin (“LMWH”) when reversal of the anticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. Ciraparantag has been granted Fast Track designation by the FDA. For additional information on our acquisition of Perosphere, see Note Q, “Acquisitions, Collaboration, License and Other Strategic Agreements” to our condensed consolidated financial statements included in this Quarterly Report on Form-10-Q.

Ciraparantag has been evaluated in more than 250 healthy volunteers across seven clinical trials. A first in human Phase 1 study evaluated the safety, tolerability, pharmacokinetic, and pharmacodynamic effects of ciraparantag alone and following a single dose of Savaysa^®, and another Phase 1 study evaluated the overall metabolism of the drug. Two Phase 2A studies evaluated the safety, tolerability, pharmacokinetic, and pharmacodynamic effects related to the reversal of unfractionated heparin and Lovenox^® and three Phase 2b randomized, single-blind, placebo-controlled dose-ranging studies evaluated the reversal of Savaysa^®, Eliquis^®, and Xarelto^® to assess the safety and efficacy of ciraparantag, each of which included 12 subjects dosed with ciraparantag. The Phase 2b study to reverse Xarelto^® is currently ongoing but is nearly complete. In these Phase 2b clinical trials, ciraparantag or placebo was administered to healthy volunteers in a blinded fashion after achieving steady blood concentrations of the respective anticoagulant. Pharmacodynamic assessments of whole blood clotting time (“WBCT”), an important laboratory measure of clotting capacity, were sampled frequently for the first hour post study drug dose, and then periodically thereafter out to 24 hours post administration of study drug. Key endpoints in the Phase 2 trials included mean change from baseline in WBCT and the proportion of subjects that returned to within 10% of their baseline WBCT. Subjects in these studies experienced a rapid and statistically significant (p<0.001) reduction in WBCT compared to placebo as early as 15 minutes after the administration of ciraparantag in each of the four studies and the effect was sustained for 24 hours. Moreover, in both the Eliquis^® and Xarelto^® studies, 100% of subjects in the highest dose cohorts (180 mg of ciraparantag) were responders, as defined by a return to within 10% of baseline WBCT within 30 minutes and sustained for at least six hours. Ciraparantag has been well tolerated in clinical trials, with the most common related adverse events to date being mild sensations of coolness, warmth or tingling, skin flushing, and alterations in taste. There have been no drug-related serious adverse events to date.

We are planning to conduct a clinical study in healthy volunteers to confirm the lowest effective dose of ciraparantag after reaching peak steady state blood concentrations of certain NOAC drugs. This proposed study will utilize an automated coagulometer developed by Perosphere Technologies, an independent company, to measure WBCT. The coagulometer requires FDA clearance for use in clinical studies through an investigational device exemption, which Perosphere Technologies will submit once the design of the healthy volunteer study is finalized. Over the past several months, Perosphere Technologies has completed additional analytic studies and we continue to work with the FDA on the design of this next clinical study. Following the completion of this study, which we estimate to be in the second half of 2020, we plan to schedule an End of Phase 2 meeting with the FDA to discuss the design of the Phase 3 program to evaluate the safety and efficacy of ciraparantag in the target patient population.

In August 2019, the pharmaceutical company who is a party to a clinical trial collaboration agreement we acquired through the Perosphere transaction informed us that it intends to terminate the agreement. Although we do not believe this company has grounds for termination, we are engaged in discussions with such partner to come to a mutually agreeable resolution.

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Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires management to make certain estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and

liabilities. Actual results could differ materially from those estimates. Management employs the following critical accounting

policies affecting our most significant estimates and assumptions: revenue recognition and related sales allowances and

accruals; valuation of marketable securities; business combinations and asset acquisitions, including acquisition-related

contingent consideration; goodwill; intangible assets; equity-based compensation; and income taxes.

Except as described in Note B, “Basis of Presentation and Summary of Significant Accounting Policies,” and Note P, “Commitments and Contingencies,” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, with respect to changes in our accounting policy related to our adoption of the requirements of Accounting Standards Codification (“ASC”) Topic 842, Leases and our consideration of collaboration type agreements that could fall under ASC 808, Collaborative Arrangements or ASC 606, Revenue from Contracts with Customers, there have been no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2019, compared to the critical accounting policies and estimates disclosed in Part II, Item 7, of our Annual Report.

Results of Operations - Three Months Ended September 30, 2019 and 2018 

Revenues

Total net product sales for the three months ended September 30, 2019 and 2018 consisted of the following (in thousands except for percentages):

	Three Months Ended September 30,				2019 to 2018
	2019		2018		$ Change			% Change
Product sales, net
Feraheme	$	44,205	$	36,963	$	7,242		20	%
Makena	34,272		80,221		(45,949		)	(57	)%
Intrarosa	5,607		4,925		682			14	%
Other	23		129		(106		)	(82	)%
Total product sales, net	$	84,107	$	122,238	$	(38,131	)	(31	)%

Our total net product sales for the three months ended September 30, 2019 decreased by $38.1 million as compared to the same period in 2018, due primarily to a $48.0 million decrease in Makena IM net sales, driven by manufacturing challenges, generic entrants and our withdrawal from the IM market. Makena IM net sales for the three months ended September 30, 2019 included $5.5 million of negative revenue charges primarily related to changes in estimated prior period liabilities for commercial rebates. Partially offsetting the decline in Makena IM revenue was an increase in Makena auto-injector net sales from $39.2 million in the third quarter of 2018 to $41.3 million in the third quarter of 2019 and a $7.2 million increase in Feraheme net sales in the third quarter of 2019, as compared to the same period in 2018.

We expect that total net sales of Feraheme, the Makena auto-injector, and Intrarosa in the fourth quarter of 2019 will be consistent with the third quarter of 2019, assuming that any action the FDA may take based on the recent Advisory Committee meeting does not have an immediate and adverse effect on Makena auto-injector revenue. Any remaining impact of generic competition to our Makena franchise sales is dependent on the timing, number and behavior of current and future generic competitors and our ability to continue to differentiate Makena auto-injector from generic IM products.

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Product Sales Allowances and Accruals

Total gross product sales were offset by product sales allowances and accruals for the three months ended September 30, 2019 and 2018 as follows (in thousands, except for percentages):

	Three Months Ended September 30,								2019 to 2018
	2019		Percent of gross product sales		2018		Percent of gross product sales		$ Change			% Change
Gross product sales	$	254,073			$	238,856			$	15,217		6	%
Provision for product sales allowances and accruals:
Contractual adjustments	144,108		57	%	93,213		39	%	50,895			55	%
Governmental rebates	25,858		10	%	23,405		10	%	2,453			10	%
Total	169,966		67	%	116,618		49	%	53,348			46	%
Product sales, net	$	84,107			$	122,238			$	(38,131	)	(31	)%

 

The increase in contractual adjustments as a percentage of gross product sales primarily related to a higher mix of business through commercial reimbursement channels and additional discounts offered to commercial entities.

We record product revenue net of certain allowances and accruals on our condensed consolidated statements of operations. Our contractual adjustments include provisions for returns, pricing and prompt payment discounts, as well as wholesaler distribution fees, rebates to hospitals that qualify for 340B pricing, and volume-based and other commercial rebates and other discounts. Governmental rebates relate to our reimbursement arrangements with state Medicaid programs.

We may refine our estimated revenue reserves as we continue to obtain additional experience or as our customer mix changes. If we determine in future periods that our actual experience is not indicative of our expectations, if our actual experience changes, or if other factors affect our estimates, we may be required to adjust our allowances and accruals estimates, which would affect our net product sales in the period of the adjustment and could be significant.

Costs and Expenses

Cost of Product Sales

Cost of product sales for the three months ended September 30, 2019 and 2018 were as follows (in thousands except for percentages):

	Three Months Ended September 30,						2019 to 2018
	2019			2018			$ Change			% Change
Direct cost of product sales	$	16,893		$	15,543		$	1,350		9	%
Amortization of intangible assets	4,212			30,946			(26,734		)	(86	)%
	$	21,105		$	46,489		$	(25,384	)	(55	)%
Direct cost of product sales as a percentage of net product sales	20		%	13		%

Direct cost of product sales as a percentage of net product sales increased from 13% during the three months ended September 30, 2018 to 20% during the three months ended September 30, 2019 primarily driven by a shift in revenue mix from products with a lower cost of product sales, such as the Makena IM product, to products with a higher cost of product sales, such as the Makena auto-injector. We expect this trend to continue for the remainder of 2019.

Amortization of intangible assets decreased by $26.7 million from September 30, 2018 to September 30, 2019 primarily due to a decrease in amortization of the Makena base technology intangible asset, which related to our Makena IM products and was fully impaired during the second quarter of 2019.

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Research and Development Expenses

Research and development expenses for the three months ended September 30, 2019 and 2018 consisted of the following (in thousands except for percentages):

	Three Months Ended September 30,				2019 to 2018
	2019		2018		$ Change		% Change
External research and development expenses	$	9,398	$	5,638	$	3,760	67	%
Internal research and development expenses	5,932		4,495		1,437		32	%
Total research and development expenses	$	15,330	$	10,133	$	5,197	51	%

 

The $5.2 million increase in research and development expenses incurred in the three months ended September 30, 2019, as compared to the three months ended September 30, 2018, was primarily related to our development program for AMAG-423.

We have a number of ongoing research and development programs that we are conducting independently or in collaboration with third parties. We expect our external research and development expenses to increase in the fourth quarter of 2019 as compared to the third quarter of 2019, primarily driven by our investments in AMAG-423 and ciraparantag, including costs related to our contract research organization services and drug supply needed to support our clinical trials. We cannot determine with certainty the duration and completion costs of our current or future clinical trials of our products or product candidates as the duration, costs and timing of clinical trials depends on a variety of factors including the uncertainties of future clinical and preclinical studies, uncertainties in clinical trial enrollment rates and significant and changing government regulation.

Acquired In-Process Research and Development

During the three months ended September 30, 2018, we recorded $12.5 million for acquired in-process research and development (“IPR&D”) related to the upfront option exercise fee paid to Velo in September 2018 in connection with our acquisition of AMAG-423.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended September 30, 2019 and 2018 consisted of the following (in thousands except for percentages):

	Three Months Ended September 30,				2019 to 2018
	2019		2018		$ Change			% Change
Compensation, payroll taxes and benefits	$	26,018	$	34,538	$	(8,520	)	(25	)%
Professional, consulting and other outside services	35,639		33,702		1,937			6	%
Fair value of contingent consideration liability	5		9		(4		)	(44	)%
Equity-based compensation expense	4,058		4,202		(144		)	(3	)%
Total selling, general and administrative expenses	$	65,720	$	72,451	$	(6,731	)	(9	)%

Selling, general and administrative expenses decreased by $6.7 million in the three months ended September 30, 2019 as compared to the same period in 2018 primarily due to our February 2019 restructuring to combine our women’s health and maternal health sales forces.

We expect that total selling, general and administrative expenses for the fourth quarter of 2019 will approximate the level of spend incurred in the third quarter of 2019.

Other Expense, Net

Other expense, net for the three months ended September 30, 2019 decreased by $42.3 million compared to the same period in 2018, primarily due to a $35.9 million loss on extinguishment of debt (including a $28.1 million redemption premium) incurred as a result of the early redemption of the 7.875% Senior Notes due 2023 (the “2023 Senior Notes”) in the third quarter of 2018. The $42.3 million decrease was partially offset by a $6.9 million reduction in interest expense in the three months ended September 30, 2019 as a result of this redemption.

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Income Tax Expense (Benefit)

The following table summarizes our effective tax rate and income tax expense (benefit) for the three months ended September 30, 2019 and 2018 (in thousands except for percentages):

	Three Months Ended September 30,
	2019			2018
Effective tax rate	(1		)%	4		%
Income tax expense (benefit)	$	232		$	(2,352	)

For the three months ended September 30, 2019, we recognized an income tax expense of $0.2 million, representing an effective tax rate of (1)%. The difference between the statutory federal tax rate of 21% and the (1)% effective tax rate for the three months ended September 30, 2019 was primarily attributable to the valuation allowance established against our current period losses generated and the non-deductible IPR&D expense related to the Perosphere acquisition. We have established a valuation allowance on our deferred tax assets other than refundable alternative minimum tax (“AMT”) credits to the extent that our existing taxable temporary differences would not be available as a source of income to realize the benefits of those deferred tax assets. The income tax expense for the three months ended September 30, 2019 primarily related to state income taxes.

For the three months ended September 30, 2018, we recognized an income tax benefit of $2.4 million, representing an effective tax rate of 4%. The difference between the statutory federal tax rate of 21% and the 4% effective tax rate for the three months ended September 30, 2018, was primarily attributable to the establishment of a valuation allowance on net deferred tax assets other than refundable AMT credits, the impact of non-deductible stock compensation and other non-deductible expenses, partially offset by a benefit from contingent consideration, state income taxes and orphan drug credits.

The primary driver of the increase in tax expense for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018 was the increase in state income taxes.

Net Income from Discontinued Operations

Net income from discontinued operations was $95.5 million for the three months ended September 30, 2018. For additional information on discontinued operations, see Note C, “Discontinued Operations” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Results of Operations - Nine Months Ended September 30, 2019 and 2018 

Revenues

Total net product sales for the nine months ended September 30, 2019 and 2018 consisted of the following (in thousands except for percentages):

	Nine Months Ended September 30,				2019 to 2018
	2019		2018		$ Change			% Change
Product sales, net
Feraheme	$	126,294	$	99,796	$	26,498		27	%
Makena	96,464		275,377		(178,913		)	(65	)%
Intrarosa	14,898		10,331		4,567			44	%
Other	156		302		(146		)	(48	)%
Total product sales, net	$	237,812	$	385,806	$	(147,994	)	(38	)%

Our total net product sales for the nine months ended September 30, 2019 decreased by $148.0 million as compared to the same period in 2018, due primarily to a $245.0 million decrease in Makena IM net sales, driven by manufacturing challenges, generic entrants and our withdrawal from the IM market. Partially offsetting these declines was a $66.1 million increase in Makena auto-injector net sales from $54.0 million in the first three quarters of 2018 to $120.1 million in the first three quarters of 2019. Net sales in the first nine months of 2019 included changes in estimates related to prior period liabilities for governmental rebates and commercial contractual adjustments as well as certain non-recurring items such as charges related to Prasco’s inability to meet their contractual obligations as a result of stock-outs of our Makena IM product. Partially offsetting these declines was a $26.5 million increase in Feraheme net sales.

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Total gross product sales were offset by product sales allowances and accruals for the nine months ended September 30, 2019 and 2018 as follows (in thousands, except for percentages):

	Nine Months Ended September 30,								2019 to 2018
	2019		Percent of gross product sales		2018		Percent of gross product sales		$ Change			% Change
Gross product sales	$	704,976			$	776,458			$	(71,482	)	(9	)%
Provision for product sales allowances and accruals:
Contractual adjustments	381,633		54	%	290,896		37	%	90,737			31	%
Governmental rebates	85,531		12	%	99,756		13	%	(14,225		)	(14	)%
Total	467,164		66	%	390,652		50	%	76,512			20	%
Product sales, net	$	237,812			$	385,806			$	(147,994	)	(38	)%

 

The increase in contractual adjustments as a percentage of gross product sales primarily related to a higher mix of business through commercial reimbursement channels and additional discounts offered to commercial entities.

Costs and Expenses

Cost of Product Sales

Cost of product sales for the nine months ended September 30, 2019 and 2018 were as follows (in thousands except for percentages):

	Nine Months Ended September 30,						2019 to 2018
	2019			2018			$ Change			% Change
Direct cost of product sales	$	51,774		$	42,444		$	9,330		22	%
Amortization of intangible assets	12,097			144,732			(132,635		)	(92	)%
	$	63,871		$	187,176		$	(123,305	)
Direct cost of product sales as a percentage of net product sales	22		%	11		%

Direct cost of product sales as a percentage of net product sales increased from 11% to 22% during the first three quarters of 2019 driven primarily by a $4.8 million one-time inventory write-down related to the Makena IM product and a shift in revenue mix from products with a lower cost of product sales, such as the Makena IM product, to products with a higher cost of product sales, such as the Makena auto-injector. Also contributing to the increase in direct cost of product sales as a percentage of net product sales was a lower net price for Makena due to generic competition during the first three quarters of 2019 as compared to the same period in 2018.

Amortization of intangible assets decreased by $132.6 million from September 30, 2018 to September 30, 2019 primarily due to a decrease in amortization related to the Makena base technology intangible asset, which was fully impaired during the second quarter of 2019 and was excluded from cost of product sales as discussed separately below.

Research and Development Expenses

Research and development expenses for the nine months ended September 30, 2019 and 2018 consisted of the following (in thousands except for percentages):

	Nine Months Ended September 30,				2019 to 2018
	2019		2018		$ Change		% Change
External research and development expenses	$	30,708	$	20,038	$	10,670	53	%
Internal research and development expenses	17,669		12,597		5,072		40	%
Total research and development expenses	$	48,377	$	32,635	$	15,742	48	%

 

The $15.7 million increase in research and development expenses incurred in the nine months ended September 30, 2019 as compared to the same period in 2018 was primarily related to our development programs for AMAG-423 and ciraparantag.

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Acquired In-Process Research and Development

During the nine months ended September 30, 2019, we recorded $74.9 million for acquired IPR&D related to the acquisition of Perosphere.

During the nine months ended September 30, 2018, we recorded $32.5 million for acquired IPR&D related to a $20.0 million milestone obligation to Palatin associated with the FDA acceptance of the Vyleesi NDA and $12.5 million as an upfront option exercise fee in connection with our acquisition of AMAG-423.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended September 30, 2019 and 2018 consisted of the following (in thousands except for percentages):

	Nine Months Ended September 30, 2019						2019 to 2018
	2019			2018			$ Change			% Change
Compensation, payroll taxes and benefits	$	83,150		$	98,213		$	(15,063	)	(15	)%
Professional, consulting and other outside services	123,554			100,593			22,961			23	%
Fair value of contingent consideration liability	(16		)	(49,175		)	49,159			(100	)%
Equity-based compensation expense	11,039			12,149			(1,110		)	(9	)%
Total selling, general and administrative expenses	$	217,727		$	161,780		$	55,947		35	%

Total selling, general and administrative expenses for the nine months ended September 30, 2018 included a $49.2 million decrease to the fair value of contingent consideration liability expense based on actual Makena net sales and our expectations for future performance. Excluding this decrease, selling, general and administrative expenses increased by $6.8 million in the nine months ended September 30, 2019 as compared to the same period in 2018. This increase was driven primarily by higher external costs to support the September 2019 launch of Vyleesi, partially offset by a decrease in costs as a result of our February 2019 restructuring to combine our women’s health and maternal health sales forces.

Impairment of Intangible Assets

As more fully described in Note I, “Goodwill and Intangible Assets, Net” to the condensed consolidated financial statements included in this quarterly report on Form 10-Q, we recorded a $77.4 million impairment charge during the nine months ended September 30, 2019 related to the Makena base technology intangible asset, which related to the Makena IM products.

There were no impairments of intangible assets for the nine months ended September 30, 2018.

Restructuring Expense

In February 2019, we completed a restructuring to combine our women’s health and maternal health sales forces into one integrated sales team, which promotes Intrarosa, the Makena auto-injector and now Vyleesi. Approximately 110 employees were displaced through this workforce reduction. We recorded a one-time restructuring charge of $7.4 million primarily related to severance and related benefits in the first quarter of 2019. We estimate total savings from the restructuring in 2019 to be approximately $15.2 million, partially offset by planned increases in external spending associated with the launch of Vyleesi and as we continue to invest in the growth of our commercial products. For additional information on restructuring expenses, see Note S, “Restructuring Expenses” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Other Expense, Net

Other expense, net for the nine months ended September 30, 2019 decreased by $63.2 million compared to the same period in 2018, primarily due to (i) a $35.9 million loss on extinguishment of debt (including a $28.1 million redemption premium), incurred during the nine months ended September 30, 2018 as a result of the early redemption of the 2023 Senior Notes, and (ii) a $26.2 million reduction in interest expense in the nine months ended September 30, 2019 as a result of this redemption.

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Income Tax (Benefit) Expense

The following table summarizes our effective tax rate and income tax (benefit) expense for the nine months ended September 30, 2019 and 2018 (in thousands except for percentages):

	Nine Months Ended September 30,
	2019			2018
Effective tax rate	—		%	(40		)%
Income tax (benefit) expense	$	(26	)	$	42,204

For the nine months ended September 30, 2019, we recognized an immaterial income tax benefit representing an effective tax rate of 0%. The difference between the statutory federal tax rate of 21% and the 0% effective tax rate for the nine months ended September 30, 2019 was primarily attributable to the valuation allowance established against our current period losses generated and the non-deductible IPR&D expense related to the Perosphere acquisition. We have established a valuation allowance on our deferred tax assets other than refundable AMT credits to the extent that our existing taxable temporary differences would not be available as a source of income to realize the benefits of those deferred tax assets. The income tax benefit for the nine months ended September 30, 2019 primarily related to the offset of the recognition of the income tax expense recorded in other comprehensive loss associated with the increase in the value of available-for-sale securities that we carried at fair market value during the period, partially offset by state income taxes.

For the nine months ended September 30, 2018, we recognized an income tax expense of $42.2 million, representing an effective tax rate of (40)%. The difference between the statutory federal tax rate of 21% and the (40)% effective tax rate for the nine months ended September 30, 2018, was primarily attributable to the establishment of a valuation allowance on net deferred tax assets other than refundable AMT credits, the impact of non-deductible stock compensation and other non-deductible expenses, partially offset by a benefit from contingent consideration, state income taxes and orphan drug credits.

The primary driver of the decrease in tax expense for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018 was the decrease in the valuation allowance established.

Net Income from Discontinued Operations

Net income from discontinued operations was $105.1 million for the nine months ended September 30, 2018. For additional information on discontinued operations, see Note C, “Discontinued Operations” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Liquidity and Capital Resources

General

We currently finance our operations primarily from cash generated from our operating activities, including sales of our commercialized products. Cash, cash equivalents, marketable securities and certain financial obligations as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands except for percentages):

	September 30, 2019		December 31, 2018		$ Change			% Change
Cash and cash equivalents	$	119,800	$	253,256	$	(133,456	)	(53	)%
Marketable securities	71,744		140,915		(69,171		)	(49	)%
Total	$	191,544	$	394,171	$	(202,627	)	(51	)%
Outstanding principal on 2022 Convertible Notes	320,000		320,000		—			—	%
Outstanding principal on 2019 Convertible Notes	—		21,417		(21,417		)	(100	)%
Total	$	320,000	$	341,417	$	(21,417	)	(6	)%

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Cash Flows

The following table presents a summary of the primary sources and uses of cash for the nine months ended September 30, 2019 and 2018 (in thousands):

	September 30, 2019			September 30, 2018			$ Change
Net cash (used in) provided by operating activities	$	(105,731	)	$	84,893		$	(190,624	)
Net cash provided by investing activities	8,408			513,136			(504,728		)
Net cash used in financing activities	(36,133		)	(503,138		)	467,005
Net (decrease) increase in cash, cash equivalents, and restricted cash	$	(133,456	)	$	94,891		$	(228,347	)

Operating Activities

Cash flows from operating activities represented the cash receipts and disbursements related to all of our activities other than investing and financing activities. We have historically financed our operating and capital expenditures primarily through cash flows earned through our operations. We expect cash provided by operating activities, in addition to our cash, cash equivalents and marketable securities, will continue to be a primary source of funds to finance operating needs and capital expenditures.

Operating cash flow is derived by adjusting our net income (loss) for:

• Non-cash operating items, such as depreciation and amortization and equity-based compensation;

• Changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations;

• Changes in deferred income taxes; and

• Changes associated with the fair value of contingent payments associated with our acquisitions of businesses.

For the period ended September 30, 2019 compared to September 30, 2018, net cash flows provided by operating activities decreased by $190.6 million, driven primarily by a decrease in net income as adjusted for non-cash charges of $195.1 million, partially offset by a $4.5 million increase due to changes in operating assets and liabilities. Included within net loss for the nine months ended September 30, 2019 was $74.9 million of acquired IPR&D expense related to the Perosphere asset acquisition, of which $60.8 million was paid in cash during the first quarter of 2019. The cash flows from operating activities for the nine months ended September 30, 2018 include cash flows from the operating activities of the CBR business, which are included in discontinued operations. Subsequent to the closing of the CBR transaction on August 6, 2018, we no longer generated cash flows from that business. See Note C, “Discontinued Operations,” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further detail regarding our discontinued operations.

Investing Activities

Cash flows provided by investing activities was $8.4 million for the nine months ended September 30, 2019 due primarily to net proceeds from the sale of marketable securities of $70.5 million, partially offset by a $60.0 million milestone payment triggered by the FDA approval of Vyleesi and capital expenditures of $2.1 million. Cash used in investing activities for the nine months ended September 30, 2018 was $513.1 million due to $519.3 million in proceeds from the sale of CBR offset by net purchases of marketable securities of $4.3 million and capital expenditures of $1.9 million.

Financing Activities

Cash used in financing activities was $36.1 million for the nine months ended September 30, 2019 due to the $21.4 million repayment of our 2019 Convertible Notes, $13.7 million for the repurchase of common stock and $1.8 million for payments of employee tax withholdings related to equity based compensation. Cash used in financing activities for the nine months ended September 30, 2018 was $503.1 million due to the repayment of the $475.0 million balance of our 2023 Senior Notes and a related redemption premium of $28.1 million. 

Future Liquidity Considerations

We believe that our cash, cash equivalents and marketable securities as of September 30, 2019, and the cash we expect to receive from sales of our products, will be sufficient to satisfy our cash flow needs for the foreseeable future. For the remainder

46

of 2019, we intend to spend more than our expected revenues and will therefore utilize a portion of our $191.5 million of cash and investments to fund our operations, including investment in significant development programs. This period of cash outflow is consistent with our evolving business plan to develop and launch innovative products that address unmet medical needs and can deliver long-term, durable revenue growth. Additionally, our expected utilization of cash for the remainder of 2019 includes approximately $5.2 million of cash interest in connection with our 2022 Convertible Notes.

For a detailed discussion regarding the risks and uncertainties related to our liquidity and capital resources, please refer to our Risk Factors in Part I, Item 1A of our Annual Report and in Part II, Item IA of this Quarterly Report on Form 10-Q. 

Borrowings and Other Liabilities

In the second quarter of 2017, we issued $320.0 million aggregate principal amount of convertible senior notes due 2022 (the “2022 Convertible Notes”), as discussed in more detail in Note R, “Debt,” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. The 2022 Convertible Notes are senior unsecured obligations and bear interest at a rate of 3.25% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2017. The 2022 Convertible Notes will mature on June 1, 2022, unless earlier repurchased or converted. Upon conversion of the 2022 Convertible Notes, such 2022 Convertible Notes will be convertible into, at our election, cash, shares of our common stock, or a combination thereof, at a conversion rate of 36.5464 shares of common stock per $1,000 principal amount of the 2022 Convertible Notes, which corresponds to an initial conversion price of approximately $27.36 per share of our common stock. The conversion rate is subject to adjustment from time to time. The 2022 Convertible Notes were not convertible as of September 30, 2019.

Share Repurchase Program

As of January 1, 2019, we had $20.5 million available under our previously approved share repurchase program to repurchase up to $60.0 million in shares of our common stock. In March 2019, our Board authorized additional repurchases of shares in an amount up to $20.0 million under this program. During the nine months ended September 30, 2019, we repurchased and retired 1,074,800 shares of common stock for $13.7 million (no repurchases were made during the three months ended September 30, 2019). As of September 30, 2019, $26.8 million remained available for future repurchases under this program. 

Off-Balance Sheet Arrangements

As of September 30, 2019, we did not have any off-balance sheet arrangements as defined in Regulation S-K, Item 303(a)(4)(ii).

Impact of Recently Issued and Proposed Accounting Pronouncements

See Note T, “Recently Issued and Proposed Accounting Pronouncements,” and Note U, “Recently Adopted Accounting Pronouncements,” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information regarding new accounting pronouncements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk:

There have been no material changes with respect to the information appearing in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report.

Item 4.  Controls and Procedures:

Managements’ Evaluation of our Disclosure Controls and Procedures

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Exchange Act Rule 13a-15(e), or Rule 15d-15(e)), with the participation of our management, have each concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective and were designed to ensure that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. It should be noted that any system of controls is designed to provide reasonable, but not absolute, assurances that the system will achieve its stated goals under all reasonably foreseeable circumstances. Our

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principal executive officer and principal financial officer have each concluded that our disclosure controls and procedures as of the end of the period covered by this report are effective at a level that provides such reasonable assurances.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the three months ended September 30, 2019 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings:

See Note P, “Commitments and Contingencies,” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for information regarding our legal proceedings, including how we accrue liabilities for legal contingencies.

Item 1A. Risk Factors:

With the exception of the risk factor below, there have been no material changes from the Risk Factors disclosed in Part I, Item 1A, of our Annual Report.

Makena revenue and our results of operations will be materially adversely impacted if the FDA withdraws Makena’s approval or changes its label due to the results of the PROLONG trial and the outcome of the recent Advisory Committee meeting and/or could be adversely impacted due to our exclusive dependency on sales from the Makena auto-injector in light of our recent termination of our partnership with Prasco, LLC (“Prasco”).

In March 2019, we announced topline results from the Progestin’s Role in Optimizing Neonatal Gestation clinical (“PROLONG” or “Trial 003”), which evaluated Makena in patients with a history of a prior spontaneous singleton preterm delivery. The PROLONG trial was conducted post-approval under the FDA’s “Subpart H” accelerated approval process to confirm the efficacy of the Meis trial (“Trial 002”), which supported Makena’s 2011 FDA approval. The PROLONG trial results did not demonstrate a statistically significant difference between the treatment and placebo arms for the co-primary endpoints. On October 29, 2019, the FDA’s Bone, Reproductive and Urologic Drugs Advisory Committee (the “Advisory Committee”) met to discuss the PROLONG study and provide the FDA input to inform the FDA’s regulatory decision making for Makena. At the conclusion of the meeting, nine members of the Advisory Committee voted to recommend that the FDA withdraw its approval of Makena, seven voted to leave Makena on the market under accelerated approval and require a new confirmatory trial and no member voted to leave Makena on the market without requiring a new confirmatory trial. While the results of the Advisory Committee's voting are not binding, those results will be considered by the FDA in deciding what regulatory steps to take with respect to Makena, which could result in a formal administrative hearing after an FDA proposal to withdraw the approval of Makena. The FDA’s decision may be further influenced by a recently filed Citizen Petition, which requested that the FDA withdraw its approval of Makena based on the failure of the Makena clinical data to establish evidence of efficacy for preterm birth. If the FDA withdraws its approval of Makena, our revenues and results of operations will be materially and adversely impacted. Even if the FDA were to decide against withdrawal of Makena from the market at this time, it is likely that the FDA would require us to generate additional data or conduct additional clinical trials as a condition to Makena’s continued commercialization. We may not be able to generate additional efficacy data that will be satisfactory to the FDA in a timely manner, or at all, and the generation of such data is likely to be costly and take a considerable amount of time to generate. Additionally, in light of the discussions and voting of the Advisory Committee and pending the FDA’s regulatory decision, healthcare providers may be reluctant to continue prescribing Makena or the FDA may require that our label include information on the PROLONG study, restrictions to the current indication or the insertion of new warnings or precautions. Further, in light of the advice of the Advisory Committee that FDA withdraw the approval of Makena, certain medical professional organizations and other societies could change their guidelines to physicians. Any of these outcomes could negatively impact or prevent our ability to commercialize Makena and would materially and adversely impact our results of operations and could materially and adversely impact our stock price.

The commercial success of Makena (if approval is not ultimately withdrawn by the FDA) is exclusively dependent upon sales from the pre-filled subcutaneous auto-injector (the “Makena auto-injector”). In August 2019, we terminated our partnership with Prasco, who had been marketing a generic version of the intramuscular (“IM”) Makena product (the “Makena authorized generic”). As a result of the supply disruptions of our Makena IM products, Prasco had been unable to meet demand for the Makena authorized generic and had consequently lost significant market share. Accordingly, we and Prasco determined it was not commercially viable to continue the relationship and decided to mutually terminate our agreement and cease commercialization of the Makena authorized generic. In light of the termination of our partnership with Prasco, we do not

48

expect to ship any further authorized generic product to Prasco.

Although there is no direct competition with the Makena auto-injector, the Makena auto-injector competes for the same patients as generic versions of the Makena IM product and we cannot guarantee that we will be able to continue to convince patients or healthcare providers to use or to switch from using the IM method of administration to the auto-injector, including (1) if patients or healthcare providers are hesitant or apprehensive to use an auto-injector product due to perceptions regarding safety, efficacy or pain associated with the Makena auto-injector, (2) if the auto-injector is not priced competitively or is not provided comparable insurance coverage, or (3) if there are concerns about our supply chain more generally in light of the Makena IM products supply disruption or if we experience a similar supply disruption for the Makena auto-injector. We expect that the Makena auto-injector may continue to experience pricing and supply chain pressure (if approval is not ultimately withdrawn by the FDA) and as a result, our financial condition and results of operations could be adversely impacted. If we are unsuccessful with any such efforts, Makena revenues could continue to be negatively and materially impacted, which could have a material and negative impact on our stock price and results of operations.

Further, we have incurred considerable expenses and our revenues have suffered as a result of the Makena IM supply disruption. For example, we were required to reimburse Prasco for certain charges it incurred in 2018 and 2019 due to our inability to supply them with sufficient product to meet their contractual obligations with customers. We expect to continue to incur expenses in connection with the termination of our relationship with Prasco. We also expect to incur expenses as we pursue our remedies under our supply agreement with our third party manufacturer of the Makena IM products, which is costly to pursue and may not result in satisfactory, adequate or any compensation for the damages we suffered.

We are completely dependent on Endoceutics to manufacture Intrarosa and any difficulties, disruptions, delays or unexpected costs, or the need to find alternative sources, could adversely affect our results of operations.

We are completely dependent upon Endoceutics, Inc. (“Endoceutics”) to manufacture commercial supply of Intrarosa, and Endoceutics currently relies on a single contract manufacturing organization (“CMO”) for such supply. Endoceutics is a small company organized outside of the U.S. with limited operations and resources and has limited experience overseeing CMOs for products at commercial scale, which involves significant and complex regulatory and compliance obligations. Endoceutics has and is likely to continue to face challenges and difficulties in satisfying such obligations. For example, in September 2019, a Complete Response Letter was received from the FDA in response to our March 2019 regulatory filing to add a manufacturing plant owned by Endoceutics, located in Canada, which would act as a second source supplier of Intrarosa. If we are unable to adequately address the issues raised or provide the information requested by the FDA in a timely manner, or at all, we may experience significant delays in our efforts to obtain approval for the Endoceutics manufacturing plant or may not receive approval at all, which would leave Endoceutics, and ultimately us, entirely dependent upon Endoceutics’ current CMO, which has experienced issues in the past. In addition, Endoceutics has expanded its manufacturing obligations to include supplying their other partners who sell Intrarosa outside the U.S. As a result, Endoceutics could exhaust some or all of their resources meeting the demand of other parties and could fail to provide us with adequate supply of Intrarosa on a timely basis. Any failure of Endoceutics to provide us with sufficient amounts of Intrarosa could result in a shortage of our Intrarosa inventory, which could adversely impact our results of operations.

Furthermore, Endoceutics' assets, including the intellectual property licensed to us, are subject to a security interest held by a third-party lender. Accordingly, if Endoceutics fails to perform its obligations under its loan documents, our rights and remedies under the license agreement may be impaired or inadequate, which could jeopardize our revenue from the Intrarosa program and/or our business, financial condition and results of operations may be materially adversely affected.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds:

The following table provides certain information with respect to our purchases of shares of our stock during the three months ended September 30, 2019.

Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of  Shares Purchased  as Part of Publicly Announced Plans or Programs (2)	Maximum Number  of Shares (or approximate dollar value) That May Yet Be Purchased Under the Plans or Programs (2)
July 1, 2019 through July 31, 2019	304	$	9.15	—	3,239,088
August 1, 2019 through August 31, 2019	2,679	9.10		—	2,450,080
September 1, 2019 through September 30, 2019	3,514	11.89		—	2,316,439
Total	6,497	$	10.61	—

_________________________

⁽¹⁾  Includes the surrender of shares of our common stock withheld by us to satisfy the minimum tax withholding obligations in connection with the vesting of restricted stock units held by our employees.

⁽²⁾  We have repurchased and retired $53.2 million of our common stock under our share repurchase program through September 30, 2019. These shares were purchased pursuant to a repurchase program authorized by our Board to repurchase up to $80.0 million of our common stock (including increased authority to repurchase an additional $20.0 million approved by our Board in March 2019), of which $26.8 million remained authorized for repurchase as of September 30, 2019. The repurchase program does not have an expiration date and may be suspended for periods or discontinued at any time.

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Item 6. Exhibits:

Exhibit Number	Description
10.1+*	Commercial Supply Agreement, dated as of June 10, 2016, by and between AMAG Pharmaceuticals, Inc. (as assignee from Palatin Technologies, Inc.) and Catalent Belgium S.A.
10.2+*	Supply Agreement, dated as of December 20, 2018, by and between AMAG Pharmaceuticals, Inc. and Ypsomed AG
10.3+*	Manufacturing Services Agreement, dated as of June 1, 2018, by and between AMAG Pharmaceuticals, Inc. and Lonza Ltd
10.4+*	Termination of Distribution and Supply Agreement, dated as of August 6, 2019, by and between AMAG Pharmaceuticals, Inc. and Prasco, LLC.
10.5	Settlement Agreement, dated October 8, 2019, by and among AMAG Pharmaceuticals, Inc., Caligan Partners LP, Caligan Partners CV II LP, David E. Johnson and Paul Fonteyne (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 8, 2019, File No. 001-10865)
31.1+	Certification Pursuant to Rule 13a‑14(a)/15d‑14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2+	Certification Pursuant to Rule 13a‑14(a)/15d‑14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1++	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2++	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.SCH+	Inline XBRL Taxonomy Extension Schema Document
101.CAL+	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB+	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE+	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF+	Inline XBRL Taxonomy Extension Definition Linkbase Document
104+	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

+	Exhibits marked with a plus sign (“+”) are filed herewith.
++	Exhibits marked with a double plus sign (“++”) are furnished herewith.
*	Certain portions of this exhibit (indicated by “[***]”) have been omitted in accordance with the rules of the Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMAG PHARMACEUTICALS, INC.
By:	/s/ William K. Heiden
	William K. Heiden
	President and Chief Executive Officer (Principal Executive Officer)
Date:	November 1, 2019
AMAG PHARMACEUTICALS, INC.
By:	/s/ Edward Myles
	Edward Myles
	Executive Vice President of Finance, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)
Date:	November 1, 2019

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EX-10.1

Exhibit 10.1

Portions of this Exhibit have been redacted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

COMMERCIAL SUPPLY AGREEMENT

(Bremelanotide—Pre-filled syringe in auto-injector)

THIS COMMERCIAL SUPPLY AGREEMENT (“Agreement”) is made as of this 10^TH day of June, 2016 (“Effective Date”)

BETWEEN

(1) Palatin Technologies, Inc., a New Jersey corporation, with a place of business at 4-B Cedar Brook Drive, Cranbury, New Jersey, USA 08512 (“Palatin”); and

(2) Catalent Belgium S.A., a Belgian company, with a place of business at Rue Font St. Landry, 10 Parc Mercator B-1120, Neder over Heembeek, Belgium (“Catalent”).

RECITALS

A. Palatin is a biopharmaceutical company that develops, tests and commercializes, directly or through third parties, pharmaceutical products.

B. Catalent is a leading provider of advanced technologies, and development, manufacturing and packaging services for pharmaceutical, biotechnology and consumer healthcare companies.

C. Palatin desires to engage Catalent to provide certain services to Palatin in connection with the processing of Palatin’s Product, and Catalent desires to provide such services, all pursuant to the terms and conditions set out in this Agreement.

D. Catalent and Palatin have entered into that certain Binding Terms for Incorporation into a Capital and a Commercial Supply Agreement, dated April 1, 2016 (the “Binding Terms”), which Binding Terms shall be superseded in its entirety by this Agreement and the Manufacturing Preparation and Services Agreement (as defined hereafter).

THEREFORE, the parties agree as follows:

1.DEFINITIONS

The following terms have the following meanings in this Agreement:

1.1“Acknowledgement” has the meaning set out in Clause 4.3.

1.2“Affiliate” means (a) with respect to Palatin, any corporation or other business entity that, directly or indirectly, is controlled by, controls, or is under common control with Palatin; and (b) with respect to Catalent, Catalent, Inc., Catalent Pharma Solutions, Inc. and any corporation or other

1

business entity controlled, directly or indirectly, by Catalent Pharma Solutions, Inc. For such purposes, “control” means the direct or indirect ownership of at least fifty percent (50%) of the voting interest in such corporation or other entity or the power in fact to control the management directions of such entity.

1.3“Agreement” has the meaning set out in the introductory paragraph, and includes all its Attachments and other appendices (all of which are incorporated herein by reference).

1.4“ANDA” has the meaning set out in Clause 9.2.1.

1.5“Annual Product Maintenance Fee” has the meaning set forth in Clause 7.1C.

1.6 “API” means the compound bremelanotide, as further described in the Specifications.

1.7“API Inventions” has the meaning set out in Section 11.

1.8“Applicable Laws” means, with respect to Palatin, all laws, statutes, statutory provisions or subordinate legislation, currently in effect or enacted or promulgated during the Term, and as amended from time to time, of each jurisdiction in which API or Product is produced, marketed, distributed, used or sold; and with respect to Catalent, cGMP and all other laws, statutes, statutory provisions and subordinate legislation, currently in effect or enacted or promulgated during the Term, and as amended from time to time, of the jurisdiction in which Catalent Processes Product.

1.9“Auto Injector Assembly Line” has the meaning set forth in Clause 3.5.

1.10“Batch” means a defined quantity of Product that has been or is being Processed in accordance with the Specifications.

1.11“Binding Terms” has the meaning set forth in the Recitals.

1.12“Catalent Defective Processing” has the meaning set out in Clause 5.2.

1.13“Catalent” has the meaning set out in the introductory paragraph. Catalent shall have the right to cause any of its Affiliates to perform any of its obligations hereunder, and Palatin shall accept such performance as if it were performance by Catalent.; provided, however, that Catalent shall remain fully liable for the performance by its Affiliate of Catalent’s obligations under this Agreement to the same extent as if Catalent had performed or failed to perform its obligations under this Agreement.

1.14“Catalent CAPEX Expenditures” has the meaning set forth in the Manufacturing Preparation and Services Agreement.

1.15“Catalent Indemnitees” has the meaning set out in Clause 13.2.

1.16“Catalent IP” has the meaning set out in Section 11.

1.17“cGMP” means current Good Manufacturing Practices promulgated by the Regulatory Authorities in the jurisdictions included in Applicable Laws. This includes 2003/94/EEC Directive (as supplemented by Volume 4 of EudraLex published by the European Commission), as amended,

2

if and as implemented in the relevant constituent country; and in the United States, this includes 21 C.F.R. Parts 210 and 211, as amended.

1.18“Change of Control” means, with respect to a party: (a) any merger, reorganization, consolidation, or other business combination of such party with a third party that results in the voting securities of such party outstanding immediately prior thereto ceasing to represent at least fifty percent (50%) of the combined voting power of the surviving entity immediately after such merger, reorganization, consolidation, or other business combination; (b) a third party becoming the beneficial owner of fifty percent (50%) or more of the combined voting power of such party in a single transaction or series of related transactions; or (c) the sale, transfer, exchange or other disposition to a third party of all or substantially all of a party’s assets or business relating to this Agreement (whether alone or in connection with a sale, transfer, exchange or other disposition of other assets or businesses of such party).

1.19“Commencement Date” means 60 days from the first date on which the FDA gives market Regulatory Approval with respect to the Product.

1.20“Confidential Information” has the meaning set out in Clause 10.1.

1.21“Contract Year” means each consecutive 12 month period beginning on the Commencement Date or anniversary thereof, as applicable.

1.22“CPR” has the meaning set out in Clause 18.10.

1.23“Defective Product” has the meaning set out in Clause 5.2.

1.24“Discloser” has the meaning set out in Clause 10.1.

1.25“Effective Date” has the meaning set out in the introductory paragraph.

1.26“Equipment” means any equipment to be supplied by Catalent to use in the Processing.

1.27“Exception Notice” has the meaning set out in Clause 5.2.

1.28“Facility” means Catalent’s facility in Brussels, Belgium or such other Catalent facility as mutually agreed by the parties.

1.29“FDA” means the United States Food and Drug Administration or any successor thereto.

1.30“Firm Commitment” has the meaning set out in Clause 4.2.

1.31“GDUFA Fees” has the meaning set out in Clause 9.2.1.

1.32“Invention” has the meaning set out in Section 11.

1.33“Losses” has the meaning set out in Clause 13.1.

1.34“Manufacturing Preparation and Services Agreement” means that certain agreement of even date herewith between Catalent and Palatin pursuant to which Catalent (itself or through its Affiliates) has agreed to upgrade its manufacturing capacity and infrastructure to provide certain

3

services in relation to the manufacture of the Product and to reserve certain manufacturing capacity on its upgraded facilities.

1.35“Minimum Requirement” has the meaning set out in Clause 4.1.

1.36“Palatin” has the meaning set out in the introductory paragraph, or any successor or permitted assign.

1.37“Palatin Indemnitees” has the meaning set out in Clause 13.1.

1.38“Palatin IP” has the meaning set out in Section 11.

1.39“Palatin-supplied Materials” means any materials to be supplied by or on behalf of Palatin to Catalent for Processing, as provided in Attachment C, including API, Ypsomed auto injector components and parts, and reference standards.

1.40“Price” shall have the meaning set forth in Attachment D hereto.

1.41“Process” or “Processing” means the compounding, filling, producing, manufacturing, assembling and packaging (clinical, secondary or retail packaging) of Palatin-supplied Materials and Raw Materials into Product by Catalent, in accordance with the Specifications and under the terms of this Agreement.

1.42“Processing Date” means the day on which the first step of physical Processing is scheduled to occur, as identified in an Acknowledgement.

1.43“Process Inventions” has the meaning set out in Section 11.

1.44“Product” means the pharmaceutical product containing the API, as more specifically described in the Specifications.

1.45“Product Maintenance Services” has the meaning set out in Clause 2.3.

1.46“Purchase Order” has the meaning set out in Clause 4.3.

1.47“Quality Agreement” has the meaning set out in Clause 9.6.

1.48“Raw Materials” means all raw materials, supplies, components, syringes, and packaging necessary to manufacture and ship Product in accordance with the Specifications, as provided in Attachment C, but excluding Palatin-supplied Materials.

1.49“Recall” has the meaning set out in Clause 9.5.

1.50“Recipient” has the meaning set out in Clause 10.1.

1.51“Regulatory Approval” means any approvals, permits, product and/or establishment licenses, registrations or authorizations, including European marketing authorizations and applications and US Investigational New Drug applications, New Drug Applications and Abbreviated New Drug Applications, as applicable, of any Regulatory Authorities that are necessary or advisable

4

in connection with the development, manufacture, testing, use, storage, exportation, importation, transport, promotion, marketing, distribution or sale of API or Product in the Territory.

1.52“Regulatory Authority” means the regulatory bodies or agencies in the Territory that are responsible for (A) the regulation (including pricing) of any aspect of pharmaceutical or medicinal products intended for human use or (B) health, safety or environmental matters generally. This includes the European Medicines Agency; and in the United States, this includes the United States Food and Drug Administration.

1.53“Representatives” of an entity means such entity’s duly-authorized officers, directors, employees, agents, accountants, attorneys or other professional advisors.

1.54”Required Disclosure” has the meaning set out in Clause 10.5.

1.55“Review Period” has the meaning set out in Clause 5.2.

1.56“Rolling Forecast” has the meaning set out in Clause 4.2.

1.57“Specifications” means the procedures, requirements, standards, quality control testing and other data and the scope of services as set out in Attachment C, as modified from time to time in accordance with Section 8.

1.58“Supply Failure” has the meaning set forth in Clause 4.7.

1.59“Term” has the meaning set out in Clause 16.1.

1.60“Territory” means the European Union and the United States and its territories and possessions, those countries that are listed in Attachment E, and any other country that the parties agree in writing to add to this definition of Territory in an amendment to this Agreement; provided, however, that Territory shall not be amended to include countries that are targeted by the comprehensive sanctions, restrictions or embargoes administered by the United Nations, European Union, United Kingdom, or the United States. Catalent shall not be obliged to Process Products for sale in any of such countries if it is prevented from doing so, or would be required to obtain or apply for special permission to do so, due to any restrictions (such as embargoes) imposed on it by any governmental authorities, including without limitation, those imposed by the US Office of Foreign Asset Control.

1.61“Uncured Supply Failure” has the meaning set out in Clause 4.7.

1.62“Unit Pricing” has the meaning set out in Clause 7.1B.

1.63“Validation Services” has the meaning set out in Clause 2.1.

1.64“Vendor” has the meaning set out in Clause 3.2B.

2.VALIDATION, PROCESSING & RELATED SERVICES

2.1Validation Services. Catalent shall perform the Product qualification, validation and stability services set out in Attachment A (the “Validation Services”).

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2.2Supply and Purchase of Product. Catalent shall Process Product in accordance with the Specifications, Applicable Laws and this Agreement. Except as set forth in Clause 4.7, Palatin and its Affiliates shall purchase [***] from Catalent no less than [***] of Palatin’s and its Affiliates’ requirements of Product in the Territory in accordance with this Agreement.

2.3Product Maintenance Services. Palatin will receive the product maintenance services set out in Attachment B (the “Product Maintenance Services”).

2.4Other Related Services. Catalent shall provide any other Product-related services as the parties may agree in writing. Such writing shall include the scope and fees for any such services and shall be appended to this Agreement. The terms and conditions of this Agreement shall govern such services unless otherwise agreed by the parties.

3.MATERIALS, EQUIPMENT AND AUTO INJECTOR ASSEMBLY LINES

3.1Palatin-supplied Materials.

A.Palatin shall supply to Catalent for Processing, at [***] cost, all Palatin-supplied Materials, in quantities sufficient to meet Palatin’s requirements for Product. Palatin shall deliver DDP (Incoterms 2010) such items and associated certificates of analysis to the Facility no later than [***] (but not earlier than [***] unless otherwise agreed by Catalent) before the Processing Date. Palatin shall be responsible at its cost for securing necessary export or import, or similar clearances, permits or certifications required in respect of such supply. Catalent shall use Palatin-supplied Materials solely for Processing. To the extent not previously provided, Palatin shall provide to Catalent, prior to delivery of any Palatin-supplied Materials, a copy of all associated material safety data sheets, safe handling instructions, health and environmental information, and any regulatory certifications or authorizations that may be required under Applicable Laws relating to the API and Product, and shall promptly provide any updates thereto.

B.Within [***] following receipt of Palatin-supplied Materials, Catalent shall inspect such items to verify their identity. Unless otherwise expressly required by the Specifications, Catalent shall have no obligation to test such items to confirm that they meet the associated specifications or certificate of analysis or otherwise; but in the event that Catalent detects a nonconformity with Specifications, Catalent shall give Palatin prompt notice of such nonconformity. Catalent shall not be liable for any defects in Palatin-supplied Materials, or in Product as a result of defective Palatin-supplied Materials unless Catalent failed to properly perform the foregoing obligations. Catalent shall follow Palatin’s reasonable written instructions in respect of return or disposal of defective Palatin-supplied Materials.

C.Palatin shall retain title to Palatin-supplied Materials at all times, and Palatin shall bear the risk of loss thereof, except in the event of losses related to Catalent’s gross negligence or willful misconduct, in which case Catalent’s liability shall be limited pursuant to Section 14 below.

3.2Raw Materials.

A.Catalent shall procure Raw Materials only from vendors that are approved in writing by Palatin or otherwise qualified in accordance with the provisions of the Quality Agreement. Catalent shall be responsible for procuring Raw Materials as necessary to meet the Firm Commitment. Catalent shall not be liable for any delay in delivery of Product if (i) Catalent is unable to obtain, in a timely manner, a particular Raw Material necessary for Processing and (ii) Catalent

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placed orders for such Raw Materials promptly following receipt of Palatin’s Firm Commitment. In the event that any Raw Material becomes subject to purchase lead time beyond the Firm Commitment time frame, the parties will negotiate in good faith an appropriate amendment to this Agreement, including Clause 4.2.

B.In certain instances, Palatin may require a specific supplier, manufacturer or vendor (“Vendor”) to be used for Raw Material. In such an event, (i) such Vendor will be identified in the Specifications and (ii) the Raw Materials from such Vendor shall be deemed Palatin-supplied Materials for purposes of this Agreement. If the cost of the Raw Material from any such Vendor (other than a Vendor specified in the Specifications as of the Effective Date) is greater than Catalent’s costs for the same raw material of equal quality from other vendors, Catalent shall add the difference between Catalent’s cost of the Raw Material and the Vendor’s cost of the Raw Material to the Unit Pricing. Palatin will be responsible for all reasonable, out-of-pocket costs incurred by Catalent associated with qualification of any such Vendor who has not been previously qualified by Catalent.

C.In the event of (i) a Specification change for any reason, (ii) obsolescence of any Raw Material or (iii) termination or expiry of this Agreement, Palatin shall bear the cost of any unused Raw Materials (including packaging), so long as Catalent (a) purchased such Raw Materials in quantities consistent with Palatin’s then current Firm Commitment and any minimum purchase obligations required by the vendor and (b) used commercially reasonable efforts to mitigate such costs by using any such unused Raw Materials in the manufacture of other products.

3.3Artwork and Labeling. Palatin shall provide, or approve prior to Catalent’s procurement of applicable Raw Material, all artwork, advertising and labeling information necessary for Processing, if any. Such artwork, advertising and labeling information is and shall remain the exclusive property of Palatin, and Palatin shall be solely responsible for the content thereof. Such artwork, advertising and labeling information or any reproduction thereof may not be used by Catalent, during or after the Term, in any manner other than performing its obligations hereunder.

3.4[***]

3.5Auto Injector Assembly Line. Catalent and Palatin agree that in order to scale up Processing of the Product, pursuant to the terms of the Manufacturing Preparation and Services Agreement Catalent shall undertake a Processing line expansion for auto injector assembly (such expanded Processing line, the “Auto Injector Assembly Line”). With respect to all equipment and components of the Auto Injector Assembly Line, notwithstanding any amounts that Palatin contributes to the purchase of equipment and components in connection with the establishment of such Auto Injector Assembly Line, Catalent shall solely own all right, title and interest in and to such line, and all equipment and components relating thereto, and shall bear the risk of loss thereof. [***] The parties shall work together in good faith to plan and schedule such Palatin priority access based on a combination of Palatin’s (i) Rolling Forecasts and Firm Commitment and (ii) Minimum Requirements for the applicable Contract Year(s). In the event that during a Contract Year(s), Catalent uses the Auto Injector Assembly Line for another Catalent customer in keeping with the priority access requirements set forth in this Clause 3.5, then [***].

4.MINIMUM REQUIREMENT, FORECASTS & PURCHASE ORDERS

4.1Minimum Requirement. During each Contract Year, Palatin (or its Affiliates or licensees) shall purchase the minimum number of units of Product set out on Attachment D (“Minimum

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Requirement”). If during any Contract Year Palatin purchases a number of units of Product that is less than the Minimum Requirement (the difference, a “Purchase Shortfall”), then within [***] after the end of such Contract Year, Palatin shall pay Catalent an amount equal to [***].

4.2Forecast. On or before the [***], and thereafter on a [***] basis on or before the [***] of each succeeding [***], Palatin shall furnish to Catalent a written [***] rolling forecast of the quantities of Product that Palatin intends to order from Catalent during such period (“Rolling Forecast”); provided that to the extent feasible at least [***] of the total number of units purchased in the relevant Contract Year shall be purchased in each of the first and second six months of such relevant Contact Year. The [***] of such Rolling Forecast shall constitute a binding commitment to purchase the quantities of Product specified therein (“Firm Commitment”) and [***] of the Rolling Forecast shall be non-binding, good faith estimates.

4.3Purchase Orders.

A.Concurrently with the submission of each Rolling Forecast, Palatin shall submit to Catalent a binding, non-cancelable purchase order for Product, specifying the Batch size (to the extent the Specifications permit Batches of different sizes) and the requested delivery date for each Batch (“Purchase Order”); provided, that each Purchase Order shall be for not less than the Firm Commitment (but only to the extent the Firm Commitment was not covered in a previous Purchase Order). Purchase Orders for quantities of Product in excess of the Firm Commitment shall be submitted by Palatin at least [***] in advance of the delivery date requested in the Purchase Order.

B.Within [***] after receipt of a Purchase Order, Catalent shall issue a written acknowledgement (“Acknowledgement”) that it accepts or rejects such Purchase Order. Each acceptance Acknowledgement shall either confirm the delivery date set out in the Purchase Order or provide a reasonable alternative delivery date (which, in any event, shall be [***]), and shall include the Processing Date. Catalent may reject any Purchase Order in excess of the Firm Commitment or otherwise not given in accordance with this Agreement; provided, however, that Catalent shall use its commercially reasonable efforts to supply Palatin with quantities of Product which are up to [***] in excess of the quantities specified in the Firm Commitment, subject to Catalent’s other supply commitments and manufacturing, packaging and equipment capacity. A properly submitted Purchase Order shall be [***] within [***] after receipt of such Purchase Order.

C.In the event of a conflict between the terms of any Purchase Order or Acknowledgement and this Agreement, the terms of this Agreement shall control unless the terms of the Purchase Order expressly override the terms set forth herein.

4.4Catalent’s Cancellation of Purchase Orders. Notwithstanding Clause 4.5, Catalent reserves the right to cancel all, or any part of, a Purchase Order upon written notice to Palatin, and Catalent shall have no further obligations or liability with respect to such Purchase Order, if Palatin refuses or fails to timely supply conforming Palatin-supplied Materials in accordance with Clause 3.1 and such failure is not cured within [***] after the giving of written notice of such failure. Any such cancellation of Purchase Orders shall not constitute a breach of this Agreement by Catalent nor shall it absolve Palatin of its obligation in respect of the Minimum Requirement.

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4.5Palatin’s Modification or Cancellation of Purchase Orders.

A.Palatin may modify the delivery date or quantity of Product in a Purchase Order only by submitting a written change order to Catalent at least [***] in advance of the earliest Processing Date covered by such change order. To the extent the change order modifies the delivery date or modifies the quantity of Product in a Purchase Order, such change order shall be effective and binding against Catalent only upon the written approval of Catalent, and notwithstanding the foregoing, Palatin shall remain responsible for the Firm Commitment.

B.Changes to or postponement of any Batch of Product by Palatin will not reduce or in any way affect Palatin’s Minimum Requirement obligations set out in Clause 4.1.

4.6Unplanned Delay or Elimination of Processing. Catalent shall use commercially reasonable efforts to meet the Purchase Orders, subject to the terms and conditions of this Agreement. Catalent shall provide Palatin with as much advance notice as practicable, and shall provide at least [***] advance notice where possible, if Catalent determines that any Processing will be delayed or eliminated for any reason.

4.7Supply Failure. For purposes of this Agreement, a “Supply Failure” shall mean a failure by Catalent to supply Product meeting the Specifications, subject to Clauses 5.2, 5.3 and 5.4, in the quantities ordered by Palatin (subject to the limitations and terms set forth in Clauses 4.3 and 4.4) for [***], where such failure is [***]. In the event of [***] (such event, an “Uncured Supply Failure”), Palatin shall have the right to [***]. In the event of such Uncured Supply Failure,[***] the parties shall meet to discuss in good faith how to equitably manage any Minimum Requirement for the then current Contract Year, [***].

4.8Observation of Processing. In addition to Palatin’s audit right pursuant to Clause 9.4, Palatin may send [***] Representatives to the Facility to observe Processing for a maximum of [***] (unless otherwise agreed by Catalent in writing), upon at least [***] prior notice, at reasonable times during regular business hours. Such Palatin Representatives shall abide by all Catalent safety rules and other applicable policies and procedures, and Palatin shall be responsible for such compliance. Palatin shall defend, indemnify and hold harmless Catalent for any action, omission or other activity of such Palatin Representatives while on Catalent’s premises. Palatin’s Representatives shall be required to sign Catalent’s standard visitor confidentiality agreement prior to being allowed access to the Facility.

5.TESTING; SAMPLES; RELEASE

5.1Batch Records and Data; Release.

A.Subject to Clause 5.1B, unless otherwise agreed to by the parties in writing, within [***] after Catalent completes Processing of a Batch, Catalent shall provide Palatin with copies of executed Batch records prepared in accordance with the Specifications; provided, that if testing reveals an out-of-Specification result, Catalent shall provide such Batch records within [***] after resolution of the out-of-Specification result. After Catalent completes Processing of a Batch, Catalent shall also provide Palatin or its designee with a certificate of analysis for such Batch. Issuance of a certificate of conformance/analysis constitutes release of the Batch by Catalent to Palatin. Palatin shall be responsible for final release of Product (including testing), at its cost, to the market.

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B.If testing reveals an out-of-Specification result with respect to a Batch, Catalent shall report such result to Palatin as soon as practicable, and in any event within [***] after obtaining such result. Within [***] after resolution of the out-of-Specification result, Catalent shall provide Palatin a written report detailing the cause of such out-of-Specification result and the manner in which it was resolved. Catalent shall provide Palatin with such further information as Palatin reasonably requests with respect to such out-of-Specification result.

5.2Testing; Rejection. Following Palatin’s receipt of a shipment of a Batch, Palatin or Palatin’s designee may test samples of such Batch to confirm that the Specifications have been met. Unless within [***] after Palatin’s receipt of a Batch (“Review Period”), Palatin or its designee notifies Catalent in writing (an “Exception Notice”) that such Batch is not in compliance with Clause 12.1A (“Defective Product”), and provides a sample of the alleged Defective Product, the Batch shall be deemed accepted by Palatin and Palatin shall have no right to reject such Batch. Upon timely receipt of an Exception Notice from Palatin, Catalent shall in its sole discretion conduct an appropriate investigation to determine whether or not it agrees with Palatin that Product is Defective Product and to determine the cause of any nonconformity. If Catalent agrees that Product is Defective Product and determines that the cause of nonconformity is attributable to Catalent’s negligence or willful misconduct (“Catalent Defective Processing”), then Clause 5.4 shall apply.

5.3Discrepant Results. If the parties disagree as to whether Product is Defective Product and/or whether the cause of the nonconformity is Catalent Defective Processing, without regard to whether Catalent conducts an appropriate investigation as provided in Clause 5.2, and this is not resolved within [***] of the Exception Notice date, the parties shall cause a mutually acceptable independent third party to review records, test data and to perform comparative tests and/or analyses on samples of the alleged Defective Product and its components, including Palatin-supplied Materials. The independent party’s results as to whether or not Product is Defective Product and the cause of any nonconformity shall be final and binding. Unless otherwise agreed to by the parties in writing, the costs associated with such testing and review shall be borne by Catalent if Product is Defective Product attributable to Catalent Defective Processing, and by Palatin in all other circumstances. For avoidance of doubt, where the cause of nonconformity cannot be determined or assigned, it shall be deemed not Catalent Defective Processing.

5.4Defective Processing. Catalent shall, [***], either (A) [***] or (B) [***]. This shall be Palatin’s sole and exclusive remedy under this Agreement for Defective Product attributable to Catalent Defective Processing, other than as provided in Clause 4.7, 9.5 and 13.1 of this Agreement.

6.DELIVERY

6.1Delivery. Catalent shall deliver Product Ex Works (Incoterms 2010) the Facility promptly following Catalent’s release of Product. Catalent shall segregate and store all Product until tender of delivery. Title to Product shall transfer to Palatin upon Catalent’s tender of delivery. Palatin shall qualify or validate at least three carriers to ship Product and then designate the priority of such qualified carriers to Catalent, and Catalent shall not, without Palatin’s prior written consent, utilize any other carrier for purposes of delivering Product to Palatin or its designees. Catalent shall include with each shipment of Product the applicable Purchase Order number, the Batch number and the quantity of Product.

6.2Storage Fees. If Catalent performs in accordance with the Purchase Order, and Palatin fails to take delivery of any Product on any agreed delivery date, Catalent shall store such Product and Palatin shall be invoiced on the first day of each month following such scheduled delivery for

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reasonable storage costs. All such storage shall be under conditions set forth in the Specifications. For each such Batch of stored Product, risk of loss shall transfer to Palatin upon placement into storage and Catalent shall have the right to ship such Product to Palatin within two months after billing.

6.3Bill and Hold. From time to time, at Palatin’s request, the agreed delivery date of the Purchase Order may be extended under a bill and hold arrangement as more fully set forth below. For each such Batch of stored Product, Palatin agrees that: (A) Palatin has made a fixed commitment to purchase the Product, (B) risk of loss for such Product passes to Palatin upon placement into storage, (C) such Product shall be on a bill and hold basis for legitimate business purposes, (D) Palatin shall identify a fixed delivery date for the Product and (E) Palatin shall agree to be invoiced and to pay such invoice in accordance with the payment terms set forth in Clause 7.3 of this Agreement. Upon making a request for a bill and hold arrangement, Palatin shall provide Catalent with a letter confirming items (A) through (E) of this Clause 6.3 for each Batch of stored Product.

7.PAYMENTS; LICENSING; CHANGE OF CONTROL

7.1 Fees. In consideration for Catalent performing services hereunder:

A.Palatin shall pay to Catalent the fees for Validation Services set out on Attachment A. Catalent shall submit an invoice to Palatin for such fees upon the completion of the relevant phase of the Validation Services.

B.Palatin shall pay Catalent the unit pricing for Product set out on Attachment D (“Unit Pricing”). Catalent shall submit an invoice to Palatin for such fees upon tender of delivery of Product as provided in Clause 6.1.

C.Except as provided in Clause 3.5, Palatin shall pay Catalent the annual fees for Product Maintenance Services set out on Attachment D (the “Annual Product Maintenance Fee”). Catalent shall submit an invoice to Palatin for such Annual Product Maintenance Fee payable upon [***] and upon each anniversary of such date thereafter during the Term.

D.Other Fees. Palatin shall pay Catalent for all other fees and expenses of Catalent owing in accordance with the terms of this Agreement, including pursuant to Clauses 2.4, 4.1, 6.2, 9.2.1 and 16.4. Catalent shall submit an invoice to Palatin for such fees as and when appropriate.

7.2Unit Pricing Adjustment. From and after [***], the Unit Pricing shall be adjusted [***], effective as of [***]. Catalent shall give Palatin written notice of such adjustment by [***]. The written notice shall specify the basis for each adjustment in the Price, including increases or decreases in the cost of Raw Materials, continuous improvement benefits and any increase or decrease of any other component of Unit Pricing. The amount of any increase in the cost of components of Unit Pricing other than Raw Materials shall not exceed [***]. The cost of Raw Materials shall be passed through to Palatin [***]. To manage the cost of Raw Materials, Palatin, at its option, may negotiate the terms of a supply agreement with any supplier of Raw Materials, including but not limited to [***] with respect to the supply of [***].

7.3Payment Terms. Payment of all Catalent invoices shall be due [***] after the later of (A) the date of the invoice and (B) the date of delivery. Palatin shall make payment in euros. Unless an invoice is disputed by Palatin in good faith, if any payment is not received by Catalent by its due date, then Catalent may charge interest on the outstanding sum from the due date (both before

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and after any judgment) at [***] per month until paid in full (or, if less, the maximum amount permitted by Applicable Laws). Further, if Palatin shall fail to make any payment when due other than for an invoice disputed by Palatin in good faith, and shall not have cured such non-payment within [***] after receiving from Catalent written notice of non-payment, then Catalent shall have the right, at its option, to suspend any further performance hereunder until such default is corrected, without thereby releasing Palatin from its obligations under this Agreement.

7.4Taxes. All taxes, duties and other levies assessed (excluding tax based on net income) on or in connection with Palatin-supplied Materials, services or Product in connection with provision or sale to Catalent or Palatin, shall be reimbursed by Palatin to Catalent (and shall be included in invoices) and all charges are exclusive of any applicable taxes, duties and levies which shall be added to invoices directed at Palatin.

7.5Palatin and Third Party Expenses. Except as may be expressly covered by Product Maintenance Service fees, Palatin shall be responsible for 100% of its own and all third-party expenses associated with the development, Regulatory Approvals and commercialization of Product, including regulatory filings and post-approval marketing studies.

7.6Development Batches. Each Batch produced under this Agreement pursuant to a Purchase Order or Palatin’s written request, including those necessary to support the validation portion of Palatin’s submissions for Regulatory Approvals, will be considered to be a “development batch” unless and until Processing has been validated. Palatin shall be responsible for the cost of each such development Batch, even if such development Batch fails to meet the Specifications, unless the cause of nonconformity is attributable to Catalent’s gross negligence or willful misconduct. Catalent and Palatin shall cooperate in good faith to resolve any problems causing the out-of-Specification Batch.

7.7Licensing Transaction by Palatin. In the event that Palatin enters into a marketing and/or licensing agreement with a third party pursuant to which agreement such third party acquires the right to market, sell and have sold the Product (i) within North America (comprising at least the United States of America) or (ii) worldwide, then the terms of Clause 3.3 of the Manufacturing Preparation and Services Agreement shall apply. For the avoidance of doubt, neither this Agreement nor the Manufacturing Preparation and Services Agreement shall terminate upon such event.

7.8Palatin Change of Control. In the event of a Change of Control of Palatin, then the terms of Clause 3.4 of the Manufacturing Preparation and Services Agreement shall apply. For the avoidance of doubt, neither this Agreement nor the Manufacturing Preparation and Services Agreement shall terminate upon such event.

8.CHANGES TO SPECIFICATIONS

All Specifications and any changes thereto agreed to by the parties from time to time shall be in writing, dated and signed by the parties. Any change to the Process shall be deemed a Specification change. No change in the Specifications shall be implemented by Catalent, whether requested by Palatin or requested or required by any Regulatory Authority, until the parties have agreed in writing to such change, the implementation date of such change, and any increase or decrease in costs, expenses or fees directly resulting from such change (including any change to Unit Pricing). Catalent shall respond promptly to any request made by Palatin for a change in the Specifications, and both parties shall use commercially reasonable, good faith efforts to agree to the terms of such

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change in a timely manner. As soon as reasonably practicable after a request is made for any change in Specifications, Catalent shall notify Palatin of the costs associated with such change and shall provide such supporting documentation as Palatin may reasonably require. Palatin shall pay all direct costs associated with such agreed upon changes. If there is a conflict between the terms of this Agreement and the terms of the Specifications, this Agreement shall control unless the parties mutually agree that the terms of the Specifications expressly override the terms set forth herein. Catalent reserves the right to postpone effecting changes to the Specifications until such time as the parties agree to and execute the required written amendment.

9.RECORDS; REGULATORY MATTERS

9.1Record Keeping. Catalent shall maintain materially complete and accurate Batch, laboratory data, reports and other technical records relating to Processing in accordance with Catalent standard operating procedures and all Applicable Laws. Such information shall be maintained for a period of at least [***] from the relevant finished Product expiry date or longer if required under Applicable Laws or the Quality Agreement.

9.2Regulatory Compliance. Catalent shall obtain and maintain all permits and licenses with respect to general Facility operations required by any Regulatory Authority in the jurisdiction in which Catalent Processes Product. Palatin shall obtain and maintain all other Regulatory Approvals and other authorizations and certificates, including those necessary for Catalent to commence Processing. During the Term, Catalent will assist Palatin with all regulatory matters relating to Processing, at Palatin’s request and sole expense. Catalent reserves the right to assess Palatin for any regulatory fees that may be established by any Regulatory Authority subsequent to the Effective Date of this Agreement, which fees result directly from Catalent’s formulation, development, manufacturing, processing, filling, packaging, storing or testing of the Product or Palatin-supplied Materials. Except as required under Applicable Laws or by any governmental agency, Palatin shall not identify Catalent in any regulatory filing or submission with a Regulatory Authority without Catalent’s prior written consent. Such consent shall not be unreasonably withheld and shall be memorialized in a writing signed by authorized representatives of both parties. Upon Catalent’s written request, Palatin shall provide Catalent with a copy of any Regulatory Approvals required to distribute, market and sell Product in one or more countries within the Territory. If Palatin is unable to provide such information, Catalent shall have no obligation to deliver Product to Palatin, notwithstanding anything to the contrary in this Agreement. The parties intend and commit to cooperate to allow each party to satisfy its obligations under Applicable Laws relating to Processing under this Agreement.

9.2.1GDUFA Fees. Palatin shall reimburse Catalent for any fees Catalent may be required to pay pursuant to the US Generic Drug User Fee Amendments of 2012 (“GDUFA Fees”), [***] GDUFA Fees are assessed on Catalent when an Abbreviated New Drug Application (“ANDA”) applicant identifies Catalent in an ANDA application filed with FDA. GDUFA Fees are assessed by the FDA annually and shall be paid by Palatin annually, where applicable. Prior to October 1st of each year, and where applicable, Catalent will invoice Palatin for [***] for each Catalent manufacturing or packaging facility identified in any Palatin ANDA(s) pursuant to FDA regulations (this includes but is not limited to any Catalent facility which manufactured or packaged Palatin’s registration batches).

9.3Governmental Inspections and Requests. Catalent shall promptly advise Palatin if an authorized agent of any Regulatory Authority (A) notifies Catalent that it intends to or does visit the Facility for the purpose of reviewing the Processing or (B) takes any regulatory action with

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respect to the Product or the Processing. Catalent shall promptly provide to Palatin a report of the result of any such inspection by any Regulatory Authority to the extent directly related to the Processing of the Product and furnish to Palatin a copy of all written information provided by such Regulatory Authority to the extent specifically and directly related to the Processing of the Product, if any, within 10 days of Catalent’s receipt of such information, in each case redacted as appropriate to protect any Confidential Information of Catalent and/or confidential information Catalent’s other customers. Palatin acknowledges that it may not direct the manner in which Catalent fulfills its obligations to permit inspection by and to communicate with Regulatory Authorities. Notwithstanding the foregoing, Catalent shall not initiate or participate in any communications with any Regulatory Authority concerning the Product or the Processing thereof without prior consultation with Palatin, unless Catalent (i) reasonably believes it is required by Applicable Law to make the communication under conditions that make such prior consultation impossible or impractical, in which case Catalent shall promptly thereafter notify Palatin in writing of the nature and content of the communication, or (ii) is requested to do so by Palatin. If any inspection by Regulatory Authorities is related to the Processing of the Product, Palatin shall reimburse Catalent for all reasonable and documented costs associated with such inspection attributable to the Processing of the Product. If deficiencies are identified in connection with any inspection by Regulatory Authorities related to or otherwise affecting the Processing of the Product, Catalent shall use commercially reasonable efforts to correct all such deficiencies in a timely manner. Catalent shall advise Palatin periodically of progress being made with respect to such deficiencies and notify Palatin, in writing, upon completion of any corrective action taken.

9.4Palatin Facility Audits. During the Term, Palatin’s Representatives shall be granted access upon [***] prior notice, at reasonable times during regular business hours, to (A) the portion of the Facilities where Catalent performs Processing, (B) relevant personnel involved in Processing and (C) Processing records described in Clause 9.1, in each case solely for the purpose of verifying that Catalent is Processing in accordance with cGMPs, the Specifications and the Product master Batch records. Palatin may not conduct an audit under this Clause 9.4 more than [***]; provided, that additional inspections may be conducted in the event there is a material quality or compliance issue concerning Product or its Processing. Palatin’s Quality Assurance Manager will arrange Palatin audits with Catalent Quality Management. Audits shall be designed to minimize, to the extent reasonably possible, disruption of operations at the applicable Facility. Palatin’s Representatives shall be required to sign Catalent’s standard visitor confidentiality agreement prior to being allowed access to the Facility. Such Representatives shall comply with the Facility’s rules and regulations. Palatin shall defend, indemnify and hold harmless Catalent for any action or activity of such Representatives while on Catalent’s premises.

9.5Recall. If Catalent believes a recall, field alert, Product withdrawal or field correction (“Recall”) may be necessary with respect to any Product supplied under this Agreement, Catalent shall promptly notify Palatin. Catalent will not act to initiate a Recall without the express prior written approval of Palatin, unless otherwise required by Applicable Laws. If Palatin believes a Recall may be necessary with respect to any Product supplied under this Agreement, Palatin shall promptly notify Catalent and Catalent shall provide all necessary cooperation and assistance to Palatin. Palatin shall provide Catalent with an advance copy of any proposed submission to a Regulatory Authority in respect of any Recall, and shall consider in good faith any comments from Catalent. The cost of any Recall shall be borne by Palatin, and Palatin shall reimburse Catalent for expenses incurred in connection with any Recall, in each case unless such Recall is caused solely by Catalent’s breach of its obligations under this Agreementwith respect to Processing, violation of Applicable Laws or its negligence or willful misconduct, then such cost shall be borne by Catalent; provided, however, that for purposes hereof, such Catalent cost shall be limited to

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reasonable, actual and documented administrative costs incurred by Palatin (or its Affiliates, licensees or distributors) for such Recall and, subject to Section 14, replacement of the Product subject to Recall in accordance with Section 5.

9.6Quality Agreement. Within six months after the Effective Date, and in any event prior to the first Processing of Product hereunder, the parties shall negotiate in good faith and enter into a quality or technical agreement (the “Quality Agreement”). The Quality Agreement shall in no way determine liability or financial responsibility of the parties for the responsibilities set out therein. In the event of a conflict between any of the provisions of this Agreement and the Quality Agreement with respect to quality-related activities, including compliance with cGMP, the provisions of the Quality Agreement shall govern. In the event of a conflict between any of the provisions of this Agreement and the Quality Agreement with respect to any commercial matters, including allocation of risk, liability and financial responsibility, the provisions of this Agreement shall govern.

9.7Quality Assurance/Quality Control Standards. Upon Palatin’s written request, Catalent shall deliver to Palatin copies of Catalent’s quality assurance/quality control investigations, deviations, out-of-Specification notifications and change controls relevant to the Processing of Product. Catalent shall notify Palatin of any material changes made to any of the foregoing or any Specification during the Term.

10.CONFIDENTIALITY AND NON-USE

10.1Definition. As used in this Agreement, the term “Confidential Information” includes all information furnished by or on behalf of Catalent or Palatin (the “Discloser”), its Affiliates or any of its or their respective Representatives, to the other party (the “Recipient”), its Affiliates or any of its or their respective Representatives, whether furnished before, on or after the Effective Date and furnished in any form, including written, verbal, visual, electronic or in any other media or manner and information acquired by observation or otherwise during any site visit at the other party’s facility. Confidential Information includes all proprietary technologies, know-how, trade secrets, discoveries, inventions and any other intellectual property (whether or not patented), analyses, compilations, business or technical information and other materials prepared by either party, their respective Affiliates, or any of its or their respective Representatives, containing or based in whole or in part on any information furnished by the Discloser, its Affiliates or any of its or their respective Representatives. Confidential Information also includes the existence of this Agreement and its terms.

10.2Exclusions. Notwithstanding Clause 10.1, Confidential Information does not include information that (A) is or becomes generally available to the public or within the industry to which such information relates other than as a result of a breach of this Agreement, (B) is already known by the Recipient at the time of disclosure as evidenced by the Recipient’s written records, (C) becomes available to the Recipient on a non-confidential basis from a source that is entitled to disclose it on a non-confidential basis or (D) was or is independently developed by or for the Recipient without reference to the Confidential Information of the Discloser as evidenced by the Recipient’s written records.

10.3Mutual Obligation. The Recipient agrees that it will not use the Discloser’s Confidential Information except in connection with the performance of its obligations hereunder and will not disclose, without the prior written consent of the Discloser, Confidential Information of the Discloser to any third party, except that the Recipient may disclose the Discloser’s Confidential Information to any of its Affiliates and its or their respective Representatives that (A) need to know such

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Confidential Information for the purpose of performing under this Agreement, (B) are advised of the contents of this Clause and (C) are bound to the Recipient by obligations of confidentiality at least as restrictive as the terms of this Clause. Each party shall be responsible for any breach of this Clause by its Affiliates or any of its or their respective Representatives.

10.4Permitted Disclosure. The Recipient may disclose the Discloser’s Confidential Information to the extent required under Applicable Laws or by the rules of any stock exchange on which the securities of the Discloser are listed in each case upon the reasonable advice of Recipient’s legal counsel; provided, that prior to making any such legally required disclosure, the Recipient shall give the Discloser as much prior notice of the requirement for and contents of such disclosure as is practicable under the circumstances and use reasonable efforts to limit the scope of any such disclosure and to obtain confidential treatment of all Confidential Information of Discloser disclosed pursuant to such requirement. Any such disclosure, however, shall not relieve the Recipient of its confidentiality obligations as set forth in this Section 10.

10.5Disclosure of this Agreement. A public disclosure of this Agreement or the Manufacturing Preparation and Services Agreement is permitted if,upon the reasonable advice of legal counsel of the party making the public disclosure, it is required by law (a “Required Disclosure”), including without limitation in a filing with the US Securities and Exchange Commission or the NYSE MKT, provided that the party making the public disclosure shall provide copies of the Required Disclosure to the non-disclosing party reasonably in advance of such filing or other disclosure for the non-disclosing party’s review and comment (but not approval). Each party shall consider in good faith any comments provided by the other party with respect to the content of the Required Disclosure, including with respect to the redaction of this Agreement and any other agreement that is to be filed or otherwise publicly disclosed in connection with the Required Disclosure, and shall incorporate such comments or redactions in the Required Disclosure if doing so does not interfere with the disclosing party’s ability to comply with any requirements under applicable law or any request or requirement of the US Securities and Exchange Commission or the NYSE MKT.

10.6No Implied License. Except as expressly set out in Clause 10.1, the Recipient will obtain no right of any kind or license under any Confidential Information of the Discloser, including any patent application or patent, by reason of this Agreement. All Confidential Information will remain the sole property of the Discloser, subject to Section 11.

10.7Return of Confidential Information. Upon expiry or termination of this Agreement, the Recipient will (and will cause its Affiliates and its and their respective Representatives to) cease its use and, upon written request, within [***] either return or destroy (and certify as to such destruction) all Confidential Information of the Discloser, including any copies thereof, except for a single copy which may be retained for the sole purpose of ascertaining compliance with its obligations under this Agreement and any copies remaining on the Recipient’s standard computer back-up devices.

10.8Survival. The obligations of confidentiality and non-use contained in this Section 10 will terminate [***] after the expiry or termination of this Agreement, except with respect to trade secrets, for which the obligations of confidentiality and non-use contained in this Section 10 will continue for so long as such information remains a trade secret under applicable law.

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11.INTELLECTUAL PROPERTY

For purposes hereof, “Palatin IP” means all intellectual property and embodiments thereof owned by or licensed to Palatin as of the Effective Date or developed by Palatin other than in connection with this Agreement; “Catalent IP” means all intellectual property and embodiments thereof owned by or licensed to Catalent as of the Effective Date or developed by Catalent other than in connection with this Agreement; “Invention” means any intellectual property developed by either party or jointly by the parties in connection with this Agreement; [***] The parties shall cooperate to achieve the allocation of rights to Inventions anticipated herein and each party shall be solely responsible for costs associated with the protection of its intellectual property.

12.REPRESENTATIONS AND WARRANTIES

12.1Catalent. Catalent represents, warrants and undertakes to Palatin that:

A.at the time of delivery by Catalent as provided in Clause 6.1, all Product shall have been Processed in accordance with Applicable Laws and in conformance with the Specifications and the Quality Agreement and will not be adulterated, misbranded or mislabeled within the meaning of Applicable Laws; provided, that Catalent shall not be liable for defects attributable to Palatin-supplied Materials (including artwork, advertising and labeling);

B.Catalent will comply with all Applicable Laws applicable to Catalent’s performance under this Agreement and its use of any Palatin-supplied Materials;

C.To Catalent’s knowledge, there are no patents owned by others, or trade secrets or other proprietary rights of others, that would be infringed by the Catalent IP in Catalent’s performance of the Agreement;

D.Catalent and its employees, affiliates, contractors, and agents have never been (i) debarred or (ii) convicted of a crime for which a person can be debarred, under Section 335(a) or 335(b) of the Federal Food, Drug, and Cosmetic Act; and

E.Catalent will not release any Batch of Product if the required certificates of conformance indicate that Product does not comply with the Specifications.

12.2Palatin. Palatin represents, warrants and undertakes to Catalent that:

A.all Palatin-supplied Materials shall have been produced in accordance with Applicable Laws, shall comply with all applicable specifications, including the Specifications, shall not be adulterated, misbranded or mislabeled within the meaning of Applicable Laws, and shall have been provided in accordance with the terms and conditions of this Agreement;

B.the content of all artwork provided to Catalent shall comply with all Applicable Laws;

C.all Product delivered to Palatin by Catalent will be held, used and disposed of by or on behalf of Palatin in accordance with all Applicable Laws, and Palatin will otherwise comply with all laws, rules, regulations and guidelines applicable to Palatin’s performance under this Agreement;

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D.Palatin will not release any Batch of Product if the required certificates of conformance indicate that Product does not comply with the Specifications and if Palatin does not hold all necessary Regulatory Approvals to market and sell the Product;

E.Palatin has all necessary authority to use and to permit Catalent to use pursuant to this Agreement all intellectual property related to Product or Palatin-supplied Materials (including artwork), and the Processing of the foregoing, including any copyrights, trademarks, trade secrets, patents, inventions and developments; to Palatin’s knowledge, there are no patents owned by others related to the Palatin IP utilized with the Product that would be infringed or misused by Palatin’s performance of the Agreement; and, to Palatin’s knowledge, no trade secrets or other proprietary rights of others related to the Palatin IP utilized with the Product would be infringed or misused by Palatin’s performance of this Agreement; and

F.to Palatin’s knowledge, the work to be performed by Catalent under this Agreement will not violate or infringe upon any trademark, tradename, copyright, patent, trade secret, or other intellectual property or other right held by any person or entity.

12.3Mutual: No transactions or dealings under this Agreement shall be conducted with or for an individual or entity that is designated as the target of any sanctions, restrictions or embargoes administered by the United Nations, European Union, United Kingdom, or the United States.

12.4Limitations. Save as expressly set out in this Agreement, neither party gives any representation or warranty in respect of the subject matter of this Agreement, and all representations and warranties that may be implied (by statute or otherwise) are hereby excluded to the maximum extent permitted by law.

13.INDEMNIFICATION

13.1Indemnification by Catalent. Catalent shall defend, indemnify and hold harmless Palatin, its Affiliates, and their respective directors, officers and employees (“Palatin Indemnitees”) from and against any and all claims, losses, demands, liabilities, damages, costs and expenses (including reasonable attorneys’ fees and reasonable investigative costs) in connection with any claim or action by any third party (“Losses”) arising out of or resulting from (A) any breach of its representations, warranties or obligations set out in this Agreement, (B) any negligence or willful misconduct by Catalent or (C) any actual or alleged infringement or violation of any patent, trade secret, copyright, trademark or other proprietary rights of a third party by the Catalent IP used in Catalent’s performance of its obligations under this Agreement, but for the avoidance of doubt not with respect to any such infringement or violation due to Palatin IP, API Inventions or Palatin-supplied Materials; in each case except to the extent that any of the foregoing arises out of or results from any Palatin Indemnitee’s negligence, willful misconduct or breach of this Agreement.

13.2Indemnification by Palatin. Palatin shall defend, indemnify and hold harmless Catalent, its Affiliates, and their respective directors, officers and employees (“Catalent Indemnitees”) from and against any and all Losses arising out of or resulting from (A) any breach of its representations, warranties or obligations set out in this Agreement, (B) any manufacture, packaging, sale, promotion, distribution or use of or exposure to Product or Palatin-supplied Materials, including product liability or strict liability, (C) Palatin’s exercise of control over the Processing, to the extent that Palatin’s instructions or directions violate Applicable Laws, (D) the conduct of any clinical trials utilizing Product or API, (E) any actual or alleged infringement or violation of any third party patent, trade secret, copyright, trademark or other proprietary rights by intellectual property or other

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information provided by Palatin, including Palatin-supplied Materials, or (F) any negligence or willful misconduct by Palatin; in each case except to the extent that any of the foregoing arises out of or results from any Catalent Indemnitee’s negligence, willful misconduct or breach of this Agreement.

13.3Indemnification Procedures. All indemnification obligations in this Agreement are conditioned upon the indemnified party (A) promptly notifying the indemnifying party of any claim or liability of which the indemnified party becomes aware (including a copy of any related complaint, summons, notice or other instrument); provided, that failure to provide such notice within a reasonable period of time shall not relieve the indemnifying party of any of its obligations hereunder except to the extent the indemnifying party is prejudiced by such failure, (B) cooperating with the indemnifying party in the defense of any such claim or liability and any related settlement negotiations (at the indemnifying party’s expense) and (C) not compromising or settling any claim or liability without prior written consent of the indemnifying party.

14.LIMITATIONS OF LIABILITY

14.1TOTAL LIABILITY. CATALENT’S TOTAL LIABILITY UNDER THIS AGREEMENT SHALL IN NO EVENT EXCEED [***]

14.2INDIRECT DAMAGES. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL LOSS OR DAMAGES, OR FOR LOSS OF REVENUES, PROFITS OR DATA, ARISING OUT OF PERFORMANCE UNDER THIS AGREEMENT, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

15.INSURANCE

Each party shall, at its own cost and expense, obtain and maintain in full force and effect during the Term the following in US dollars or foreign currency equivalent: (A) Commercial General Liability Insurance with a per-occurrence limit of not less than [***]; (B) Products and Completed Operations Liability Insurance with a per-occurrence limit of not less than [***]; and (C) All Risk Property Insurance, including transit coverage, in an amount equal to the full replacement value of its property while in, or in transit to, a Catalent facility as required under this Agreement. Each party may self-insure all or any portion of the required insurance as long as, together with its Affiliates, its US GAAP or foreign currency equivalent net worth is greater than [***] or its annual EBITDA (earnings before interest, taxes, depreciation and amortization) is greater than [***]. Each required insurance policy, other than self-insurance, shall be obtained from an insurance carrier with an A.M. Best rating of at least A- VII. If any of the required policies of insurance are written on a claims made basis, such policies shall be maintained throughout the Term and for a period of at least [***] thereafter. Each party shall obtain a waiver of subrogation clause from its property insurance carriers in favor of the other party, and such waivers will operate the same whether insurance is carried through third parties or self-insured. Upon the other party’s written request from time to time, each party shall promptly furnish to the other party a certificate of insurance or other evidence of the required insurance.

16.TERM AND TERMINATION

16.1Term. This Agreement shall commence on the Effective Date and shall continue until the end of the fifth Contract Year (the “Initial Term”), unless earlier terminated in accordance with

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Clause 16.3 or Clause 16.4 (the Initial Term as may be extended in accordance with Clause 16.2, the “Term”).

16.2Renewal. The Initial Term shall automatically be extended for one 24-month period unless at least [***] prior to the end of the Initial Term one party gives the other party written notice of its desire to terminate as of the end of the Initial Term.

16.3Regulatory Approval.

A.In the event that Palatin fails to obtain Regulatory Approval from the FDA prior to [***], then the parties shall meet to discuss in good faith such situation and shall agree upon an appropriate rental fee that Palatin shall pay to Catalent for the Auto Injector Assembly Line on a monthly basis until such time as Regulatory Approval is obtained or the Agreement is terminated hereunder, which payment shall in no event be less than [***]. The parties shall negotiate in good faith the minimum monthly rental payment to be made in the event that Catalent is using the Auto Injector Assembly Line on its own behalf or on behalf of a third party customer during such period..

B.In the event that Palatin fails to obtain Regulatory Approval from the FDA prior to [***], then the parties shall meet to discuss in good faith such situation; provided, however, that notwithstanding such discussions, on or after such date, (i) Palatin shall pay to Catalent an amount equal to [***] and (ii) Catalent shall have the right to terminate the Agreement after such date pursuant to the terms of this Section 16.

16.4Termination. This Agreement may be terminated:

A.by either party if steps are taken by or against the other party for the appointment of a liquidator, an administrator, a receiver, administrative receiver, manager, interim receiver, trustee, trustee in bankruptcy, nominee or supervisor or the other party proposes or enters into an agreement or arrangement with its creditors generally or makes an assignment for the benefit of its creditors generally, or otherwise suffers or permits the taking of any steps for adjudicating it to be bankrupt or insolvent and any such process, if reasonably shown to be warranted, frivolous or vexatious, is not withdrawn, dismissed or discharges within [***], or any equivalent or similar action to the above in consequence of the insolvency of that party is taken in any jurisdiction and is not withdrawn, dismissed or discharged in the circumstances described above;

B.by either party if the other party materially breaches any of the provisions of this Agreement and such breach is not cured within [***] after the giving of written notice requiring the breach to be remedied; provided, that in the case of a failure of Palatin to make payments in accordance with the terms of this Agreement, Catalent may terminate this Agreement if such payment breach is not cured within [***] of receipt of notice of non-payment from Catalent;

C.by Palatin pursuant to Clause 4.7;

D.by Palatin upon notice and payment of the termination penalty provided in Clause 16.5D; and

E.by Catalent pursuant to Clause 16.3B.

16.5Effect of Termination. Expiry or termination of this Agreement shall be without prejudice to any rights or obligations that accrued to the benefit of either party prior to such expiry or termination. In the event of a termination of this Agreement:

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A.Catalent shall promptly return to Palatin, at Palatin’s expense and direction, all remaining inventory of Product and Palatin-supplied Materials; provided, that all outstanding undisputed invoices have been paid in full;

B.Palatin shall pay Catalent all undisputed invoiced amounts outstanding, plus, upon receipt of an undisputed invoice(s), amounts for any (i) Product that has been shipped pursuant to Purchase Orders but not yet invoiced, (ii) Product Processed pursuant to Purchase Orders that has been completed but not yet shipped, and (iii) in the event that this Agreement is terminated for any reason other than by Palatin pursuant to Clause 16.3A, 16.3B or 16.3C, all Product in process of being Processed pursuant to Purchase Orders (or, alternatively, Palatin may instruct Catalent to complete such work in process, and the resulting completed Product shall be governed by clause (ii)); and

C.In the event that this Agreement is terminated for any reason other than by Palatin pursuant to Clause 16.3A, 16.3B or 16.3C, Palatin shall pay Catalent for all out-of-pocket costs and expenses incurred, and all noncancellable commitments made, in connection with Catalent’s performance of this Agreement, so long as such costs, expenses or commitments were made by Catalent consistent with Palatin’s then current Firm Commitment and any minimum purchase obligations required by the vendor; provided, however, that notwithstanding the foregoing, Palatin shall have no obligation to pay Catalent for costs, expenses or commitments made with respect to Product in process of being Processed pursuant to Purchase Orders (it being understood that the amounts payable pursuant to Clause 16.4B(ii) shall fully compensate Catalent with respect to such Product in process).

D.If this Agreement is terminated by Palatin pursuant to Clause 16.4D or for any reason other than pursuant to Clause 16.4B or 16. 4C, then Palatin shall pay Catalent a termination penalty in accordance with the following schedule:

Date of Termination	Amount of Termination Penalty
On or before the last day of Contract Year 1	[***]
During Contract Year 2	[***]
During Contract Year 3	[***]
During Contract Year 4	[***]

E.Survival. The rights and obligations of the parties shall continue under Sections 11 (Intellectual Property), 13 (Indemnification), 14 (Limitations of Liability), 17 (Notice), 18 (Miscellaneous); under Clauses 10 (Confidentiality and Non-Use) and 15 (Insurance), in each case to the extent expressly stated therein; and under Clauses 7.3 (Payment Terms), 7.4 (Taxes), 7.5 (Palatin and Third Party Expenses), 9.1 (Record Keeping), 9.5 (Recall), 12.4 (Limitations on Warranties), 16.4 (Effect of Termination) and 16.5 (Survival), in each case in accordance with their respective terms if applicable, notwithstanding expiry or termination of this Agreement.

17.NOTICE

All notices and other communications hereunder shall be in writing and shall be deemed given: (A) when delivered personally or by hand; (B) when delivered by facsimile transmission (receipt verified); (C) when received or refused, if sent by registered or certified or recorded post (return receipt requested), postage prepaid; or (D) when delivered by courier service; in each case, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice; provided, that notices of a change of address shall be effective only upon receipt thereof):

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To Palatin: Palatin Technologies, Inc.

4-B Cedar Brook Drive

Cranbury, New Jersey 08512 USA

Attn: Chief Financial Officer

Facsimile: (609) 495-2202

With a copy to: Thompson Hine LLP

335 Madison Avenue, 12^th Floor

New York, New York 10017 USA

Attn: Faith Charles, Esq.

Facsimile: (212) 344-6101

To Catalent: Catalent Belgium S.A.

Rue Font St. Landry

10 Parc Mercator B-1120

Neder over Heembeek, Belgium

Attn: General Manager

Facsimile: 32-2-788-39-59

With a copy to: Catalent Pharma Solutions

14 Schoolhouse Road

Somerset, NJ 08873 USA

Attn: General Counsel (Legal Department)

Facsimile: +1 (732) 537-6491

18.MISCELLANEOUS

18.1Entire Agreement; Amendments. This Agreement, together with the Manufacturing Preparation and Services Agreement, the Quality Agreement and each Purchase Order, constitutes the entire understanding between the parties, and supersedes any contracts, agreements or understandings (oral or written) of the parties, with respect to the subject matter hereof, including, for avoidance of doubt, that certain quotation letter (QTE- BRU 2012 059J) signed 12^th October 2012 and the Binding Terms. For the avoidance of doubt, this Agreement does not supersede any existing generally applicable confidentiality agreement between the parties as it relates to time periods prior to the date hereof or to business dealings not covered by this Agreement. No term of this Agreement may be amended except upon written agreement of both parties, unless otherwise expressly provided in this Agreement.

18.2Captions; Certain Conventions. The headings used in this Agreement are for convenience only and are not to be interpreted or construed as a substantive part of this Agreement. Unless otherwise expressly provided herein or the context of this Agreement otherwise requires, (A) words of any gender include each other gender, (B) words such as “herein”, “hereof”, and “hereunder” refer to this Agreement as a whole and not merely to the particular provision in which such words appear, (C) words using the singular shall include the plural, and vice versa, (D) the words “include(s)” and “including” shall be deemed to be followed by the phrase “but not limited to”, “without limitation” or words of similar import, (E) the word “or” shall be deemed to include the word “and” (e.g., “and/or”) and (F) references to “Clause” or other subdivision, or to an Attachment or other appendix, without reference to a document are to the specified provision or Attachment of this Agreement. This Agreement shall be construed as if it were drafted jointly by the parties.

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18.3Further Assurances. The parties agree to execute such further instruments and to undertake such other acts as may be reasonably necessary or appropriate to give full effect to the terms of this Agreement.

18.4No Waiver. In no event shall any delay, failure or omission (in whole or in part) in enforcing, exercising or pursuing any right, power, privilege, claim or remedy conferred by or arising under this Agreement or by law, be deemed to be or construed as a waiver of that or any other right, power, privilege, claim or remedy in respect of the circumstances in question, or operate so as to bar the enforcement of that, or any other right, power, privilege, claim or remedy, in any other instance at any time or times subsequently.

18.5Severability. If any term of this Agreement is declared invalid or unenforceable by a court or other body of competent jurisdiction, the remaining terms of this Agreement will continue in full force and effect.

18.6Independent Contractors. The relationship of the parties is that of independent contractors, and nothing in this Agreement is intended to create or will be construed as creating between the parties the relationship of joint venture, co-partners, employer/employee or principal/agent.

18.7Successors and Assigns. Neither party may assign this Agreement, in whole or in part, without the prior written consent of the other party; provided, however, that either party may, without the other party’s consent, assign this Agreement in its entirety to an Affiliate or to a successor to substantially all of the business or assets of the assigning party or the assigning party’s business unit responsible for performance under this Agreement.

18.8Third Party Rights. This Agreement shall not confer any rights or remedies upon any person or entity other than the parties to this Agreement and their respective successors and permitted assigns, and a person or entity who is not a party to this Agreement has no rights to enforce any term of this Agreement.

18.9Governing Law. This Agreement and the legal relations between the parties in connection herewith shall be governed by, and construed in accordance with, the laws of the State of New Jersey, USA, without regard to the conflict of law principles thereof. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement.

18.10Alternative Dispute Resolution. Any dispute that arises between the parties in connection with this Agreement shall first be presented to the senior executives of the parties for consideration and resolution. If such executives cannot reach a resolution of the dispute within a reasonable time, not to exceed 30 days unless otherwise agreed by the parties in writing, then such dispute shall be submitted to arbitration by the International Institute for Conflict Prevention and Resolution, 575 Lexington Avenue, 21st Floor, New York, NY  10022 (“CPR”) by one arbitrator mutually agreed upon by the Parties. If no agreement can be reached within 30 days after names of potential arbitrators have been proposed by the CPR, then the CPR will choose one arbitrator having reasonable experience in commercial transactions of the type provided for in this Agreement. The arbitration shall take place in the English language in New York City, New York, in accordance with the CPR administered arbitration rules then in effect, and judgment upon any award rendered in such arbitration will be binding and may be entered in any court having jurisdiction thereof. Unless otherwise agreed to by the parties in writing, the arbitration shall commence within 60 days of the date on which a written demand for arbitration is filed. The arbitrator’s decision shall set forth a reasoned basis for any award of damages or finding of liability. The arbitrator shall not have power

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to award damages in excess of actual compensatory damages and shall not multiply actual damages or award punitive damages..

18.11Prevailing Party. In any dispute resolution proceeding between the parties in connection with this Agreement, the prevailing party will be entitled to recover its reasonable attorney’s fees and costs in such proceeding from the other party.

18.12Publicity. Neither party will make any press release or other public disclosure regarding this Agreement or the transactions contemplated hereby without the other party’s express prior written consent, except as required under Applicable Laws, by any governmental agency or by the rules of any stock exchange on which the securities of the disclosing party are listed, in which case the party required to make the press release or public disclosure shall use commercially reasonable efforts to obtain the approval of the other party as to the form, nature and extent of the press release or public disclosure prior to issuing the press release or making the public disclosure. Notwithstanding the foregoing, the parties hereto intend to make a jointly agreed press release with respect to the Agreement within 60 days after the Effective Date or at such other time as mutually agreed by the parties.

18.13Right to Dispose. If Catalent requests in writing from Palatin direction with respect to disposal of any inventories of Product, Palatin-supplied Materials, Palatin Equipment, other equipment, samples or other items belonging to Palatin and is unable to obtain a response from Palatin within 90 days after making such request, Catalent shall be entitled in its sole discretion to dispose of all such items.

18.14Force Majeure. Except as to payments required under this Agreement, neither party shall be liable in damages for, nor shall this Agreement be capable of termination by reason of, any delay in such party’s performance, or breach of its obligations, hereunder if such delay or breach is caused by events beyond such party’s reasonable control, including acts of God, law or regulation or other action or failure to act of any government or agency thereof, war or insurrection, civil commotion, destruction of production facilities or materials by earthquake, fire, flood or weather, labor disturbances, epidemic or failure of suppliers, public utilities or common carriers. If the events shall continue unabated for 90 days, then both parties shall meet to discuss and negotiate in good faith what modifications to this Agreement should result from such events.

18.15Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by fax or e-mail in an image format (e.g., .pdf file) shall be as effective as delivery of a manually executed counterpart of this Agreement.

(signature page follows)

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IN WITNESS WHEREOF, the parties have caused their respective duly authorized representatives to execute this Agreement effective as of the Effective Date.

CATALENT BELGIUM S.A.		PALATIN TECHNOLOGIES, INC.
By:	/s/ Eric Kummer	By:	/s/ Stephen T. Wills
Name:	Eric Kummer	Name:	Stephen T. Wills
Title:	General Manager	Title:	CFO/CO
	June 14, 2016

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ATTACHMENT A

VALIDATION SERVICES

[To be agreed by the parties within ninety (90) days following the Effective Date

and, when agreed to, to form a part of this Agreement.
Attachment to reflect standard Catalent quotation format, including pricing.
If no validation services are desired, state “N/A” on this page.]

ATTACHMENT B

PRODUCT MAINTENANCE SERVICES

[***]

ATTACHMENT C

SPECIFICATIONS

[***]

ATTACHMENT D

UNIT PRICING, FEES AND MINIMUM REQUIREMENT

[***]

ATTACHMENT E

COUNTRIES INCLUDED IN TERRITORY

Canada

Kosovo

Former Yugoslav Republic of Macedonia

Turkey

Albania

Andorra

Bosnia and Herzegovina

Iceland

Liechtenstein

Monaco

Montenegro

Norway

San Marino

Serbia

Switzerland

Vatican City State

Armenia

Azerbaijan

Belarus

Georgia

Kazakhstan

Kyrgyzstan

Moldova

Russia

Tajikistan

Ukraine

Uzbekistan

Turkmenistan

Mongolia

Vietnam

EX-10.2

Exhibit 10.2

Portions of this Exhibit have been redacted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

SUPPLY AGREEMENT

effective as of 20 December 2018 ("Effective Date")

between

AMAG Pharmaceuticals, Inc., 1100 Winter Street, Waltham, MA 02451, USA

- "AMAG" -

and

Ypsomed AG, Brunnmattstrasse 6, CH-3401 Burgdorf, Switzerland

- "Ypsomed" –

For Autoinjectors for the Administration of Bremelanotide

Preamble

a) Palatin Technologies, Inc., 4-B Cedar Brook Drive, Cranbury, New Jersey 08512, USA (“Palatin”) developed a subcutaneous injection formulation of Bremelanotide (as defined below) for use in female sexual dysfunction;

b) Palatin licensed to AMAG the rights to develop and commercialize Bremelanotide in North America and to manufacture Bremelanotide worldwide;

c) AMAG, Palatin and Ypsomed have entered into a three way Confidentiality and Non-Use Agreement, effective as of 6 March 2017 (hereinafter “Confidentiality Agreement”), and, under such Confidentiality Agreement, have discussed the potential use of a customized version of the YpsoMate (as defined below) for the injection of Bremelanotide;

d) Palatin and Ypsomed entered into an agreement, dated as of 8 June 2012, with respect to the variant specific customization of the YpsoMate for the administration of pre-filled Bremelanotide syringes (“Customization Proposal”);

e) Palatin and Ypsomed entered into an agreement, dated as of 30 January 2015, with respect to an industrialization project for the initializing of the commercial supply of the customized autoinjectors (“Industrialization Proposal”);

f) AMAG and Ypsomed entered into Terms and Conditions dated 14 June 2017 governing the purchase of Component Sets (as defined therein) pursuant to AMAG purchase order numbers 71635 and 71636 (the “Terms and Conditions”) and it is intended that the terms and conditions of this Agreement will govern the supply of such Component Sets to AMAG; and

g) AMAG and Ypsomed now wish to agree on the terms and conditions of the commercial supply of the Components (as defined hereunder) used to assemble the customized YpsoMateinjection device.

Now, therefore, in consideration of the above, AMAG and Ypsomed agree as follows:

1.Definitions    

"Affiliate"	shall mean any corporation or other entity that directly or indirectly controls, is controlled by, or is under common control with AMAG or Ypsomed, as applicable. For the purpose of this Agreement, "control" shall mean the direct or indirect ownership of fifty percent (50%) or more of the outstanding shares or other voting rights of the subject entity for the election of directors.
"Agreement"	shall mean this Supply Agreement, together with all Appendices, as amended or modified from time to time in accordance with the terms hereof.
“Annual Minimum Quantity”	shall have the meaning set forth in Appendix 3.
"Appendix", "Appendices"	shall mean the addenda, exhibits, schedules and/or supplements to this Agreement, as amended or modified from time to time in accordance with the terms hereof.
"Applicable Laws"	as of the Effective Date, Applicable Laws shall mean applicable statutes, laws and regulations of the United States, the European Union, Switzerland, Canada, Mexico, China, and South Korea relevant to the services under this Agreement and the manufacture of the Components in the Territory, and shall include, without limitation, cGMP; FDA 21 CFR Part 820; European Council Directive 93/42/EEC; ISO 13485:2003; ISO 14971:2007 and any additional, successor or replacement statutes, laws and regulations thereto, which come into effect during the Term of this Agreement. The statutes, laws and regulations of additional countries or jurisdictions in the Territory may be added to the Applicable Laws upon mutual agreement of the Parties in accordance with Section 4.9.
"Authority"	shall mean the Food and Drug Administration (“FDA”) (or any successor agency thereto) in the United States, the European Medicines Agency EMA (or any successor agency thereto) in Europe, Health Canada in Canada, and/or the applicable equivalent regulatory agency or entity, governmental or non-governmental, having the responsibility, jurisdiction and authority for the grant of Authorizations in Mexico, China, South Korea, and any other country or jurisdiction in the Territory as mutually agreed to by the Parties in accordance with Section 4.9.
"Authorizations"	shall mean the authorizations for the manufacture, labeling, packaging, importation, promotion, marketing, offer to sell, sale, distribution and use of the Bremelanotide Devices in the Territory, and any amendments or modifications thereto.
“Binding Forecast”	shall have the meaning set forth in Section 7.2.
"Bremelanotide"	shall mean Palatin’s injectable drug substance licensed to AMAG in which the active pharmaceutical ingredient is the peptide Ac-Nle-cyclo(-Asp-His-D-Phe-Arg-Trp-Lys)-OH.

"Bremelanotide Device"	shall mean the customized YpsoMate for the injection of Bremelanotide consisting of the Components, a syringe containing Bremelanotide and accessories, if any, as such Bremelanotide Device is further defined in the Specifications.
“Price Change Order”	shall mean a document in the format provided in Appendix 5 provided by Ypsomed to AMAG outlining a proposed adjustment (increase or decrease) to the Purchase Price and the reasons for such adjustment, such document to be reviewed and signed by both parties to enable such adjustment to take effect.
"cGMP"	shall mean the current Good Manufacturing Practice requirements related to the methods used in, and the facilities and controls used for, developing, customizing, manufacturing, testing, processing, packaging, labeling, storing, installing, and servicing of the Components as specified in the Medical Device Directive 93/42/EEC and ISO 13485, as amended or modified from time to time.
"Components"	shall mean the individual parts and subassemblies of Ypsomed’s customized YpsoMate, as they are described in the Specifications. For the avoidance of doubt, Components shall not include the syringe containing Bremelanotide.
"Component Set"	shall mean a complete set of all Components for use by AMAG or its designee to assemble of one Bremelanotide Device.
"Delivery"	shall have the meaning set forth in Section 8.1.
“Delivery Date”	shall have the meaning set forth in Section 7.4.
"Hidden Defect"	shall mean any Component's failure (i) to have been manufactured in accordance with this Agreement, including, without limitation, cGMP in effect at the time of manufacture, or (ii) to conform in all material respects to the Specifications in effect at the time of manufacture, to the exclusion of any failure which was or could have been identified through commercially reasonable and adequate inspection and testing based on mutually agreed inspection criteria as set out in the Specifications and according to Section 9.1.
“Initial Inspection”	shall have the meaning set forth in Section 9.1.
"Initial Term"	shall have the meaning set out in Section 21.1.
"Intellectual Property Rights"	shall mean any and all rights in or to inventions, discoveries, know-how, trade secrets, trade names, confidential information (including know-how), domain names, works of authorship reduced to a tangible medium of expression, including, without limitation, technical data and software, industrial and other design rights, patents, trademarks, copyrights, database rights, and any other intellectual property, in each case, whether registered or unregistered or patentable or not, including rights to applications or registrations for any of the foregoing.
"Party", "Parties"	shall mean AMAG and/or Ypsomed, as applicable.
“Pricing Tier”	shall have the meaning set forth in Appendix 3.
“Purchase Order”	shall have the meaning set forth in Section 7.3.
"Purchase Price"	shall mean the prices per Component Set according to the price list as set out in Appendix 3.
"Quality Agreement"	shall mean the quality agreement set out in Appendix 2, as amended or modified from time to time in accordance with the terms hereof.
“Rolling Forecast”	shall have the meaning set forth in Section 7.2.
"Subsequent Term"	shall have the meaning set out in Section 21.1.

"Specifications"	shall mean the specifications for the Components and Component Sets, as well as certain requirements regarding the assembly of the Bremelanotide Device, all as further described in Appendix 1, as amended from time to time in accordance with the terms hereof.
"Territory"	shall - for the purpose of this Agreement - include the countries enumerated in the definition of Applicable Laws and Authority hereinabove; provided however that Ypsomed acknowledges that AMAG has the right to use, register, and market the Bremelanotide Device worldwide. Accordingly, statutes, laws and regulations of additional countries or jurisdictions may be added to the Applicable Laws and the respective further countries will be included to the definition of Territory pursuant to Section 4.9.
"YpsoMate"	shall mean the technical platform of a two-step disposable autoinjector developed by Ypsomed for use with various drug substances contained in a syringe.

2. Appendices

2.1 The following Appendices are incorporated into this Agreement by this reference:

No.	Appendix	Subject/Content (inter alia)
1	Specifications	Specifications for Component and Component Sets
2	Quality Agreement	Quality Agreement for Component Sets: change control, complaint handling, audits, regulatory issues
3	Commercial Terms	Pre-commercial supply & capacity reservation, forecast and ordering procedure, Purchase Prices, minimum purchase quantities
4	Price Change Order	Form to be used in the event of a change to the Purchase Price based on the template format set out in Appendix 4.

2.2 Order of Precedence. The following interpretation rule shall apply: (a) any amendments or modifications to this Agreement or the Appendices shall prevail over this Agreement or the Appendices themselves, (b) this Agreement shall prevail over the Appendices, except with respect to matters relating to the quality of the Components, the Quality Agreement shall prevail over this Agreement, and (c) this Agreement shall prevail over the Terms and Conditions.

3.    Amendments and/or Modifications

3.1 Either Party may at any time recommend an amendment and/or modification to this Agreement or the Appendices, including the Specifications. Amendments and/or modifications to this Agreement or the Appendices shall only be effective upon a signed written agreement between the Parties. The Appendices shall be subject to version control to document any changes made to them. Amendments and/or modifications to the Specifications shall be made in accordance with the change control provisions of the Quality Agreement.

3.2 Neither Party shall unreasonably withhold, condition or delay its consent to any amendments and/or modifications recommended in good faith by the other Party in relation to compliance with changes in Applicable Laws, including, without limitation, cGMP, or changes in the regulatory environment. In the event Ypsomed modifies the YpsoMate and determines in good faith that corresponding modifications to any Component is necessary or beneficial, then AMAG shall approve such modifications,

provided that such modifications are made in accordance with the change control provisions of the Quality Agreement. Notwithstanding the foregoing, with respect to each proposed amendment and/or modification to the Agreement or the Appendices, the Parties shall discuss in good faith the cost and time implications associated therewith. The requirements and the procedure for change control are set out in the Quality Agreement.

3.3 In the event that the Parties agree to change the Specifications in accordance with the change control provisions of the Quality Agreement, Ypsomed shall: (x) use commercially reasonable efforts to implement such change as soon as reasonably practicable; (y) be responsible for ensuring that all Components manufactured following such change meets the Specifications as amended; and (z) provide AMAG with all information and reasonable assistance with respect to the manufacture of the Components in connection with such change needed to amend any regulatory filings maintained with respect to the Bremelanotide Device. To the extent such change is a result of a change in Applicable Law or a discretionary change requested by [***], AMAG shall [***] of implementing the changes, otherwise, Ypsomed shall [***].

3.4 The Specifications are not physically attached to this Agreement, since they are kept in the Design History File (DHF) which is maintained at Ypsomed's premises. Ypsomed shall provide AMAG with a copy of the Specifications.

4.    Commercial Supply

4.1 Ypsomed shall manufacture the Component Sets in accordance with the terms of this Agreement and the Specifications attached as Appendix 1.    

4.2 Subject to the terms of this Agreement, AMAG shall purchase Component Sets from Ypsomed and Ypsomed shall supply AMAG with Component Sets.

4.3 In the event AMAG decides during the Term of this Agreement to develop (directly or indirectly) a new injection device for the administration of Bremelanotide, AMAG shall give Ypsomed notice thereof prior to issuing an invitation to tender or commencing negotiations with any third party in respect of developing such injection device. If, within [***] after AMAG gives such notice to Ypsomed, Ypsomed requests, in writing, an opportunity to submit a proposal with respect to the development, customization, manufacture and supply of such injection device, AMAG shall provide Ypsomed with the desired specifications on a confidential basis and negotiate in good faith with Ypsomed regarding any such proposal by Ypsomed. For the avoidance of doubt, AMAG shall be free to engage in parallel good faith negotiations, and to enter into a definitive agreement, with any third party with respect to the development, customization, manufacture and supply of the new injection device.

4.4 Ypsomed retains all rights to promotion, import, advertisement, distribution, offering for sale and sale in the Territory of the YpsoMateand/or customized variations thereof as well as other disposable injection systems, other than the Component Sets being supplied to AMAG pursuant to this agreement, to itself, its customers or distributors.

4.5 The commercial terms for the supply of Component Sets are set out in Appendix 3.

4.6 [***] at the Purchase Price set out in Appendix 3. The Purchase Price is firm until [***]. Thereafter, the Purchase Price is subject to adjustments, however no more than on [***] basis, to reflect increases or decreases in raw material prices and other related cost influencing factors that are not under Ypsomed’s control; provided, however, that notwithstanding the foregoing, the percentage increase or decrease in

the Purchase Price shall not exceed the lesser of (i) the percentage increase in the [***] since the then-current Purchase Price was established and (ii) [***]. In the event of a proposed adjustment to the Purchase Price under this Section 4.6, Ypsomed will in good faith submit a Price Change Order to AMAG to substantiate the adjustment, and such adjustment shall not take effect until the Price Change Order is signed by both Parties.

4.7 Throughout the Term, Ypsomed agrees to use its commercially reasonable efforts to identify and target all potential areas of cost improvement. [***]. In the event of a proposed adjustment to the Purchase Price under this Section 4.7, Ypsomed will in good faith submit a Price Change Order to AMAG to substantiate the adjustment, and such adjustment shall not take effect until the Price Change Order is signed by both Parties.

4.8 Beginning in [***], AMAG shall purchase at least the Minimum Annual Quantity of Component Sets in each remaining calendar year during the Initial Term as set out in Appendix 3. For the purpose of determining whether AMAG is in compliance with this Section 4.8, a Component Set is considered “purchased” as of the agreed Delivery Date in the respective Purchase Order, provided however that such ordered Component Sets will have been duly paid by AMAG (during such calendar year or, as applicable, at a later stage in accordance with the terms of this Agreement). If AMAG does not purchase the Annual Minimum Quantity in a calendar year in accordance with this Section 4.8, AMAG shall pay Ypsomed at the end of such calendar year, upon receipt of an invoice and reasonable supporting documentation in accordance with Section 6, an amount equal to (a) the difference between (i) the Annual Minimum Quantity for such calendar year and (ii) the aggregate number of Component Sets purchased by AMAG (or its Affiliates or licensees) during such calendar year (such amount, the “Shortfall”), multiplied by[***] of the Unit Price per Component Set as set forth in Appendix 3 (the “Shortfall Fee”). In the event that AMAG disputes the amount of the Shortfall Fee due under this Section 4.8, AMAG shall provide Ypsomed with written notice of such dispute within [***] of receipt of such invoice. If no written notice is provided by AMAG within [***] of receipt of such invoice AMAG shall be deemed to have given its approval to the Shortfall Fee.

4.9 The Parties - each for its obligations under this Agreement - shall comply with all Applicable Laws. The Parties acknowledge that AMAG has the right to market, sell and distribute the Bremelanotide Device in further countries than those enumerated in the definition of Applicable Laws and Authority in Section 1 subject to and in accordance with the terms of this Agreement. Accordingly, AMAG has the right to reasonably request Ypsomed to comply with any applicable laws other than the Applicable Laws as such laws are identified and deviate from the Applicable Laws and their requirements communicated in writing by AMAG to Ypsomed and to adjust the term Territory under Section 1 accordingly. In the event of any additional, successor or replacement applicable laws affecting Ypsomed's performance under this Agreement (including, without limitation, in respect of costs, timelines, facilities, equipment, processes, materials or systems), Ypsomed shall have the right to request and the Parties shall negotiate in good faith an amendment and/or modification pursuant to Section 3. For clarity, in the event that any additional, successor or replacement applicable laws that AMAG wishes Ypsomed to comply with, does not affect Ypsomed's performance under this Agreement, such additional applicable laws shall become automatically part of the Applicable Laws without any need for an amendment and/or modification pursuant to Section 3.

4.10 The Parties agree that the terms and conditions of this Agreement will govern the manufacture and supply of Component Sets pursuant to AMAG purchase order numbers 71635 and 71636, and such Component Sets are deemed to be Component Sets manufactured by Ypsomed and supplied to AMAG under this Agreement. In the event of a conflict between this Agreement and the Terms and Conditions, this Agreement shall control.

5.    Engagement of Subcontractors and Designees, Final Assembly & Packaging

5.1 Ypsomed shall be entitled to engage subcontractors in accordance with the Quality Agreement, including (i) such subcontractors involved in the development and manufacture of the YpsoMate platform (“YpsoMate Subcontractor”), and (ii) such other subcontractors which are solely and specifically involved in the manufacture of Component Sets under this Agreement, not being YpsoMate Subcontractors (“Specific Subcontractor”). The engagement of a Specific Subcontractor by Ypsomed requires AMAG’s prior written approval, such approval not to be unreasonably withheld, conditioned or delayed. Ypsomed shall not be relieved from its obligations hereunder and assumes full liability for the performance and all acts and/or omissions of its subcontractors as if they were its own performance and acts and/or omissions. Ypsomed shall ensure that each subcontractor is aware of and bound by the applicable provisions of this Agreement.

5.2 Ypsomed shall deliver the Component Sets in bulk packaging as set out in the Specifications (Appendix 1). AMAG shall be responsible for the final assembly and packaging of the Bremelanotide Device. AMAG shall be entitled to engage designees for final assembly and/or packaging of the Bremelanotide Device, provided that AMAG shall not be relieved from its obligations hereunder and that it assumes full liability for the performance and all acts and/or omissions of its designees as if they were its own performance and acts and/or omissions.

5.3 The Parties agree that Ypsomed and its subcontractors, and AMAG and its designees, as applicable, may need to discuss aspects of this Agreement with each other, (e.g., in respect of AMAG’s designee's final assembly of the Component Set into the Bremelanotide Device). For such purpose, Ypsomed and its subcontractors, as applicable, on the one hand, and AMAG and its designees, as applicable, on the other hand, may directly disclose to, and receive from, each other confidential information of the other Party. Each Party shall ensure that its designees or its subcontractors, as applicable, are bound by appropriate confidentiality obligations no less stringent than the confidentiality obligations set out in this Agreement.

6.    Payment

6.1 All costs and prices invoiced under this Agreement are specified in [***]. All payments due to Ypsomed by AMAG under this Agreement are expressed as net amounts and AMAG shall be liable to pay any applicable sales taxes, value added taxes and duties.

6.2 With respect to each undisputed invoice under this Agreement, AMAG shall make payments to Ypsomed under this Agreement in immediately available funds to the bank account designated by Ypsomed from time to time, within [***] after the date of the invoice.

6.3 Any payments due hereunder which are not made within [***]after the due date of such payments shall be subject to default interest of [***] per [***] period on the unpaid amount until paid in full. Notwithstanding any right to terminate this Agreement

for AMAG's material breach as set out in Section 21.2, if any payment due hereunder is not made within [***] after the date on which such payment is due, Ypsomed shall provide written notice to AMAG, and AMAG shall use commercially reasonable efforts to remedy such failure. If any portion of an invoice is disputed by AMAG on justified grounds, AMAG shall pay the undisputed amounts in accordance with the terms above, and the Parties shall use good faith efforts to resolve differences or discrepancies with regard to any disputed amount as soon as practicable.

7.    Forecasts and Purchase Orders

7.1 On the Effective Date and before January 1 of each year thereafter, AMAG shall provide Ypsomed with a written forecast for [***] of AMAG’s estimated requirements for Component Sets (the "Long Range Forecast"). Such Long Range Forecasts shall only be used for capacity planning and determination purposes as set out herein.

7.2 On the Effective Date and on or before of each January 1, April 1, July 1 and October 1 during the Term, AMAG shall provide Ypsomed with a written [***] rolling forecast of AMAG’s estimated requirements for Component Sets (the "Rolling Forecast"). Such Rolling Forecasts shall include binding and non-binding periods, [***] (the “Binding Forecast”). The non-binding portion of each Rolling Forecast shall only be used for capacity planning and determination purposes as set out herein. In its Rolling Forecast, AMAG shall, to the extent practicable, level out potential variations in the forecasted amounts for consecutive quarters (in any case for at least the first [***] covered by the Rolling Forecast) to enable continuous manufacture and resource planning at Ypsomed.

7.3 On or before each January 1, April 1, July 1 and October 1 during the Term, AMAG shall submit to Ypsomed a purchase order specifying the number of Component Sets and the requested delivery date(s) for the second quarter thereafter in accordance with the Binding Forecast (“Purchase Order”), and in each case no later than [***] prior to the requested delivery date(s) specified in the Purchase Order.

7.3 In the event of any conflict between a Purchase Order submitted by AMAG and this Agreement, this Agreement shall prevail, unless Ypsomed expressly approves such conflict or accepts such Purchase Order in writing.

7.4 Ypsomed shall acknowledge and confirm each Purchase Order in writing within [***] of receipt, provided that AMAG has submitted the Purchase Order in accordance with the terms of this Agreement. However, (a) in no event shall Ypsomed be required to supply quantities of Component Sets in excess of the Applicable Capacity unless otherwise agreed by the Parties, and (b) if the quantity of ordered Component Sets in a Purchase Order exceeds the quantity set out in the Rolling Forecast by more than [***]for the respective quarter, the Parties will agree on the delivery date for such excess quantities on a case-by-case basis. If Ypsomed is unable to deliver all of the Component Sets by the requested date of Delivery in the Purchase Order, Ypsomed shall so notify AMAG within [***] of receipt of the Purchase Order, and the Parties shall negotiate in good faith an alternate date of Delivery as close to the requested date of Delivery as is commercially reasonable, provided that in no event shall such alternate date be more than [***] after the requested date of Delivery in the Purchase Order. Upon confirmation by Ypsomed, each Purchase Order will be regarded by the Parties as a binding commitment by Ypsomed to manufacture and Deliver to AMAG the relevant number of Component Sets on the delivery date (such agreed upon delivery date being the “Delivery Date”).

8.    Delivery

8.1 Ypsomed shall deliver the number of Component Sets set out in the relevant Purchase Order by the Delivery Date (“Delivery”), provided that over-delivery or under-delivery of up to [***] of the ordered amount shall be allowed. Component Sets shall be delivered to AMAG FCA Ypsomed's manufacturing facility indicated in the Quality Agreement (Incoterms 2010) and title shall pass upon Delivery at such facility.

8.2 Ypsomed shall notify AMAG of any expected delay in Delivery and will make commercially reasonable efforts to effect Delivery as quickly as possible. The Parties shall, if requested by AMAG, renegotiate the date(s) of Delivery of all placed Purchase Orders following a delayed Delivery. Ypsomed may, upon AMAG’s prior written consent, make partial deliveries to maintain continuous supply. In case Ypsomed anticipates that it may not be able or is unable to Deliver all Components Sets by more than [***] after the Delivery Date set forth in a Purchase Order, Ypsomed shall notify AMAG in writing immediately and provide an explanation thereof. Ypsomed shall discuss with AMAG potential remedies and propose as soon as reasonably possible a mitigation plan to AMAG’s reasonable satisfaction, which will include concrete measures in line with Ypsomed’s business continuity plan, such as the introduction or increase of shift work, an internal second source option, or safety stock provisions; as well as any other measures in order to provide a fast and secure recovery of the supply of Component Sets. Notwithstanding the foregoing, if Ypsomed is or will be unable for any reason to deliver all Component Sets within [***] of the Delivery Date in the respective Purchase Order, then AMAG may, at its sole discretion, (i) cancel such Purchase Order without penalty to AMAG and the number of Component Sets in such cancelled Purchase Order shall be counted toward the Annual Minimum Quantity for the calendar year in which the cancelled Purchase Order was submitted, or (ii) accept Delivery of the Component Sets on a delivery date mutually agreed to by the Parties.

8.3 Ypsomed will convey good title to the Component Sets to AMAG on the date of Delivery, free and clear of any lien or encumbrance.

9.    Inspection, Notification of Defects

9.1 Upon receipt of a lot of Component Sets and all release documentation at AMAG or its designee’s premises, AMAG or its designee acting on behalf of AMAG shall carry out commercially reasonable and adequate inspection and testing of the lot of Component Sets based on mutually agreed inspection criteria as set out in the Specifications (the “Initial Inspection”). If any Component Sets fail Initial Inspection, then AMAG shall notify Ypsomed within [***] after the arrival of such Component Sets at AMAG's or its designee’s premises (such notice, a “Failure Notice”). If AMAG does not so notify Ypsomed, then such Component Sets shall be deemed accepted by AMAG. In the event AMAG rejects any Component Sets under this Section 9.1, AMAG shall identify such Component Sets and their date of Delivery and provide Ypsomed with a report (including photos if applicable) on the nature of the alleged defect. AMAG shall hold any such Component Sets for inspection by Ypsomed or, upon Ypsomed’s written request and at [***] sole cost, shall return such Component Sets to Ypsomed, whereas [***] shall reimburse the cost of returning such Component Sets to Ypsomed in the event the respective Component Sets are determined not to have failed Initial Inspection.

9.2 If at any time within a period of [***] after Delivery of a Component Set to AMAG or its designee AMAG discovers an alleged Hidden Defect, AMAG shall notify Ypsomed within [***] after the discovery of such Hidden Defect. AMAG shall identify the relevant Component Sets and their date of Delivery and provide Ypsomed with a report (including photos if applicable) describing the nature of the alleged Hidden Defect. AMAG shall hold any such Component Set for inspection by Ypsomed or, upon Ypsomed’s written request and at [***] sole cost, shall return such Component Sets to Ypsomed, whereas [***] shall reimburse the cost of returning such Component Sets to Ypsomed in the event the respective Component Sets are determined to comply with the product warranty set out in Section 11.1. Except to the extent AMAG provides the notice of an alleged Hidden Defect to Ypsomed in accordance with this Section 9.2, the Delivered Component Sets shall be deemed to be accepted by AMAG.

10.    Remedy and Liability for Defects

10.1 In the event one or more Component Sets fails Initial Inspection under Section 9.1, has a Hidden Defect under Section 9.2, or is determined not to comply with the product warranty set out in Section 11.1, provided that AMAG provided proper notice to Ypsomed within the agreed time period under Section 9.1 or Section 9.2, as applicable, and subject to Section 11.2, as applicable, Ypsomed shall, upon the Parties good faith decision, either (a) [***] or, (b) [***]. In either case, [***] shall reimburse [***] for any applicable delivery charges. AMAG shall not request an [***]as set out under option (a) above, if the amount of defective Components is [***] as set forth in Appendix 4.

10.2 In the event the Parties are unable to agree as to whether or not a Component Set fails Initial Inspection under Section 9.1, has a Hidden Defect under Section 9.2, or complies with the product warranty set out in Section 11.1, the Parties shall select an independent laboratory which shall test such Component Set lot or Component Sets to determine whether such Component Set(s) fails Initial Inspection under Section 9.1, has a Hidden Defect under Section 9.2, or complies with the product warranty set out in Section 11.1. The findings of such laboratory shall be binding. [***] upon such laboratory testing shall pay the costs invoiced by such laboratory. During any period that the Parties are in dispute regarding the conformity of the Component Sets, Ypsomed shall, if requested by AMAG, replace such quantity of Component Sets. If the laboratory determines the Component Set(s) fail Initial Inspection under Section 9.1, has a Hidden Defect under Section 9.2, or does not comply with the product warranty set out in Section 11.1, then AMAG shall be entitled to the remedies set out in Section 10.1. If the laboratory determines the Component Set(s) passes Initial Inspection under Section 9.1, does not have a Hidden Defect under Section 9.2, or complies with the product warranty set out in Section 11.1, then AMAG shall pay for both the original shipment of Component Sets and the replacement shipment of Component Sets following such determination.

11.    Representations and Warranties by Ypsomed

11.1 Product Warranty. Subject to Section 11.2, Ypsomed hereby represents and warrants to AMAG that the Component Sets delivered by Ypsomed to AMAG hereunder (a) will have been manufactured in accordance with this Agreement, the Quality Agreement and Applicable Laws, including, without limitation, cGMP in effect at the time of manufacture, (b) will, as of the date of Delivery, conform to the Specifications in effect at the time of manufacture, and (c) will not be adulterated

within the meaning of the U.S. Federal Food, Drug and Cosmetic Act, or any other law in the Territory.

11.2 Warranty Limitation. The warranty under Section 11.1 and AMAG’s remedies under Section 10 shall not apply to, and shall be void in respect to (a) Components that have been modified or altered in any manner by anyone other than Ypsomed or its Affiliates or designees or authorized by Ypsomed, except that activities carried out by AMAG or its designees in the final assembly of a Component Set into a Bremelanotide Device in accordance with the applicable specification, including the Specifications, shall not be considered modified or altered under this Section 11.2(a), or (b) defects caused by anyone other than Ypsomed or its Affiliates or designees or authorized by Ypsomed (i) by the use or operation of the Component Sets in an application or environment other than that intended or recommended for the Component Sets and/or the Bremelanotide Devices (as further detailed in the Specifications or other separate documents such as the Bremelanotide Device IFU); ii) by accident, negligence, misuse or other causes other than the uses covered by this Agreement; or (iii) by packaging, transport, warehousing, storage or handling of the Component Sets, in any manner inconsistent with this Agreement, including, without limitation, the Specifications. Ypsomed expressly excludes any liability for instructions for use for the Component Sets or Bremelanotide Devices respectively.

11. 3 Authority & Approvals. Ypsomed represent and warrants that (a) it has full power and authority, and has taken all necessary actions and has obtained all necessary statutory authorizations, licenses and approvals required, to execute and perform this Agreement; and (b) its entry into this Agreement and its performance of its obligations under this Agreement do not, and will not, breach any agreements (to which it is party) with any third party.

11.4 Regulatory Violations. Ypsomed represents and warrants that it and its employees, agents, officers and directors have not been debarred, disqualified or convicted of a crime for which one can be debarred under Article 306 of the FDCA, 21 U.S.C. §335a(a) or (b), or any equivalent foreign or local law, rule or regulation. In the event that Ypsomed or any of its employees, agents, officers and directors becomes so debarred, disqualified or convicted, Ypsomed agrees to notify AMAG thereof immediately, and AMAG shall have the right to terminate this Agreement pursuant to Section 21.2. Ypsomed further represents and warrants that it has not and shall not knowingly use or employ in any capacity related to any activities under this Agreement any individual, corporation, partnership, or association which has been debarred, disqualified or convicted of a crime for which one can be debarred under Article 306 of the FDCA, 21 U.S.C. §335a(a) or (b), or any equivalent foreign or local law, rule or regulation. In the event that Ypsomed becomes aware of or receives notice of the debarment, disqualification or conviction of any such individual, corporation, partnership, or association providing services to it which relate to any activities under this Agreement, Ypsomed agrees to notify AMAG immediately thereof, and AMAG shall have the right to terminate this Agreement pursuant to Section 21.2.

12.    Representations and Warranties by AMAG

12.1 AMAG warrants that, following Delivery to AMAG or its designee, all Component Sets shall be transported, warehoused, stored, processed, handled and marketed by AMAG or its designees in accordance with this Agreement, including the Specifications, and all Applicable Laws. AMAG further warrants that it will not knowingly put on the market any Component Sets or Bremelanotide Device with known defects nor shall AMAG knowingly put on the market any Component Sets or

Bremelanotide Device except subject to and in accordance with the applicable specifications, including the Specifications and Authorizations.

12.2 AMAG warrants that all advertising and promotional materials as well as user manuals and other information, instructions and directions of use relating to safety and risk issues, use, transport, handling, and storage of the Bremelanotide Device shall comply with the applicable specifications, and all applicable laws, rules, and regulations in the Territory.12.3    AMAG warrants that it will not market, offer to sell or sell any Bremelanotide Device in any country unless and until it has all the necessary Authorizations from the relevant regulatory agency in such country that are required to market, offer to sell and sell the Bremelanotide Device. Ypsomed will support AMAG in obtaining such Authorizations in accordance with Section 14 and as set out in the Quality Agreement.

12.4 Authority & Approvals. AMAG represent and warrants that (a) it has full power and authority, and has taken all necessary actions and has obtained all necessary statutory authorizations, licenses and approvals required, to execute and perform this Agreement; and (b) its entry into this Agreement and its performance of its obligations under this Agreement do not, and will not, breach any agreements (to which it is party) with any third party.

12.5 Regulatory Violations. AMAG represents and warrants that is has not been debarred under Article 306 of the FDCA, 21 U.S.C. §335a(a) or (b), or any equivalent foreign or local law, rule or regulation. In the event that AMAG becomes debarred, AMAG agrees to notify Ypsomed thereof immediately, and Ypsomed shall have the right to terminate this Agreement pursuant to Section 21.2. AMAG further represents and warrants that it has not and shall not knowingly use or employ in any capacity related to any activities under this Agreement any individual, corporation, partnership, or association which has been debarred under Article 306 of the FDCA, 21 U.S.C. §335a(a) or (b), or any equivalent foreign or local law, rule or regulation. In the event that Ypsomed becomes aware of or receives notice of the debarment of any such individual, corporation, partnership, or association providing services to it which relate to any activities under this Agreement, AMAG agrees to notify the Ypsomed immediately thereof, and Ypsomed shall have the right to terminate this Agreement pursuant to Section 21.2.

13.    Quality Management System

13.1 On or about the date hereof the Parties shall enter into a Quality Agreement covering the Components and Component Sets. The Parties shall review the Quality Agreement and shall modify same from time to time as detailed in the Quality Agreement as necessary through a written amendment to the Quality Agreement signed by an authorized representative on behalf of each of the Parties. The Parties shall perform the quality control and quality assurance testing specified in this Section 13, the Quality Agreement, theSpecifications and Applicable Laws.

13.2 Ypsomed shall (i) maintain a quality management system, (ii) manufacture the Component Sets and (iii) generate and maintain the compilation of records of the manufacturing, testing, processing, packaging, labeling, and storage of the Component Sets in accordance with the Quality Agreement. Reference is made to Section 24.7 for the language of such records.

13.3 Ypsomed will participate in and support AMAG in all required actions in respect of AMAG’s medical device vigilance systems, including, without limitation, support in

respect of initial reporting and corrective action, as set out in the Quality Agreement or required by Applicable Law.

13.4 In accordance with the Quality Agreement, Ypsomed shall allow AMAG (and, if requested by AMAG, its notified body) to audit Ypsomed’s manufacturing facilities in order to assure compliance with this Agreement and the Quality Agreement.

13.5 Unless otherwise indicated, [***] incurred in respect of Audits pursuant to Section 13.4. All information obtained by AMAG in any Audit (including, without limitation, the findings and results related thereto but excluding all Confidential Information of AMAG) shall be deemed to be Ypsomed’s Confidential Information that may not be shared with any third parties, except as otherwise permitted under this Agreement (which permitted uses include, for clarity, use in regulatory filings for Authorizations, provided however that AMAG shall not be authorized to list patents of Ypsomed in the FDA publication entitled Approved Drug Products with Therapeutic Equivalence Evaluations (Orange Book) without the prior written consent of Ypsomed) or unless compulsory under Applicable Law.

14.    Authorizations

14.1 AMAG shall obtain and maintain all Authorizations for the Bremelanotide Device and shall be the sole owner of such Authorizations in the Territory. The costs for such applications and Authorizations shall be borne by [***]. Subject to Section 14.3, as between the Parties, AMAG shall be responsible for all communications with Authorities regarding such Authorizations.

14.2 For the purposes of Sections 14.3 and 14.4, AMAG shall use reasonable efforts to notify Ypsomed in a timely manner about its application schedule for Authorizations and any updates thereto. AMAG shall use reasonable efforts to regularly inform Ypsomed about the expected times for obtaining the Authorizations and notify Ypsomed in writing about any Authorizations obtained.

14.3 Ypsomed shall use reasonable efforts to provide AMAG or, at AMAG's request, Authorities in the Territory with any data and information (in English) relating to Ypsomed's performance under this Agreement, which is necessary to apply for and/or maintain Authorizations in the Territory.

14.4 Ypsomed agrees to cooperate with any inspection of Ypsomed's facilities by Authorities, including any regulatory inspection required for AMAG to apply for and/or maintain Authorizations, in accordance with the Quality Agreement.

14.5 Any provision in this Agreement, including, without limitation, in the Quality Agreement, giving AMAG the right to access, control, check or receive documents from Ypsomed or to visit or audit Ypsomed’s premises, shall be interpreted as covering all documents and information relevant to the Components but excluding trade, operating and/or business secrets of Ypsomed and/or its subcontractors. If documents or information containing such trade, operating and business secrets are required for (i) AMAG's certification by an Authority, (ii) applying for and/or maintaining Authorizations in the Territory, (iii) risk evaluation by an Authority or (iv) market surveillance by an Authority, the document or information will be disclosed only to the relevant Authority. Ypsomed shall inform AMAG of any information directly submitted to Authorities, and Ypsomed shall be responsible for any updates and annual reports required by such Authorities in respect of such information.

14.6 [***] shall [***] in respect of Ypsomed's activities of providing data and information as set out in Section 14.3, Section 14.4 and Section 14.5, provided such costs are administrative costs of Ypsomed. To the extent such costs relate to the Authorizations and are not administrative costs (e.g., costs for the undertaking of further technical studies, tests or experiments, costs for translation of or costs for compiling additional documents), [***] shall pay the respective costs, provided [***] supplies reasonable documentation substantiating such costs, except as otherwise agreed upon in writing. For one (1) regulatory inspection related to the Authorizations every [***] pursuant to Section 14.4, [***] shall bear its own costs. [***] shall pay the reasonable costs incurred by [***] for regulatory inspections in excess of one (1) every [***] related to the Authorizations, provided [***] supplies reasonable documentation substantiating such costs, except if such inspection is for-cause.

15.    Patient Complaints and Recalls

15.1 The process for resolving complaints, adverse events, and inquiries related to the Bremelanotide Device shall be in accordance with the Quality Agreement. As between the Parties, AMAG shall have the sole responsibility for resolving patient questions or complaints related to the Bremelanotide Device. Ypsomed shall refer any patient questions and complaints (including safety and efficacy inquiries, quality complaints and adverse event reports) that it receives concerning the Bremelanotide Device to AMAG (together with all available evidence and other information relating thereto) in accordance with the Quality Agreement. Ypsomed shall not take any further action in connection with any such patient questions or complaints without the consent of AMAG, but shall cooperate in the investigation and closure of any such questions or complaints at the request of AMAG. Such assistance shall include follow-up investigations, including testing according to Ypsomed’s SOP and complaint handling proceedings. In addition, Ypsomed shall provide AMAG with all information to enable AMAG to respond properly to patient questions or complaints relating to the Components Sets as provided in the Quality Agreement.

15.2 As between the Parties, AMAG shall have the sole responsibility as to whether to institute a recall or withdrawal of Bremelanotide Devices (whether required by an Authority or instituted by AMAG for any reason). Ypsomed shall support AMAG as set out in the Quality Agreement. If AMAG plans a recall or withdrawal of the Bremelanotide Device, AMAG shall notify Ypsomed promptly of the details regarding such recall or withdrawal, including, without limitation, providing copies of all relevant documentation concerning such recall or withdrawal. As far as the Components are concerned, Ypsomed shall cooperate with AMAG in any such recall and AMAG shall reasonably consider Ypsomed’s input in respect to the Components. Ypsomed shall provide such information in respect of Ypsomed's performance under this Agreement as AMAG reasonably requests or which is necessary according to Applicable Laws. All regulatory contacts that are made and all activities concerning such recall will be initiated and coordinated by AMAG with Ypsomed’s involvement and assistance, as such involvement and assistance is reasonably requested by AMAG. .

15.3 Ypsomed shall indemnify AMAG and bear the expense and costs, including replacements costs but not including loss of profit, resulting from a recall or withdrawal of Bremelanotide Device to the extent caused by a failure of the Components to comply with the product warranty set out in Section 11.1.

16.    Intellectual Property Rights

16.1 Any and all Intellectual Property Rights in existence prior to the Effective Date or developed during the period of this Agreement but otherwise than in the course of performance of obligations under this Agreement shall, as between the Parties, remain the sole and exclusive property of the Party that brings such rights to this Agreement.

16.2 Ypsomed shall be the sole and exclusive owner of [***] (“New Ypsomed Intellectual Property Rights”). AMAG agrees to assign and hereby assigns all of its rights, including all patent rights, to such New Ypsomed Intellectual Property Rights to Ypsomed, and such New Ypsomed Intellectual Property Rights shall be included in the license in Section 16.4. Ypsomed shall be solely entitled to legally protect any such New Ypsomed Intellectual Property Rights and shall bear all related costs.

16.3 AMAG shall be the sole and exclusive owner of [***] (“New AMAG Intellectual Property Rights”). Ypsomed agrees to assign and hereby assigns all of its rights, including all patent rights, to such New AMAG Intellectual Property Rights to AMAG. AMAG shall be solely entitled to legally protect any such New AMAG Intellectual Property Rights and shall bear all related costs.

16.4 Ypsomed grants to AMAG a royalty-free, fully paid-up, irrevocable (during the term of this Agreement), sublicensable and non-exclusive license in respect of the Ypsomed Intellectual Property Rights and New Ypsomed Intellectual Property Rights to the extent required for AMAG to final assemble and pack, use, sell, offer for sale, distribute, import and export the Components, Component Sets and Bremelanotide Device. This limited license shall only survive an expiration or termination of this Agreement to the extent that a permitted use set out hereunder outlasts the expiration or termination of this Agreements. For the avoidance of doubt, the license shall survive expiration or termination of this Agreement with respect to any and all Component Sets ordered or purchased as of the date of expiration or termination until such time as the resulting Bremelanotide Devices have been sold or have expired. The license shall not include the right to manufacture or have manufactured the Components.

16.5 Each Party shall cooperate with the other in completing any patent applications or obtaining any other patent rights relating to Intellectual Property Rights created or developed under this Agreement, including executing and delivering any instrument required to assign or transfer such Intellectual Property Rights to the other Party in accordance with Sections 16.2 or 16.3.

16.6 Ypsomed has established a continuous standard patent surveillance in the EU, USA and Switzerland concerning the YpsoMate. Under this Agreement Ypsomed shall continue to undertake its continuous standard patent surveillance concerning the YpsoMate.

In the event that Ypsomed becomes aware of any third party patent rights (granted patents) that may reasonably adversely impact AMAG’s use of the Components in accordance with this Agreement, Ypsomed shall notify AMAG thereof in writing without delay.

Ypsomed represents and warrants that [***]it has not received any claims from a third party that the YpsoMate or the performance of the activities under this Agreement infringe or misappropriate the rights of any third party Intellectual Property Rights and according to Ypsomed’s assessment (of infringement and validity) and good faith belief, [***], the use of the Components and Component Sets in

accordance with this Agreement does not infringe or misappropriate any valid and enforceable issued third party patent. If Ypsomed becomes aware of any third party claims of patent infringement or misappropriation (e.g., by receiving a cease and desist letter) after the Effective Date, Ypsomed shall promptly notify AMAG thereof in writing.

16.7 If either Party becomes aware of any claim or action by a third party claiming that the YpsoMate or the Component Sets infringes or misappropriates a third party patent (in particular upon receipt of a corresponding letter from such third party) (each a "Third Party Action"), such Party shall promptly inform the other Party of such Third Party Action.

16.8 The defense against a Third Party Action shall be ruled as follows:

a) If the Third Party Action is directed against Ypsomed for alleged infringement of a third party patent by the YpsoMate, Ypsomed shall defend at its sole cost the Third Party Action directed against the YpsoMate through counsel of its choice. Ypsomed shall reasonably update and inform AMAG on its defense strategy and the status of any Third Party Action under this Section 16.8(a).

b) If the Third Party Action is [***] then AMAG shall have the right to defend such Third Party Action [***]. The Party defending such Third Party Action shall have the sole and exclusive right to select counsel for such Third Party Action. The non-controlling Party shall have a reasonable opportunity for meaningful participation in decision-making and formulation of defense strategy. The Parties shall reasonably cooperate with each other in all such actions or proceedings. In the event that AMAG is enjoined from selling the Bremelanotide Device as a result of such Third Party Action, [***].

c) For Third Party Actions under Section 16.8 (b), the Party conducting the defense to such Third Party Action shall (i) take all reasonable steps to prevent judgment by fault or by default being granted in favor of the third party; (ii) ensure that the other Party is given the right to conduct proper consultations with the third party in relation to the claim or potential claim; (iii) if appropriate and practicable, allow the other party to join in the defense (including, without limitation, settlement, litigation or appeal) of any claim; and (iv) not, without the prior written consent of the other Party, settle or compromise any claim or consent to the entry of any judgment that imposes any liability or obligation upon such Party.

16.9 In the event it is established that the Components infringe a third party patent or if the Parties agree to settle any claim or consent to the entry of any judgment that prevents Ypsomed to continue to manufacture and supply the Components to AMAG, the Parties shall mutually agree on the strategy to be followed which may contain one of the following actions: (i) Ypsomed at its own cost shall redesign the Components to avoid the infringement, or (ii) Ypsomed at its own cost shall procure to obtain a license from such third party, [***]. If the Parties cannot agree on either of such actions, or if such actions are not possible or successful, the Parties agree to discuss in good faith alternative solutions, whereas in case such alternative solutions are not possible or successful, the Parties agree to consensually terminate this Agreement.

16.10 If any Ypsomed Intellectual Property Right licensed to AMAG under this Agreement is infringed and/or misappropriated by a third party (the “Infringed Intellectual Property”) the Party first having knowledge of such infringement/misappropriation shall promptly notify the other Party in writing.

17.    Disclaimer

Except as expressly set out in this Agreement, neither Party makes any warranties in respect of its activities under this Agreement, express or implied, including, without limitation, any implied warranty of merchantability or fitness for a particular purpose.

18.    Indemnity and Insurance

18.1 Ypsomed agrees to indemnify, defend and hold harmless AMAG, its Affiliates and its and their respective officers, directors, employees, subcontractors, and agents (collectively, the “AMAG Indemnitees”) against any and all losses, damages, liabilities or expenses (including reasonable attorney’s fees and other costs of defense) (collectively, “Losses”) in connection with any and all actions, suits, claims or demands that are brought or instituted against any AMAG Indemnitee by any third party to the extent they arise out of (a) any breach of Ypsomed’s representations, warranties or obligations set out in this Agreement, including but not limited to the ones set out in Sections 11, 16.6 and 16.7, (b) any Ypsomed Indemnitees’ gross negligence or willful misconduct in performing obligations under this Agreement, (c) a recall or withdrawal of Bremelanotide Device in accordance with Section 15.3, or (d) [***] except, in each case, to the extent that such Losses result from an action for which AMAG has an obligation to indemnify Ypsomed under Section 18.2(a), (b) or (c).

[***].

18.2 AMAG agrees to indemnify, defend and hold harmless Ypsomed, its Affiliates and its and their respective officers, directors, employees, subcontractors, and agents (collectively, the “Ypsomed Indemnitees”) against any and all Losses in connection with any and all actions, suits, claims or demands that are brought or instituted against any Ypsomed Indemnitee by any third party to the extent they arise out of (a) the use of the Component Sets, (b) any breach of AMAG’s representations, warranties or obligations set out in this Agreement, (c) any AMAG Indemnitee’s gross negligence or willful misconduct in performing obligations under this Agreement, or (d) any claim alleging that the manufacture, use, offer for sale, sale, import or export of Bremelanotide infringes any Intellectual Property Rights of a third party, except, in each case, to the extent that such Losses result from an action for which Ypsomed has an obligation to indemnify AMAG under Section 18.1(a), (b) or (c).

18.3 Each Party agrees that if it is notified by a third party of any claim or potential claim that may give rise to a right of indemnification pursuant to Section 18.1 or Section 18.2, it shall

a) forthwith inform the other Party of such claim or potential claim;

b) take all reasonable steps to prevent judgment by fault or by default being granted in favor of the third party;

c) ensure that the other Party is given the right to conduct proper consultations with the third party in relation to the claim or potential claim;

d) if appropriate, allow the other party to join in the defense (including, without limitation, settlement, litigation or appeal) of any claim; and

e) not, without the prior written consent of the other Party, settle or compromise any claim, or consent to the entry of any judgment that imposes any liability or obligation upon such Party.

18.4 Both Parties shall obtain and maintain for the duration of this Agreement and a period of [***]thereafter comprehensive liability insurance and other insurance all in amounts and with coverage as required by the jurisdictions in which they operate or as necessary to cover their obligations pursuant to this Agreement. Each Party shall, within [***] of any request from the other Party, provide a copy or extract of its certificate of insurance to the other Party evidencing compliance with this Section.

19.    Limitation of Liability

19.1 To the extent permitted by the applicable law, neither Party shall be liable to the other Party or to any third party, under this Agreement, in contract, tort (including negligence) or otherwise howsoever, and whatever the cause thereof, for lost profits, goodwill, the cost of procurement of substitute goods, the cost of Bremelanotide or for any consequential or indirect damages, provided, however that such limitation shall not apply with respect to any claim arising from (a) the gross negligence or willful misconduct of either Party, or (b) a breach of the confidentiality provisions of Section 20. This limitation shall apply even where a Party has been advised of the possibility of such damage and notwithstanding the failure of the essential purpose of any limited remedy stated herein.

19.2 To the extent permitted by applicable laws and subject to the provisions of this Section 19.2, either Party’s liability under this Agreement in any calendar year shall be limited to the greater of (a) [***]) and (b) the total charges paid by AMAG to Ypsomed under this Agreement during the [***] period preceding the event that gave rise to the liability, provided, however that Ypsomed’s liability over such calendar year shall in any event be limited to [***]. Such limitation shall not apply with respect to any claim arising from (a) the gross negligence or willful misconduct of either Party, or (b) a breach of the confidentiality provisions of Section 20.

It is hereby clarified that [***] own costs for defending a Third Party Action pursuant to Section 16.8 (a) or 16.8 (b) [***], shall not be considered as "liability" for the purpose of calculating [***] liability limit pursuant to this Section 19.2.

19.3 Each Party shall be obliged to mitigate damages.

20.    Confidentiality

20.1 It is understood between the Parties that the existing secrecy undertakings as stipulated in the Confidentiality Agreement have been and shall remain in force with respect to information exchanged thereunder.

20.2 For purposes of this Agreement, “Confidential Information” includes all information furnished by or on behalf of a Party (the “Disclosing Party”), its Affiliates or any of its or their respective Representatives (as defined below), to the other Party (the “Receiving Party”), its Affiliates or any of its or their respective Representatives, in respect of this Agreement or any performance hereunder, whether furnished before, on or after the Effective Date and furnished in any form, including written, verbal, visual, electronic or in any other media or manner and information acquired by observation or otherwise during any site visit at the other Party’s facility. Confidential Information includes all proprietary technologies, know-how, trade secrets, discoveries, ideas, processes, formulas, samples, compounds, extracts, inventions and any other intellectual property (whether or not patented), analyses and

compilations, business, technical and financial information and other materials prepared by either Party, their respective Affiliates, or any of its or their respective representatives, containing or based in whole or in part on any information furnished by the Discloser, its Affiliates or any of its or their respective Representatives. Confidential Information also includes the existence of this Agreement and its terms.

20.3 The Receiving Party shall maintain all Confidential Information in trust and confidence and shall not disclose or divulge or use any Confidential Information for any purpose other than the performance of its obligations under this Agreement without the prior written consent of the Disclosing Party.

20.4 The Receiving Party may disclose Confidential Information to its officers, directors, employees, agents, independent, consultants, attorneys or accountants (collectively “Representatives”) only on a need to know basis; provided that (a) such Representatives are bound by written agreements to maintain in confidence and not use the Confidential Information under terms at least as restrictive as the terms of this Agreement, and (b) the Receiving Party shall be liable for any breach by its Representatives of any obligations hereunder.

20.5 The foregoing obligations of confidentiality shall not apply to Confidential Information that the Receiving Party can prove by competent written proof:

a) was known to the Receiving Party prior to its receipt from the Disclosing Party, or

b) is publicly available prior to receipt from the Disclosing Party or subsequently becomes publicly available through no fault of the Receiving Party, or

c) is obtained by the Receiving Party from a third party who is not under an obligation of confidentiality and has a lawful right to make such disclosures, or

d) is independently developed by or for the Receiving Party without use of the Disclosing Party’s confidential information.

20.6 The Receiving Party may make disclosures required by an order of a governmental agency, legislative body or court of competent jurisdiction, provided that the Receiving Party: (i) provides the Disclosing Party with immediate written notice of such requirement, (ii) cooperates with the Disclosing Party at the Disclosing Party’s expense in connection with the Disclosing Party’s reasonable and lawful actions to obtain confidential treatment for such Confidential Information, and (iii) limits such disclosure of Confidential Information to the fullest extent permitted under applicable law.

20.7 The confidentiality and non-use obligations imposed by this Agreement shall expire with respect to any particular item of a Disclosing Party's Confidential Information on the [***] anniversary of the date of disclosure of such Confidential Information.

21.    Term and Termination

21.1 The term of this Agreement shall commence on the Effective Date and, unless terminated under Sections 21.2 through 21.6, this Agreement shall continue in full force and effect until [***] ("Initial Term"). This Agreement shall be automatically renewed for successive [***]year periods (each a "Subsequent Term" and, with the Initial Term, the “Term”) unless either Party terminates this Agreement by [***]written notice to the other Party prior to the expiration of the Initial Term or any Subsequent

Term, as applicable. [***] before expiration of this Agreement, the Parties shall undertake to facilitate the phase out and wind down of the supply.

21.2 This Agreement may be terminated by either Party effective upon [***] written notice to the other Party in the event of material breach of this Agreement by the other Party, provided it has previously given written notice of such material breach and the breaching Party has failed to remedy such breach within [***]of receipt of such notice.

21.3 This Agreement may be terminated by either Party effective immediately upon written notice to the other Party (i) upon the institution by or against the other Party of insolvency, receivership or bankruptcy proceedings or any other proceedings for the settlement of the other Party’s debts, unless such other Party timely contests such proceedings, (ii) upon the other Party’s making an arrangement for the benefit of creditors, or (iii) upon the other Party’s dissolution or cessation of business.

21.4 This Agreement may be terminated by either Party effective upon [***] written notice to the other Party in the event of a change of control of the other Party if such controlling party is a competitor of the terminating Party. For the purposes of this Section 21.4, the term “control” shall have the same meaning as set out in Section 1 in respect of Affiliates.

21.5 This Agreement may be terminated by AMAG if the Bremelanotide Device does not receive FDA approval, provided AMAG notifies Ypsomed in writing with [***]notice that it wishes to terminate the Agreement.

21.6 This Agreement may be terminated by AMAG if AMAG is required to withdraw the Bremelanotide Device from the market for regulatory or health and safety reasons, provided AMAG notifies Ypsomed in writing with [***] notice that is wishes to terminate the Agreement.

22.    Effects of Termination or Expiration

22.1 Upon termination by Ypsomed or receipt of notice of termination from AMAG, Ypsomed will as soon as reasonably practicable cease performance of the applicable activities in respect to the Component Sets and will take reasonable steps to mitigate the out-of-pocket expenses incurred in connection therewith.

22.2 Each Party shall return all documents and materials in its possession which contain confidential information of the other Party within [***] after termination or expiration of this Agreement, except for copies of information that may be routinely and automatically stored in the Party’s computer backup and electronic communications systems. The receiving Party may retain one copy of documents and materials which contain the disclosing Party's confidential information for the purpose of verifying the receiving Party's compliance with its obligations under this Agreement or as required by Applicable Laws, but for no other purpose whatsoever.

22.3 Sections 1, 2, 4.4, 6, 9, 10, 11, 12, 13.2(iii), 13.3, 14.3, 14.4, 14.5, 14.6, 15, 16, 17, 18, 19, 20, 22, 24.1, 24.2, 24.4, 24.5, 24.6, 24.7, 25 and 26 shall survive termination or expiration of this Agreement.

22.4 In the event of termination of this Agreement by Ypsomed according to Section 21.2, 21.3 or 21.4, [***] shall (i) [***].

22.5 In the event of termination of this Agreement by AMAG according to 21.5 or 21.6, [***] shall (i) [***].

22.6 In the event of termination of this Agreement by [***] according to Sections 16.9, 21.2, 21.3 or 21.4, [***].

23.    Force Majeure

Neither Party shall lose any rights hereunder or be liable to the other Party for damages or losses (except for payment obligations) on account of failure of performance by the defaulting Party if the failure is occasioned by war, strike, acts of terrorism, fire, acts of god, earthquake, flood, lockout, embargo, governmental acts or orders or restrictions or any other similar reason where failure to perform is beyond the reasonable control of and could not reasonably have been expected to occur by the defaulting Party and such Party has exerted all reasonable efforts to avoid or remedy such force majeure. Failure to obtain, or revocation of, one or more Authorizations shall not be considered an event of force majeure.

24.    Miscellaneous

24.1 Entire Agreement. This Agreement, including its Appendices, together with the Confidentiality Agreement, set forth the entire agreement and understanding of the Parties in respect of the subject matter hereof, and supersedes all prior discussions, agreements and writings relating thereto.

24.2 Independent Contractors. The relationship of the Parties hereto is that of independent contractors. The Parties are not deemed to be agents or partners nor are they engaged in a joint venture for any purpose as a result of this Agreement or the transactions contemplated herein.

24.3 Assignment. Except as otherwise expressly provided herein, the Parties agree that their rights and obligations under this Agreement shall not be delegated, transferred or assigned to a third party without the prior written consent of the other Party; provided either Party may assign this Agreement or parts thereof to its Affiliates, without the other Party's consent. Subject to Section 21.4, either Party may assign this Agreement in its entirety, without the other Party’s consent, to a successor to substantially all of the business or assets of the assigning Party. This Agreement shall be binding upon and inure to the benefit of the Parties and their successors and permitted assigns.

24.4 Severability, Waiver. In the event that any provisions of this Agreement are determined to be invalid or unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall remain in full force and effect without said provision. The Parties shall in good faith negotiate a substitute clause for any provision declared invalid or unenforceable, which shall most nearly approximate the intent of the Parties in entering this Agreement, or will leave the provision unreplaced by mutual consent. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. The failure of a Party to enforce any provision of this Agreement shall not be construed to be a waiver of the right of such Party to thereafter enforce that provision or any other provision or right.

24.5 Notices. Any required notices hereunder shall be given in writing and sent by (a) facsimile or electronic mail transmission (receipt verified), (b) recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt

or (c) priority mail, postage prepaid, with written verification of receipt, in each case, to the address of the applicable Party below, or to such other address as such Party may substitute by written notice.

If to AMAG:

AMAG Pharmaceuticals, Inc.

1100 Winter Street

Waltham, MA 02451

USA

Attention: VP, Technical Operations
Fax:

with a copy to:

Attention: General Counsel

Fax:

If to Ypsomed:

Ypsomed AG
Brunnmattstrasse 6
CH-3401 Burgdorf
Switzerland

Attention: General Counsel
Fax: +41 (34) 424 41 55

With a copy to:
Attention: Product and Account Manager AMAG

Either Party may change its address for communications by a notice to the other Party in accordance with the terms of this Section 24.5.

24.6 No Use of Name. Neither AMAG nor Ypsomed shall be permitted to use the name of the other Party in any publicity, advertising or public announcement concerning this Agreement or the subject matter hereof without the prior express written consent of the other Party except to the extent required by law. As soon as the Bremelanotide Device is in the market, Ypsomed shall be allowed to mention AMAG in its clients list and to show the Component Set (assembled with a syringe of placebo) in trade fairs, exhibitions and publications.

24.7 English Language. This Agreement has been prepared in the English language and the English language shall control its interpretation. All notices required or permitted to be given hereunder, and all written or other communications between the Parties regarding this Agreement or pursuant to this Agreement, shall be in the English language, unless otherwise stated herein. AMAG acknowledges that parts of the technical and quality documentation for the Component Sets and the documentation of Ypsomed's business activities are in the German language.

25.    Arbitration and Governing Law

25.1 Disputes. The Parties will try to settle their differences amicably between themselves. If any claim, dispute, or controversy of whatever nature arising out of or relating to this Agreement, including the performance or alleged nonperformance of a Party of its obligations under this Agreement arises between the Parties (each a “Dispute”), a Party will, before initiating any proceedings pursuant to Section 6(c), notify the other Party in writing of such Dispute. If the Parties are unable to resolve the Dispute within [***] of receipt of the written notice by the other Party, such dispute will be referred to an executive officer of AMAG and an executive officer of Ypsomed, or their designees, who will meet in person at least once and use their good faith efforts to resolve the Dispute within [***] after such referral.

25.2 Arbitration. If a Dispute is not resolved as provided in Section 25.1, whether before or after expiration or termination of these Terms and Conditions, the Parties hereby agree that such Dispute will be resolved by final and binding arbitration conducted in accordance with the [***]. The arbitration will be held in [***]. The governing law of this Agreement will govern any such proceedings. The arbitration will be conducted by a panel of three (3) arbitrators with significant experience in the pharmaceutical manufacturing industry, unless otherwise agreed by the Parties, appointed in accordance with applicable [***]. Any arbitration herewith will be conducted in the English language to the maximum extent possible. The arbitrators will be instructed not to award any punitive or special damages and will render a written decision no later than [***] following the selection of the arbitrators, including a basis for any damages awarded and a statement of how the damages were calculated. Any award will be promptly paid in U.S. dollars free of any tax, deduction or offset. Each Party agrees to abide by the award rendered in any arbitration conducted pursuant to this Section 6. With respect to money damages, nothing contained herein will be construed to permit the arbitrator or any court or any other forum to award punitive or exemplary damages. By entering into this agreement to arbitrate, the Parties expressly waive any claim for punitive or exemplary damages. Each Party will pay its legal fees and costs related to the arbitration (including witness and expert fees). Judgment on the award so rendered will be final and may be entered in any court having jurisdiction thereof.

25.3 Governing Law. This Agreement and any dispute arising therefrom shall be governed by and construed in accordance with the laws of [***], regardless of the conflict of laws principles of that or any other jurisdiction. The UN Convention on Contracts for the International Sale of Goods is not applicable to this Agreement.

25.4 Nothing in this Section 25 will preclude either Party from seeking equitable relief or interim or provisional relief from a court of competent jurisdiction, including a temporary restraining order, preliminary injunction, specific performance or other interim equitable relief, concerning a Dispute either prior to or during any arbitration if necessary to protect the interests of such Party or to preserve the status quo pending the arbitration proceeding.

26. Securities Laws. The parties hereby acknowledge that AMAG is publicly traded on the NASDAQ National Market System under the symbol "AMAG" and Ypsomed is publicly traded on the Swiss Performance Index (SPI) of SIX Swiss Exchange.  Further, each party is aware and will advise its Representatives who are informed of matters that are the subject of this Agreement, of the restrictions imposed by certain applicable securities laws on the purchase or sale of securities by any person who has received or had access material, nonpublic information concerning a company and on the communication of such information to any other person when it is 

reasonably foreseeable that such person is likely to purchase or sell such securities in reliance on such information.

In witness whereof, AMAG and Ypsomed have executed this Agreement in two originals, one for each Party, by their respective duly authorized representatives.

AMAG Pharmaceuticals, Inc.		Ypsomed AG
Date:	December 21, 2018	Date:	January 25, 2019
By:	/s/ William K. Heiden	By:	/s/ Ulrike Bauer
Print Name:	William K. Heiden	Print Name:	Ulrike Bauer
Title:	President and CEO	Title:	SVP Marketing and Sales Delivery Systems
		By:	/s/ Frank Mengis
		Print Name:	Frank Mengis
		Title:	COO

Appendix 1

Specifications for Components

The Specifications for the Components are kept in the Design History File (DHF), which is maintained at Ypsomed's premises.

Appendix 2

Quality Agreement

Separate Document.

Appendix 3

Commercial Terms

1. Applicable Capacity & Contribution

1.1 Ypsomed will invest in the entire production infrastructure required to produce the Components, including high-cavity tooling and fully automatic assembly equipment.

Pursuant to the terms of the Industrialization Proposal, [***] partially financed the manufacturing capacity build-up through upfront payments as set out in the Industrialization Proposal.

1.2 AMAG and Ypsomed will determine the required manufacturing capacity that Ypsomed will reserve for AMAG based on AMAG’s Long Range Forecast delivered by AMAG to Ypsomed in accordance with Section 7.1 of the Supply Agreement. It is agreed between the Parties that the applicable manufacturing capacity per calendar year (“Applicable Capacity”) will be determined in accordance with this Section 1.2. The initial Applicable Capacity is [***] Component Sets. The Applicable Capacity may be adjusted, from time to time upon either Party’s written request, based on the Long Range Forecast. In the event AMAG requests an increase in the Applicable Capacity that requires Ypsomed to invest in additional production infrastructure, such change shall be possible provided AMAG notifies Ypsomed at least [***]prior to such requested increase. In the event AMAG or Ypsomed in good faith requests a decrease in the Applicable Capacity, such change shall be possible provided that the Party requesting such decrease notifies the other Party at least [***] prior to such requested decrease. Each change of the Applicable Capacity shall be agreed upon by the Parties in good faith. In the event AMAG’s capacity demand according to the Long Range Forecast exceeds [***]Component Sets per calendar year, the parties shall negotiate in good faith the terms upon which Ypsomed will expand its manufacturing capacity to accommodate AMAG’s increased capacity demand. In the event AMAG’s capacity demand according to the Long Range Forecast exceeds [***] Component Sets per calendar year (i.e., a commitment for Applicable Capacity above [***]but not more than [***] Component Sets) AMAG shall pay Ypsomed a capacity contribution fee of [***]) as follows upon receipt of an invoice from Ypsomed:

Payment Milestones (Contribution for Applicable Capacity from[***]to[***]Component Sets)	Amount in[***]
[***]prior to the planned change of Applicable Capacity (i.e. date of request for additional capacity above [***] Component Sets per calendar year)	[***]
[***]prior to the planned change of Applicable Capacity (i.e. [***]after date of request for additional capacity above [***]Component Sets per calendar year)	[***]
[***]prior to the planned change of Applicable Capacity (i.e. [***]after date of request for additional capacity above [***] Component Sets per calendar year)	[***]
Total	[***]

2. Minimum Purchase Quantity

In accordance with Section 4.8 of the Supply Agreement, beginning in 2019 AMAG shall purchase at least the Annual Minimum Quantity of Component Sets in each calendar year

during the Term as set forth below. For the purpose of determining whether AMAG is in compliance with Section 4.8 of the Agreement, a Component Set is considered “purchased” as of the agreed Delivery Date in the respective Purchase Order, provided however that such ordered Component Sets will have been duly purchased and paid by AMAG (during such calendar year or, as applicable, at a later stage in accordance with the terms of this Agreement).

Units	Minimum Purchase Quantity
Per Purchase Order	[***] (the “Minimum Batch Size”)
Initial Term	[***] Component Sets per each calendar year during the Initial Term beginning in [***] (the “Annual Minimum Quantity”)
Subsequent Term(s)	The Annual Minimum Quantity for the Subsequent Term(s) shall be determined and mutually agreed upon by the Parties prior to the end of the Initial Term or of each Subsequent Term, as applicable. If the Parties cannot agree on the Annual Minimum Quantity for a Subsequent Term prior to beginning of such Subsequent Term, AMAG shall be obligated to purchase, in each calendar year during the Subsequent Term, no less than the Annual Minimum Quantity for the last full calendar year

3. Purchase Price

The invoiced Purchase Price for Component Sets applied to all invoices during a calendar year will be determined based on number of Component Sets for the respective calendar year as set forth in the Binding Forecast and as determined according to the following Pricing Tiers:

Pricing Tiers

Annual Quantity of Component Sets	Unit Price per Component Set in [***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

The Purchase Price includes the costs for bulk packaging (bulk packaging as set out in Appendix 2).

The effective Unit Price per Component Set shall be determined based on the total number of Component Sets ordered by AMAG for the respective calendar year accordance with Section 7.3, provided however that such ordered Component Sets will have been duly purchased and paid by AMAG (during such calendar year or, as applicable, at a later stage in accordance with the terms of this Agreement).

Accordingly, within [***] after the end of each calendar year during the Term, Ypsomed shall calculate the total amount of ordered Component Sets duly purchased and paid by AMAG and shall perform a “True-Up” reconciliation and shall provide AMAG with a written report of such reconciliation. If the True-Up report shows that a difference in the number of Component Sets purchased by AMAG compared to the pricing tier serving as basis for the invoiced Purchase Price in such calendar year results in either an underpayment or an

overpayment between the Parties, the Party owing payment to the other Party shall pay the amount of the difference to the other Party within [***]of the date of delivery of such True-Up report.

4. Invoicing

Ypsomed shall submit an invoice to AMAG upon each Delivery of Component Sets. The term of payment is [***]from the date of invoice.

5. Delivery

5.1 Ypsomed shall deliver the Component Sets in accordance with Section 8 of the Agreement and the shipping procedures set out in the Specifications.

5.2 All Component Sets shall be delivered to AMAG FCA Ypsomed's manufacturing facility (Incoterms 2010).

Appendix 4

Price Change Order

Price Change Order – [insert number]

Dated: [insert date]

This is a Price Change Order of the purposes of Supply Agreement between Ypsomed AG and AMAGPharmaceuticals, Inc.dated _________________[insert date] (the “Agreement”).

Terms used but not defined in this Price Change Order shall have the meaning given to them in the Agreement.

Effective Date:    Day, Month, Year

End Date:    Day, Month, Year

Current Purchase Price: $

Revised Purchase Price: $

New Total Cost (if applicable): $

The following reasons have caused the Purchase Price to change (increase or decrease):

1.

EXECUTED as an AGREEMENT

Signed by YPSOMED AG ___________________________ Signature ___________________________ Name ___________________________ Title ___________________________ Date Signed for and on behalf of AMAG PHARMACEUTICALS, INC. ___________________________ Signature ___________________________ Name ___________________________ Title ___________________________ Date

EX-10.3

Exhibit 10.3

Portions of this Exhibit have been redacted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

Manufacturing Services Agreement

(the “Agreement”)

by and between

Lonza Ltd

Münchensteinerstrasse 38CH-4002 BaselSwitzerland

- hereinafter “Lonza” -

and

AMAG Pharmaceuticals, Inc.

1100 Winter St, Waltham,

MA 02451                            

- hereinafter “Customer” –

Effective as of 1 June, 2018 (the “Effective Date”)

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Table of Contents

1Definitions and Interpretation    

2Commitments and Performance of Services    

3Project Management / Steering Committee    

4Quality    

5Insurance    

6Forecasting, Ordering and Cancellation    

7Delivery and Acceptance    

8Price and Payment    

9Intellectual Property    

10Warranties    

11Indemnification and Liability    

12Confidentiality    

13Term and Termination    

14Force Majeure    

15Miscellaneous    

Appendix A

Appendix B

Appendix C

Appendix D

Appendix E

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Recitals

WHEREAS, Customer is engaged in the development and research of certain products and requires assistance in the development and manufacture of product;

WHEREAS, Lonza and its Affiliates have expertise in the evaluation, development and manufacture of products;

WHEREAS, Lonza and Palatin Technologies, Inc. (“Palatin”) entered into a Service Agreement dated as of November 11, 2015, as amended on January 19, 2016 and November 11, 2017 (the “Palatin Service Agreement”);

WHEREAS, pursuant to a License Agreement entered into as of January 8, 2017, by and between Customer and Palatin (the “Palatin License Agreement”), Palatin was obligated to assign to Customer agreements that relate to the manufacture or supply of the Product, as defined herein, including specifically the Palatin Service Agreement;

WHEREAS, on December 27, 2017, Palatin assigned to Customer the Palatin Service Agreement;

WHEREAS, Customer wishes to engage Lonza for Services relating to the manufacture of the Product as described in this Agreement; and

WHEREAS, Lonza, or its Affiliate, is prepared to perform such Services for Customer on the terms and subject to the conditions set out herein.

NOW, THEREFORE, in consideration of the mutual promises contained herein, and for other good and valuable consideration, the parties intending to be legally bound, agree as follows:

1Definitions and Interpretation

“Affiliate” means any company, partnership or other entity which directly or indirectly Controls, is Controlled by or is under common Control with the relevant Party. “Control” means the ownership of more than fifty percent (50%) of the issued share capital or the power to direct or cause the direction of the general management and policies of the relevant Party.

“Agreement” means this agreement incorporating all Appendices, as amended from time to time by written agreement of the Parties.

“Applicable Laws” means all relevant federal, state and local laws, statutes, rules, and regulations in the Territory which are applicable to a Party’s activities hereunder, including, without limitation, the applicable regulations and guidelines of any Governmental Authority and all applicable cGMP together with amendments thereto.

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“Approval” means the first marketing approval by the FDA or EMA of Product from the Facility for commercial supply.

“Background Intellectual Property” means any Intellectual Property either (i) owned or controlled by a Party prior to the Effective Date or (ii) developed or acquired by a Party (a) independently from the performance of the Services hereunder during the Term of this Agreement and (b) that does not claim or otherwise expressly incorporate the other Party’s Intellectual Property.

“Batch” means the Product derived from a single run of the Manufacturing Process, yielding approximately [***] of Product.

"Batch Price" means the Price of each Batch.

“Binding Forecast” has the meaning given in Section 6.1.

“Campaign” means a series of cGMP Batches manufactured consecutively.

“Cancellation Fee” has the meaning given in Section 6.7.

“Capacity Reservation” has the meaning given in Section 6.5.

“Certificate of Analysis” means a document prepared by Lonza listing tests performed by Lonza or approved External Laboratories, the Specifications and test results.

“cGMP” means those laws and regulations applicable in the Territory, relating to the manufacture of medicinal products for human use, including, without limitation, current good manufacturing practices as specified in the ICH guidelines, including without limitation, ICH Q7A “ICH Good Manufacturing Practice Guide for Active Pharmaceutical Ingredients”, US Federal Food Drug and Cosmetic Act at 21CFR (Chapters 210, 211, 600 and 610) and the Guide to Good Manufacturing Practices for Medicinal Products as promulgated under European Directive 91/356/EEC, each as may be amended from time to time. For the avoidance of doubt, Lonza’s operational quality standards are defined in internal cGMP policy documents.

“cGMP Batches” means any Batches which are required under the Project Plan to be manufactured in accordance with cGMP.

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“Change” means any change to the Services, Specifications, pricing or Scope of Work incorporated into a written amendment to the Agreement in accordance with clause 15.2 or effected in accordance with the Quality Agreement.

“Change Order” means a document in the format provided in Appendix E provided by Lonza to Customer outlining a proposed adjustment (increase or decrease) to the Price and the reasons for such adjustment, such document to be reviewed and signed by both parties to enable such adjustment to take effect.

“Commencement Date” means the date of commencement of manufacturing activities for a Campaign or Batch hereunder.

“Confidential Information” means Customer Information and Lonza Information, as the context requires.

“Customer Indemnitees” has the meaning given in Section 11.1.

“Customer Information” means all information that is proprietary to Customer or any Affiliate of Customer and that is maintained in confidence by Customer or any Affiliate of Customer and that is disclosed by Customer or any Affiliate of Customer to Lonza under or in connection with this Agreement, including without limitation, the Manufacturing Process, any and all Customer know-how and trade secrets, and any materials supplied by Customer to Lonza in accordance with this Agreement.

“Delivery Date” means the delivery date of a Batch as set forth in a Purchase Order and confirmed by Lonza in accordance with Section 6.3.

“Disclosing Party” has the meaning given in Section 12.1.

“EMA” means the European Medicines Agency, or any successor agency thereto.

“External Laboratories” means any Third Party instructed by Lonza, with Customer’s prior consent, which is to conduct activities required to complete the Services.

“Facility” means Lonza’s manufacturing facilities in [***]or such other Lonza facility as may be agreed upon by the Parties.

“Failure to Supply” has the meaning given in Section 7.4.1.

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“FDA” means the United States Food and Drug Administration, or any successor agency thereto.

“Forecast” has the meaning given in Section 6.1.

“Governmental Authority” means any Regulatory Authority and any national, multi-national, regional, state or local regulatory agency, department, bureau, or other governmental entity in the Territory.

“Intellectual Property” means (i) inventions (whether or not patentable), patents, trade secrets, copyrights, trademarks, trade names and domain names, rights in designs, rights in computer software, database rights, rights in confidential information (including know-how) and any other intellectual property rights, in each case whether registered or unregistered, and (ii) all applications (or rights to apply) for, and renewals or extensions of, any of the rights described in the foregoing clause (i) in each case, which exist now or which come to exist in the future, anywhere in the world.

“LOI” has the meaning given in Section 2.4.

“LOI Batch” has the meaning given in Section 2.4.

“Lonza Indemnitees” has the meaning given in Section11.2.

“Lonza Information” means all information that is proprietary to Lonza or any Affiliate of Lonza and that is maintained in confidence by Lonza or any Affiliate of Lonza and that is disclosed by Lonza or any Affiliate of Lonza to Customer under or in connection with this Agreement, including without limitation, any and all Lonza know-how and trade secrets.

“Lonza Manufacturing-related IP” has the meaning given in Section 9.7.

“Lonza Release” has the meaning given in Section 7.1.

“Manufacturing Process” means the production process provided by Customerfor the manufacture of Product, as such process may be improved or modified from time to time by agreement of the Parties in writing.

“Master Batch Record” means the document, proposed by Lonza and approved by Customer, which defines the manufacturing methods, test methods and other procedures, directions and controls associated with the manufacture and testing of Product.

“Minimum Quantity” has the meaning given in Section 6.4.

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“Minimum Quantity Penalty” has the meaning given in Section 6.4.

“Necessary Consumables” has the meaning given in Section 2.8.

“New Customer Intellectual Property” has the meaning given in Section 9.2.

“New General Application Intellectual

Property” has the meaning given in Section 9.3.

“Party” means each of Lonza and Customer and, together, the “Parties”.

“Price” means the price for the Services and Products as set out in Appendix A.

“Process Validation Batch” means a Batch that is produced with the intent to show reproducibility of the Manufacturing Process and is required to complete process validation studies.

“Product” means the proprietary molecule identified by Customer as PI-001 (Bremelanotide), to be manufactured using the Manufacturing Process by Lonza for Customer as specified in the Project Plan.

“Project Plan” means the plan(s) describing the Services to be performed by Lonza under this Agreement, including any update and amendment of the Project Plan to which the Parties may agree from time to time. The initial Project Plan is attached hereto as Appendix B.

“Purchase Order” has the meaning set forth in Section 6.2.

“Quality Agreement” means the quality agreement, attached hereto as Appendix C, setting out the responsibilities of the Parties in relation to quality as required for compliance with the Manufacturing Process, Specifications and cGMP.

“Raw Materials” means all general ingredients, solvents, amino acids, and other components of the Product required to perform the Manufacturing Process or Services set forth in the bill of materials detailing the same (excluding [***], which is defined as “Specialty Material” herein).

“Receiving Party” has the meaning given in Section 12.1.

“Specialty Material” means [***].

"Specialty Material Fee" means a procurement and handling fee of [***] of the acquisition cost of Specialty Material by

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Lonza that is charged to the Customer in accordance with Section 2.9. In the event that Specialty Material will be used less than [***]times, the handling fee for the next purchase of Specialty Materials shall be reduced to [***].

“Regulatory Authority” means the FDA, EMA and any other similar regulatory authorities in the Territory.

“Release for Delivery” has the meaning given in Clause 7.1.

“Services” means all or any part of the services to be performed by Lonza under this Agreement (including, without limitation, process and analytical method transfer, process development, process optimization, validation, clinical and commercial manufacturing, as well as quality control and quality assurance activities), particulars of which are set out in a Project Plan and the Quality Agreement.

“Specifications” means the specifications of the Product as specified in Appendix D, which may be amended from time to time in accordance with this Agreement.

“Term” has the meaning given in Section 13.1.

“Territory” means the United States, European Union and such other countries as may be agreed upon by the Parties.

“Third Party” means any party other than Customer, Lonza and their respective Affiliates.

“Up-Front Payment” has the meaning set forth in Appendix A.

In this Agreement references to the Parties are to the Parties to this Agreement, headings are used for convenience only and do not affect its interpretation, references to a statutory provision include references to the statutory provision as modified or re-enacted or both from time to time and to any subordinate legislation made under the statutory provision, references to the singular include the plural and vice versa, and references to the word “including” are to be construed without limitation.

2Commitments and Performance of Services

2.1 Performance of Services. Lonza shall itself and through its Affiliates, diligently carry out the Services as provided in the Project Plan. Lonza shall retain appropriately qualified and trained personnel with the requisite knowledge and experience to perform the Services in accordance with this Agreement. Lonza may subcontract or delegate any of its rights or obligations under this Agreement to an External Laboratory to perform the Services only with prior written consent from Customer; provided, that any External Laboratories shall be subject to the same obligations and other provisions contained in this Agreement or any applicable Project Plan. In the event that Customer requests

8

Lonza to outsource certain services to an External Laboratory appointed by Customer, Lonza shall not be responsible for analytical lab services performed by External Laboratories.

2.2 cGMP Batch(es). Lonza will, in accordance with the terms of this Agreement and Quality Agreement, manufacture at the Facility and deliver to Customer, cGMP Batches that comply with the Manufacturing Process, cGMP and the Specifications, together with a Certificate of Analysis and all other documentation as set forth in the Quality Agreement. Prior to commencement of cGMP manufacturing in 2018, Lonza shall review the process assumptions. In the event that there is a material difference in the process assumptions as compared with the process results demonstrated during previous manufacturing campaigns, the Parties shall meet to discuss in good faith to resolve the matter.

2.2.1 Notwithstanding anything herein to the contrary or in the Quality Agreement, except as otherwise agreed to by Customer in writing or as may be required to comply with Applicable Laws (including cGMPs), Lonza shall not amend, change, or supplement any of the following without Customer’s prior written consent: (1) the Specifications; (2) the specifications for or the source of Raw Materials or Specialty Materials that have regulatory impact; (3) the equipment and machinery, other than in-kind replacements, used in the manufacture of Product that have a direct impact on the quality of the Product; (4) the test methods used in connection with manufacturing Product that have regulatory impact; or (5) the Manufacturing Process.

2.2.2 In the event that Lonza is required to change any of the foregoing in order to comply with a change in an Applicable Law (including cGMPs) or such change is otherwise agreed to by Customer in writing, Lonza shall: (i) immediately notify Customer of such change and use commercially reasonable efforts to implement such change as soon as reasonably practicable; (ii) be responsible for ensuring that all Product manufactured following such change meets the Specifications; and (iii) provide Customer with all information with respect to the manufacture of the Product in connection with such change needed to amend any regulatory filings maintained with respect to the Product. [***].

2.2.3 In the event that Customer desires to propose a discretionary change (i.e., changes which are not required by cGMPs or other Applicable Laws) under Section 2.2.1 during the Term, the Parties shall discuss such discretionary changes and any manufacturing issues identified by either Party in connection with implementing such change. In all cases, such discretionary changes shall be made in accordance with any change control procedures in the Quality Agreement to the extent applicable. [***].

2.2.4 In the event that Lonza desires to propose a discretionary change (i.e., changes which are not required by cGMPs or other Applicable Laws) under Section 2.2.1 during the Term, the Parties shall discuss such discretionary changes and any manufacturing issues identified by either Party in connection with implementing such change. In all cases, such discretionary changes shall be made in accordance with any change control procedures in the Quality Agreement to the extent applicable. [***].

2.2.5 Lonza acknowledges that any such change(s) under this Section 2.2 shall, in each case, comply with cGMP, this Agreement and the Quality Agreement. Any

9

such amended Specifications shall be reflected in and attached hereto as an amended and restated Appendix D.

2.3 Process Validation Batches. Customer may request Lonza to manufacture and deliver Process Validation Batches as mutually agreed by Parties sufficient to document the operability and reproducibility of the Manufacturing Process and permit the Parties to complete and file the necessary regulatory documents. Any and all validation effort shall be additional and outside the scope of this Project Plan. No Validation effort is currently anticipated as part of the current Project Plan.

2.3.1 Upon request of Customer, Lonza and Customer shall further discuss and agree to a process validation plan identifying the validation requirements of the Manufacturing Process. Any and all process validation activities are not considered as part of the Project Plan and are excluded from the Prices within this Agreement. Any such future Process Validation or Process Validation Batches shall be approved by the Customer in advance and shall be paid for by the Customer at a Price to be determined in a separate Project Plan.

2.4 Letter of Intent. The Parties entered into a Letter of Intent dated [***] (the “LOI”) [***] (the “LOI [***]”). In accordance with Sections 6(c) and 11 of the LOI, the terms covenants and conditions of this Agreement govern the supply of the LOI [***] and such LOI [***] is deemed to be Product manufactured by Lonza and supplied to AMAG under this Agreement. In the event of a conflict between this Agreement and the LOI, this Agreement shall control.

2.5 Regulatory Support Activities. Any regulatory support documentation (including, without limitation, documentation related to pre-Approval inspection and provision of any data and information (in English) relating to Lonza’s performance under this Agreement) required and agreed to by Customer to support and maintain the Approval of the Product from the Facility shall be performed and supported by Lonza as reasonably requested by Customer. [***]. If required, additional regulatory support activities shall be approved by the Customer in advance, [***] at a price set out in a separate Project Plan.

2.6 Commercial manufacturing and supply. Customer shall purchase Product from Lonza during the Term at the Price outlined in Attachment A. Lonza shall manufacture all Product as ordered and accepted per Section 6, under this Agreement at the Facility and pursuant to the terms hereof and the Quality Agreement. Manufacturing of Product may not be relocated from the Facility without Customer’s prior written consent.

2.7 Supply of Customer Information. Customer shall supply to Lonza all Customer Information and other information or materials that may be reasonably required by Lonza to perform the Services. Lonza shall not be responsible for any delays arising out of Customer’s failure to provide such Customer Information or other information or materials reasonably required to perform the Services to Lonza.

2.8 Raw Materials. Lonza shall procure all required Raw Materials as well as consumables necessary to perform the Services (the “Necessary Consumables”). In order to fulfil its obligations under this Agreement, Lonza may purchase and hold a minimum of [***] extra Batch’s requirements of Raw Materials to serve as safety stock.

2.9 Specialty Material and Specialty Material Fee. Specialty Material is not considered part of the Raw Materials and shall be ordered and invoiced separately from Raw Materials. Specialty Material shall be ordered and stocked by Lonza only upon reasonable notice

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to and approval by Customer, such notice not to be unreasonably withheld. The Specialty Material Fee is intended compensate Lonza for the procurement and handling of the Specialty Material, any development or validation efforts Lonza performs in order to prepare, use, clean and/or store Specialty Material (including any experimentation to determine the number of times Specialty Material may be reused), and Lonza’s preparation, use, cleaning and/or storage of Specialty Material. Lonza shall submit an invoice to Customer, together with sufficient substantiating documentation, for the cost of Specialty Material and the associated Specialty Material Fee. Customer shall pay invoices under this Section in accordance with Section 8.

3Project Management / Steering Committee

3.1 Project Plan. With respect to the Services to be governed by this Agreement, a Project Plan shall be added by agreement in a writing signed by the Parties and appended to Appendix B. The Project Plan shall include a description of the Services to be provided and such other information as is necessary for performance of the Services. In the event of a conflict between the terms of a Project Plan and this Agreement, the terms of this Agreement will govern unless the terms of the Project Plan expressly override the terms of the Agreement set forth herein.

3.2 Project Management. Each party will appoint a project manager who will be the party responsible for overseeing the Project Plan.

3.3 Steering Committee. Each Party shall name a mutually agreed upon equal number of representatives for the Steering Committee, which shall meet twice per calendar year, or as otherwise mutually agreed by the Parties. In the event that a Steering Committee dispute cannot be resolved, such dispute shall be escalated to a senior executive of each of Customer and Lonza.

The primary function of the Steering Committee is to ensure the ongoing communication between the Parties and discuss and resolve any issues arising under this Agreement. In addition to the primary function described above, the Steering Committee shall also take on the following responsibilities:

3.3.1 discuss and seek resolution of issues around management of the Services;

3.3.2 agree and monitor deadlines and milestones for the Services; and

3.3.3 discuss and recommend any changes to the Services (although such changes will not take effect until they have been incorporated into a written amendment to the Project Plan which has been signed by the Parties).

3.4 Person in Plant. In addition to the inspection and audit rights set forth in Section 4.2 and the Quality Agreement, Customer shall be permitted to have, at no additional cost, [***]at the Facility as reasonably requested by Customer, [***] the Manufacturing Process for the purpose of observing, reporting on, and consulting as to the performance of the Services. Such [***] shall be subject to and agree to abide by confidentiality obligations of this Agreement and Lonza’s customary practices and operating procedures regarding persons in plant, and such [***] agrees to comply with all instructions of Lonza’s employees at the Facility.

4Quality

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4.1 Responsibility for quality assurance and quality control of Product shall be allocated between Customer and Lonza as set forth in the Quality Agreement. If there is a conflict between the terms and conditions of this Agreement and the Quality Agreement, the terms and conditions of this Agreement shall prevail except on quality matters where the Quality Agreement shall prevail. Lonza and Customer commit to enter into the Quality Agreement in a timely manner, but in no event later than the commencement of cGMP manufacturing.

4.2 Inspections by Regulatory Authorities and audits shall be in accordance with the Quality Agreement.

5Insurance

5.1 Each Party shall, during the Term and for [***]years after delivery of the last Product manufactured or Services provided under this Agreement, obtain and maintain [***] from a qualified insurance company, comprehensive general liability insurance including, but not limited to product liability coverage in the amount of at least [***] per claim. Each Party shall provide the respective other Party with a copy of the certificate of such insurance upon reasonable request.

6Forecasting, Ordering and Cancellation

6.1 Forecast and Binding Forecast. No later than the first (1st) day of each calendar quarter, Customer shall supply Lonza with a written forecast showing Customer’s good faith estimated quarterly requirements for Batches for the following [***] period (the “Forecast”). No later than [***] following Lonza’s receipt of a Forecast, Lonza shall provide written notice to Customer of whether it has (as of the date of receipt of the Forecast) capacity available to manufacture the number of Batches forecasted therein and shall provide Customer with an estimated production schedule showing the estimated Commencement Date and delivery date of each Batch. In the event Customer disputes all or a portion of such production schedule provided by Lonza, the Parties agree to negotiate in good faith the disputed portion(s) of such production schedule. Upon agreement between the Parties regarding the production schedule set forth in the Forecast, the first [***] of such Forecast shall be binding on both Parties (the “Binding Forecast”). For the sake of clarity, such Binding Forecast shall include at least the Minimum Quantity as set forth in Section 6.4. If the Binding Forecast exceeds the Capacity Reservation as set forth in Section 6.5, Lonza will use commercially reasonable efforts to include such excess Batch(es) in its production schedule.

6.2 Purchase Order. Customer shall provide Lonza with a binding purchase order in writing (the “Purchase Order”) a minimum of [***] prior to the scheduled Commencement Date of each Batch consistent with the Binding Forecast under Section 6.1.

6.3 Purchase Order Confirmation. Lonza shall confirm the delivery date as set out in each Purchase Order within [***] business days of receipt from Customer of the relevant Purchase Order (the “Delivery Date”). Upon confirmation, each Purchase Order will be regarded by the Parties as a binding commitment by Lonza to manufacture and to deliver to Customer the Batch according to the requirements set out in such Purchase Order. Lonza will make commercially reasonable efforts to effect delivery as close as possible to the Delivery Date set forth in the Purchase Order confirmation, provided that in no event shall actual delivery be greater than [***] before or after such Delivery Date. [***]. Any additional or inconsistent terms or conditions of any Purchase Order, acknowledgement or similar standardized form given or received pursuant to this

12

Section shall have no effect and such additional or inconsistent terms or conditions are hereby rejected.

6.4 Minimum Quantity. Customer undertakes to purchase from Lonza a minimum of [***] per calendar year during the Term of the Agreement (“Minimum Quantity”). For the purposes of this section, a Batch is considered “purchased” as of the Commencement Date in the Purchase Order confirmed by Lonza in accordance with Section 6.3. If Customer fails to purchase the Minimum Quantities in any calendar year, Lonza shall submit an invoice to Customer in January of the next calendar year and Customer shall pay the [***] ("Minimum Quantity Penalty"), within [***] after receipt of such invoice.

6.5 Capacity Reservation. Lonza shall reserve capacity to manufacture the Minimum Quantity agreed between the Parties plus [***] per applicable calendar year during the Term of the Agreement, starting in 2019 (“Capacity Reservation”).

6.6 First Commercial Batch. Lonza agrees to manufacture [***]. This commercial [***] will be manufactured in accordance with the Specifications. The Parties agreed upon the pricing of [***] in the Letter of Intent entered into as [***].

6.7 Cancellation Fee. Customer may cancel a Purchase Order upon written notice to Lonza, subject to the payment of a cancellation fee equal to [***] with supplier, of each such Batch cancelled under the Purchase Order (the "Cancellation Fee"). Any Up-Front Payment paid by Customer to Lonza in accordance with Appendix A shall be deducted from such Cancellation Fee; provided, however, to the extent that such Up-Front Payment was used by Lonza to purchase Raw Materials in reliance on such cancelled Purchase Order, (i) the cost of such Raw Materials, as substantiated by sufficient documentation, shall not be deducted from the Cancellation Fee, and (ii) such Raw Materials shall be used by Lonza in the preparation of a subsequent Batch (and the cost of such Raw Materials shall be deducted from the Batch Price for such subsequent Batch) or otherwise disposed of at Customer’s direction. Any Cancellation Fee shall be payable in accordance with Section 8 herein. For the purpose of calculating whether Customer has purchased the Minimum Quantity in accordance with Section 6.4, any Batch in a Purchase Order that is cancelled under this Section 6.7 and for which the applicable Cancellation Fee has been paid by Customer will be considered a Batch “purchased” as of the Commencement Date in such cancelled Purchase Order.

6.8 Rescheduling. Lonza shall have the right to reschedule a Commencement Date of any Batch or Campaign once upon [***] prior written notice to Customer, provided that the resulting rescheduled Delivery Date is targeted not to exceed [***] later than the confirmed Delivery Date and for the purpose of calculating whether Customer has purchased the Minimum Quantity in accordance with Section 6.4, such rescheduled Batch will be considered “purchased” as of the original Commencement Date in the confirmed Purchase Order. If the Customer requests to change the Commencement Date, Lonza will make all reasonable attempts to accommodate the request; provided, however, in the event that this change would impact other projects scheduled for occupancy in the designated suite or suites, manufacture of the Customer’s Batch or Campaign may be delayed until an adequate time period is available in the Facility schedule. Parties shall discuss in good faith the impact such rescheduling request has. Any delay requested by Customer of more than [***] shall be considered a cancellation of the Purchase Order and shall be subject to the Cancellation Fee set forth in Section 6.7.

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6.9 Product Quantities. A Batch of [***] of Product (the “Target Quantity”), up to a maximum of [***] above or below, will be invoiced according to the Batch Price as set forth in Appendix A.

In case of quantities below [***] of the Target Quantity), Lonza shall invoice and Customer shall pay (i) the Batch Price minus (ii) the Batch Price multiplied by the number of kilograms produced less than [***] divided by the Target Quantity. For example: In case the quantity is [***]))).

In case of quantities above [***] of the Target Quantity) Lonza shall invoice and Customer shall pay (i) the Batch Price plus (ii) the Batch Price multiplied by the number of kilograms produced in excess of [***] divided by the Target Quantity. For example: In case the quantity is [***]))).

The Purchase Order shall be fulfilled if at least [***] of the Target Quantity is delivered. In the event that [***]or less of the Target Quantity for any Batch is delivered, (a) the Parties will negotiate in good faith the scheduling of the manufacture of a subsequent Batch, and Lonza will use its best efforts to prioritize the scheduling of such subsequent Batch so as to minimize disruption of Customer’s supply of Product, and (b) at Customer’s discretion, such subsequent Batch shall be considered a Batch “purchased” in the next calendar year for purposes of calculating whether Company has purchased the Minimum Quantity in accordance with Section 6.4.

7Delivery and Acceptance

7.1 Delivery. Lonza shall deliver to Customer all documentation as set forth in the Quality Agreement and as is reasonably required to meet all applicable regulatory requirements of the Governmental Authorities, including without limitation Master Batch Records, Certificates of Analysis, deviations, and Batch records in accordance with the Quality Agreement (the “Lonza Release”). After the Lonza Release, [***] in accordance with Appendix A and Section 8. Customer shall be responsible for reviewing such documentation and for final release for delivery of the Product to Customer within [***] after Lonza Release in accordance with the Quality Agreement, and upon approval of such documentation by Customer, Lonza shall deliver the Product [***] on a date mutually agreed to by the Parties in accordance with Section 7.2 (the “Release for Delivery”) and title and risk of loss shall transfer to Customer [***].

7.2 Storage. Customer shall arrange for shipment and take delivery of such Batch from the Facility, at [***] expense, within [***] after Lonza Release or [***]. Lonza shall provide storage in accordance with the requirements set forth in the Quality Agreement on a bill and hold basis for such Batch(es) at [***] for up to [***]; provided that any additional storage beyond [***]. In addition to Section 8.2, below, [***] shall be responsible for all value added tax (VAT) and any other applicable taxes, levies, import, duties and fees of whatever nature imposed as a result of any storage. Notwithstanding anything to the contrary contained in this Agreement, in no event shall Lonza be required to store any Batch for more than [***] after Release for Delivery. Within [***] following a written request from Lonza, Customer shall provide Lonza with a letter in form satisfactory to Lonza confirming the bill and hold status of each stored Batch.

7.3 Acceptance/Rejection of Product.

7.3.1 Promptly following Lonza Release of a Batch, Customer shall inspect such Batch and shall have the right to test such Batch to determine compliance with the

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Product Specifications. Customer shall notify Lonza in writing of any rejection of a Batch based on any claim that it fails to meet Specifications within [***] of Release for Delivery, after which time all unrejected Batches shall be deemed accepted. Customer shall inform Lonza in writing in case of concealed or latent defects (i.e. not discovered by routine quality control means), promptly upon discovery of such defects but no later than [***] after delivery of the Product.

7.3.2 In the event that Lonza believes that a Batch has been incorrectly rejected, Lonza may require that Customer provide to it Batch samples for testing. Lonza may retain and test the samples of such Batch. In the event of a discrepancy between Customer’s and Lonza’s test results such that Lonza’s test results fall within relevant Specifications, or there exists a dispute between the Parties over the extent to which such failure is attributable to a given Party, the Parties shall cause an independent laboratory promptly to review records, test data and perform comparative tests and analyses on samples of the Product that allegedly fails to conform to Specifications. Such independent laboratory shall be mutually agreed upon by the Parties. The independent laboratory’s results shall be in writing and shall be final and binding save for manifest error. Unless otherwise agreed to by the Parties in writing, the costs associated with such testing and review shall be borne by the Party against whom the independent laboratory rules.

7.3.3 Lonza shall Reprocess or Rework any Batch, as defined in the Quality Agreement, or, if Reprocessing or Reworking is not possible, replace any Batch that fails to conform with the Specifications (a “Failed Batch”). In the event that such failure of the Failed Batch is determined by the Parties or the independent laboratory in accordance with Section 7.3.2 to be attributable to the Manufacturing Process supplied to Lonza by Customer (“AMAG Failed Batch”), then such Reprocessing, Reworking or replacement will be at [***] cost, including the cost of Raw Materials and Necessary Consumables, according to a schedule mutually agreed to by the Parties, which shall in any event be as promptly as practicable.

In the event that it is determined by the Parties or the independent laboratory in accordance with Section 7.3.2 that such failure of the Failed Batch is not attributable to the Manufacturing Process supplied to Lonza by Customer (“Lonza Failed Batch”), then such Reprocessing, Reworking or replacement will be at [***] cost, including the cost of Raw Materials and Necessary Consumables, and according to a schedule mutually agreed to by the Parties, which shall in any event be as promptly as practicable. If Lonza is or will be unable to (i) Reprocess or Rework such Lonza Failed Batch and deliver the resulting Product within [***] of the Delivery Date, or (ii) replace such Lonza Failed Batch and deliver the resulting Product within [***] of the Delivery Date, then in either case Lonza shall instead, at Customer’s discretion, refund the Batch Price of the Lonza Failed Batch to Customer. In the event that [***] or more consecutive Lonza Failed Batches occur during the Term, Customer may, at its discretion, terminate this Agreement.

Regardless of the remedy elected by Customer under this Section 7.3.3, for the purpose of calculating whether Customer has purchased the Minimum Quantity in accordance with Section 6.4, a Failed Batch shall be considered a Batch “purchased” on the Commencement Date of such Batch as specified in the Purchase Order.

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Except for Lonza’s indemnification obligations set forth in Section 11.1, Customer acknowledges and agrees that its sole remedy with respect to a Lonza Failed Batch is as set forth in this Section, and in furtherance thereof, Customer hereby waives all other remedies at law or in equity regarding the foregoing claims.

7.4 Failure to Supply

7.4.1 If Lonza is or will be unable, for any reason (not including an event of Force Majeure under Section 14 hereof) to supply a Batch in accordance with the quantity and/or on the Delivery Date specified in a Purchase Order confirmed by Lonza in accordance with Section 6.3 or as rescheduled in accordance with Section 6.8 (“Failure to Supply”), Lonza shall immediately upon discovery notify Customer in writing of such circumstance. Within [***] of discovery of such Failure to Supply, Lonza shall notify Customer of the cause of such failure and shall propose a plan of remediation.

7.4.2 If Lonza is unable to remedy the Failure to Supply within [***] after the Delivery Date specified in the Purchase Order confirmed by Lonza in accordance with Section 6.3, then Customer may, at its discretion, cancel such Purchase Order, provided that in the event of such a cancellation, (i) the Cancellation Fee set forth in Section 6.7 shall not apply to such canceled Purchase Order, (ii) the Batch set forth in such canceled Purchase Order shall be considered a Batch “purchased” on the Commencement Date of such Batch as specified in the Purchase Order for purposes of calculating whether Company has purchased the Minimum Quantity in accordance with Section 6.4, and (iii) any Up-Front Payment paid by Customer to Lonza according to Appendix A shall be, at Customer’s discretion, fully refunded to Customer or applied to the Batch Price for a subsequent Batch.

7.4.3 Lonza shall promptly notify Customer when Lonza can resume supply of Product in accordance with this Agreement and provide Customer with a date for Delivery of the Product in accordance with Customer’s needs.

7.4.4 In the event that [***] or more consecutive Supply Failures occur during the Term, Customer may, at its discretion, terminate this Agreement.

8Price and Payment

8.1 Pricing for the Services provided by Lonza are set out in, and based on the assumptions and information set out in Appendix A.

8.2 Unless otherwise indicated in writing by Lonza, all Prices and charges are exclusive of value added tax (VAT) and of any other applicable taxes, levies, import, duties and fees of whatever nature imposed by or under the authority of any government or public authority and all such charges applicable to the Services shall be paid by Customer.

8.3 All invoices are strictly net of any deduction and payment must be made within [***] of date of receipt of invoice. Customer will inform Lonza in writing if it disputes any invoice or amounts specified therein within [***] of its receipt thereof.

8.4 Any payments due hereunder which are not made within [***] after the due date of such payments shall be subject to default interest at the lesser of (i) rate of [***] per month or (ii) the [***], such interest to accrue on a day to day basis until full payment, provided that if any portion of an invoice is disputed by Customer on justified grounds,

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Customer shall pay the undisputed amounts in accordance with the terms above, and the Parties shall use good faith efforts to resolve differences or discrepancies with regard to any disputed amount as soon as practicable.

8.5 Price adjustments. Not more than once per calendar year, Lonza may adjust the Batch Price in accordance with [***] increase for the previous calendar year, such increase not to exceed [***] in any calendar year, provided that Lonza provides Customer with sufficient documentation to substantiate such proposed increase. The new Batch Price reflecting any such adjustment shall be effective for any Batch for which the Commencement Date is on or after the date of Lonza’s notice to Customer of the Price adjustment. In the event of an adjustment to the Batch Price under this Section 8.5, Lonza will submit a Change Order to the pricing to substantiate the change at least [***] prior to the proposed change, to be signed by both Parties.

8.6 Capital Equipment. Any capital equipment required for the performance of the Services shall be acquired on terms to be agreed by the Parties prior to commencement of the relevant Services.

9Intellectual Property

9.1 Except as expressly otherwise provided herein, neither Party will, as a result of this Agreement, acquire any right, title, or interest in any Background Intellectual Property of the other Party, including any improvements made thereto during the Services under this Agreement.

9.2 Subject to Section 9.3, Customer shall own all right, title, and interest in and to [***] (collectively, the “New Customer Intellectual Property”). For avoidance of doubt, New Customer Intellectual Property shall include [***].

9.3 Subject to Section 9.2, and subject to the license granted in Section 9.5, Lonza shall own all right, title and interest in [***] (“New General Application Intellectual Property”). For avoidance of doubt, New General Application Intellectual Property shall include [***].

9.4 Lonza agrees to assign and hereby assigns to Customer all of its right, title and interest in any New Customer Intellectual Property. Lonza shall execute, and shall require its personnel as well as its Affiliates, External Laboratories or other contractors or agents and their personnel involved in the performance of the Services to execute, any documents reasonably required to confirm Customer’s ownership of the New Customer Intellectual Property, and any documents required to apply for, maintain and enforce any patent or other right in the New Customer Intellectual Property. Customer agrees to assign and hereby assigns to Lonza all of its right, title and interest in any New General Application Intellectual Property. Customer shall execute, and shall require its personnel as well as its Affiliates, or other contractors or agents and their personnel involved in the performance of the Services to execute, any documents reasonably required to confirm Lonza’s ownership of the New General Application Intellectual Property, and any documents required to apply for, maintain and enforce any patent or other right in the New General Application Intellectual Property.

9.5 Subject to the terms and conditions set forth herein (including the payment of the Price as required above), Lonza hereby grants to Customer a non-exclusive, world-wide, fully paid-up, irrevocable, transferable license, including the right to grant sublicenses, under the Lonza Background Intellectual Property and the New General Application Intellectual

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Property to use, offer for sale, sell, export and import the Product manufactured under this Agreement.

9.6 Subject to the terms and conditions set forth herein, Customer hereby grants Lonza the non-exclusive right to use the Customer Information, Customer Background Intellectual Property and New Customer Intellectual Property during the Term solely for the purpose of fulfilling its obligations under this Agreement.

9.7 Customer has the right to transfer the Manufacturing Process to itself and any Third Party. Lonza shall provide reasonably necessary documents to complete such technology transfer and [***] (based on a full-time employee rate for such support) and expenses that are substantiated by sufficient documentation. If any Lonza Confidential Information, Lonza Background Intellectual Property, or New General Application Intellectual Property is useful in manufacturing the Product (“Lonza Manufacturing-related IP”), the Parties shall negotiate in good faith the terms and conditions of a [***] license under such Lonza Manufacturing-related IP for the manufacture of the Product, provided, additionally, that any such license shall be [***].

10Representations and Warranties

10.1 Lonza represents and warrants that:

10.1.1 the Services shall be performed in accordance with all Applicable Laws;

10.1.2 except with respect to any development services and preparation batches as needed, the manufacture of Product shall be performed in accordance with cGMP and the Quality Agreement and will, at the date of delivery, meet the Specifications at the date of delivery and not be adulterated or misbranded within the meaning of the U.S. Federal Food, Drug and Cosmetic Act, or any similar Applicable Laws;

10.1.3 it or its Affiliate holds, and shall maintain during the Term, all necessary permits, approvals, consents and licenses to enable it to perform the Services at the Facility in accordance with Applicable Laws, the Quality Agreement and this Agreement;

10.1.4 it is under no contractual or other obligation or restriction that is inconsistent with its execution or performance of this Agreement, and it will not enter into any agreement, either written or oral, that would conflict with its responsibilities under this Agreement;

10.1.5 at the Effective Date of this Agreement and to the best of its knowledge, the performance and provision of Services will not infringe or misappropriate any patent, trade secret or other proprietary or Intellectual Property rights of any Third Party;

10.1.6 it will promptly notify Customer in writing if it becomes aware of a claim from a Third Party that its performance of the Services or the use, offer for sale, sale, import or export by the Customer of the Product manufactured under this Agreement infringes any Intellectual Property or other rights of any Third Party;

10.1.7 as of the Effective Date of this Agreement and to the best of its knowledge, any Third Party property that is either (i) used in Lonza’s performance of the Services or (ii) incorporated into the Services or the Product manufactured under this

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Agreement or (iii) subject to a sub-license from Lonza to Customer under the terms of this Agreement is under a valid license, with the right to sublicense, from the Third Party;

10.1.8 Lonza, its employees, affiliates, contractors, and agents used to perform Services under this Agreement, and any of their respective officers or directors, as applicable: (i) have not been debarred and are not subject to a pending debarment, (ii) are not disqualified and are not subject to a pending disqualification proceeding by any government or regulatory agency from performing the Services, and (iii) have not been convicted of a crime for which a person can be debarred under Section 335(a) or 335(b) of the Federal Food, Drug, and Cosmetic Act or under any analogous law or regulation under Applicable Laws, and are not subject to any such pending action upon execution of this Agreement; and Lonza will notify Customer immediately if Lonza, its employees, affiliates, contractors, and agents, or any person used to perform Services under this Agreement, or any of their respective officers or directors, as applicable, is subject to the foregoing, or if any action, suit, claim, investigation, or proceeding relating to the foregoing is pending, or to the best of Lonza’s knowledge, is threatened; and

10.1.9 it has the necessary corporate authorizations to enter into and perform this Agreement.

10.2 Customer warrants that:

10.2.1 at the Effective Date of this Agreement and to the best of its knowledge, Lonza’s use of the Customer Information and Customer Intellectual Property in connection with the performance of the Services shall not infringe any Third Party Intellectual Property rights;

10.2.2 Customer will promptly notify Lonza in writing if it becomes aware of a claim from a Third Party that Customer Information and Customer Intellectual Property or that the use by Lonza thereof for the provision of the Services infringes any Intellectual Property or other rights of any Third Party;

10.2.3 Customer has the necessary corporate authorizations to enter into this Agreement;

10.2.4 Customer, its employees, affiliates, contractors, and agents used to perform Services under this Agreement, and any of their respective officers or directors, as applicable: (i) have not been debarred and are not subject to a pending debarment, (ii) are not disqualified and are not subject to a pending disqualification proceeding by any government or regulatory agency from performing the Services, and (iii) have not been convicted of a crime for which a person can be debarred under Section 335(a) or 335(b) of the Federal Food, Drug, and Cosmetic Act or under any analogous law or regulation under Applicable Laws, and are not subject to any such pending action upon execution of this Agreement upon execution of this Agreement; and Customer will notify Lonza immediately if Lonza, its employees, affiliates, contractors, and agents, or any person used to perform Services under this Agreement, or any of their respective officers or directors, as applicable, is subject to the foregoing, or if any action, suit, claim, investigation, or proceeding relating to the foregoing is pending, or to the best of Customer’s knowledge, is threatened.

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10.3 The Parties hereby acknowledge that Customer is publicly traded on the NASDAQ National Market System under the symbol "AMAG".  Further, each party is aware and will advise its employees, consultants and representatives who are informed of matters that are the subject of this Agreement, of the restrictions imposed by certain federal and state securities laws on the purchase or sale of securities by any person who has received or had access to material, nonpublic information concerning a company and on the communication of such information to any other person when it is  reasonably foreseeable that such person is likely to purchase or sell such securities in reliance on such information.

10.4 DISCLAIMER: THE WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT ARE IN LIEU OF ALL OTHER WARRANTIES, AND ALL OTHER WARRANTIES, BOTH EXPRESS AND IMPLIED, ARE EXPRESSLY DISCLAIMED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

11Indemnification and Liability

11.1 Indemnification by Lonza. Lonza shall indemnify the Customer, its Affiliates, and their respective officers, employees and agents (“Customer Indemnitees”) for any loss, damage, costs and expenses (including reasonable attorney fees) that Customer Indemnitees may suffer as a result of any Third Party claim arising directly out of (i) any material breach of the warranties given by Lonza in this Agreement, or (ii) Lonza’s or Lonza’s Indemnitees’ negligence or intentional misconduct in performing any obligations under this Agreement, or (iii) any claims alleging that the Services (excluding use by Lonza of Customer Information and Customer Background Intellectual Property) infringe any Intellectual Property rights of a Third Party except, in each case, to the extent that such claims resulted from the negligence, intentional misconduct or breach of this Agreement by any Customer Indemnitees.

11.2 Indemnification by Customer. Customer shall indemnify Lonza, its Affiliates, and their respective officers, employees and agents (“Lonza Indemnitees”) from and against any loss, damage, costs and expenses (including reasonable attorney fees) that Lonza Indemnitees may suffer as a result of any Third Party claim arising directly out of (i) any material breach of the warranties given by Customer in this Agreement, or (ii) any claims alleging that Lonza’s use of the Customer Intellectual Property or Customer Information in the performance of Services infringes any Intellectual Property rights of Third Parties, or (iii) Customer’s or Customer’s Indemnitees’ negligence or intentional misconduct in performing any obligations under this Agreement, or (iv) the manufacture (except pursuant to this Agreement), use, sale, or distribution of any Product, including any claims of product liability; except, in each case, to the extent that such claims (A) resulted from the negligence, intentional misconduct or breach of this Agreement by any Lonza Indemnitees, or (B) resulted in any loss, damage, costs and expenses (including reasonable attorney fees) for which Lonza is liable pursuant to Clause 11.1 above.

11.3 Indemnification Procedure. If the Party to be indemnified intends to claim indemnification under this Clause 11, it shall promptly notify the indemnifying Party in writing of such claim. The indemnitor shall have the right to control the defense and settlement thereof; provided, however, that any indemnitee shall have the right to retain its own counsel at its own expense. The indemnitee, its employees and agents, shall reasonably cooperate with the indemnitor in the investigation of any liability covered by this Clause 11. The failure to deliver prompt written notice to the indemnitor of any claim, to the extent prejudicial to its ability to defend such claim, shall relieve the indemnitor of its obligation

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to the indemnitee under this Clause 11 to the extent so prejudiced. The indemnitor shall not settle or compromise any claim in any manner that could have an adverse effect upon any indemnitee without such indemnitee’s consent, which shall not be unreasonably withheld or delayed.  The indemnitor shall not make any admission of liability in respect of any claim without the prior written consent of the indemnitee(s).

11.4 DISCLAIMER OF CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR [***] ARISING FROM OR RELATED TO THIS AGREEMENT, EXCEPT TO THE EXTENT RESULTING FROM FRAUD, NEGLIGENCE OR INTENTIONAL MISCONDUCT, OR A BREACH OF SECTION 12.

11.5 LIMITATION OF LIABILITY. LONZA’S LIABILITY FOR DAMAGES UNDER THIS AGREEMENT SHALL IN NO EVENT EXCEED, [***] UNDER THIS AGREEMENT IN THE [***] (OR IN THE CASE OF RELATED CAUSES OF ACTION, [***]), EXCEPT TO THE EXTENT RESULTING FROM INDEMNIFIABLE THIRD PARTY CLAIM UNDER CLAUSE 11.1 (i) OR (ii) ABOVE, LONZA’SFRAUD, NEGLIGENCE OR INTENTIONAL MISCONDUCT, OR A BREACH OF SECTION 12.

12Confidentiality

12.1 Except as expressly permitted otherwise herein, the Party receiving Confidential Information (the “Receiving Party”) agrees to strictly keep secret any and all Confidential Information received during the Term from or on behalf of the other Party (the “Disclosing Party”) using at least the same level of measures as it uses to protect its own Confidential Information, but in any case at least commercially reasonable and customary efforts. Confidential Information shall include information disclosed in any form including but not limited to in writing, orally, graphically or in electronic or other form to the Receiving Party, observed by the Receiving Party or its employees, agents, consultants, or representatives, or otherwise learned by the Receiving Party under this Agreement, which the Receiving Party knows or reasonably should know is confidential or proprietary.

12.2 Notwithstanding the foregoing, Receiving Party may disclose to any courts and/or other authorities Confidential Information which is required to be disclosed pursuant to applicable governmental or administrative or public law, rule, regulation or order. In such case the Receiving Party will, to the extent legally permitted, (i) inform the other Party promptly in writing, (ii) cooperate with the Disclosing Party to secure confidential treatment for such Confidential Information, and (iii) seek to minimize the extent of Confidential Information which is required to be disclosed to the courts and/or authorities.

12.3 The obligation to maintain confidentiality under this Agreement does not apply to Confidential Information, which:

12.3.1 at the time of disclosure was publicly available; or

12.3.2 is or becomes publicly available other than as a result of a breach of this Agreement by the Receiving Party; or

12.3.3 as the Receiving Party can establish by contemporaneous written records, was rightfully in its possession at the time of disclosure by the Disclosing Party and had not been received from or on behalf of Disclosing Party; or

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12.3.4 is supplied to a Party by a Third Party which was not in breach of an obligation of confidentiality to Disclosing Party or any other party, as evidenced by contemporaneous written records; or

12.3.5 is developed by the Receiving Party independently from and without use of the Confidential Information, as evidenced by contemporaneous written records.

12.4 The Receiving Party will use Confidential Information only for the purposes of this Agreement and will not make any use of the Confidential Information for its own separate benefit or the benefit of any Third Party including, without limitation, with respect to research or product development or any reverse engineering or similar testing. The Receiving Party agrees to return or destroy promptly (and certify such destruction) on Disclosing Party’s request all written or tangible Confidential Information of the Disclosing Party, except that one copy of such Confidential Information may be kept by the Receiving Party in its confidential files for record keeping purposes only.

12.5 Each Party will restrict the disclosure of Confidential Information to such officers, employees, consultants and representatives of itself and its Affiliates who have been informed of the confidential nature of the Confidential Information and who have a need to know such Confidential Information for the purpose of this Agreement. Prior to disclosure to such persons, the Receiving Party shall bind its and its Affiliates’ officers, employees, consultants and representatives to confidentiality and non-use obligations no less stringent than those set forth herein. The Receiving Party shall notify the Disclosing Party as promptly as practicable of any unauthorized use or disclosure of the Confidential Information.

12.6 The Receiving Party shall be fully liable for any and all breaches of the confidentiality obligations in this Clause 13 by any of its Affiliates or the officers, employees, consultants and representatives of itself or its Affiliates.

12.7 Each Party hereto expressly agrees that any breach or threatened breach of the undertakings of confidentiality provided under this Clause 12 by a Party may cause irreparable harm to the other Party and that money damages may not provide a sufficient remedy to the non-breaching Party for any breach or threatened breach. In the event of any breach and/or threatened breach, then, in addition to all other remedies available at law or in equity, the non-breaching Party shall be entitled to seek injunctive relief.

12.8 The confidentiality and non-use obligations imposed by this Agreement shall expire with respect to any particular item of a Disclosing Party's Confidential Information on the [***] anniversary of the date of disclosure of such Confidential Information (and in the case of trade secrets, until such time as such trade secrets are no longer accorded trade secret status under [***] law).

13Term and Termination

13.1 Term. This Agreement shall commence on the Effective Date and shall be in effect until [***] (the "Term”). In order to avoid interruptions in the supply of Product to Customer, at least [***]prior to theexpiration of the Term, the Parties shall meet (in person or telephonically) to discuss whether or not to extend the Term of this Agreement or to agree in good faith on a new agreement, which may include revisions to the following terms:

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13.1.1 an annual minimum supply quantity (kilograms or Batches) Customer undertakes to purchase from Lonza;

13.1.2 a minimum % of Customer's annual demand that Customer undertakes to purchase from Lonza; and

13.1.3 the option for Lonza to produce the Product in a dedicated manufacturing asset.

13.2 Termination. This Agreement may be terminated as follows:

13.2.1 by either Party if the other Party breaches a material provision of this Agreement and fails to cure such breach within [***] for non-payment) following written notification of such breach from the non-breaching party to the breaching party; provided, however, that such [***] (or [***] for non-payment) period may be extended only if mutually agreed to by the Parties if the identified breach is incapable of cure within [***] (or [***] for non-payment) and if the breaching Party promptly provides a plan and timeline to cure the breach, promptly commences efforts to cure the breach and diligently prosecutes such cure;

13.2.2 by Customer, if the Product does not receive FDA approval and if Customer notifies Lonza in writing, within [***] that it wishes to terminate the Agreement for that reason;

13.2.3 by Customer, if Customer is required to withdraw the Product from the market for regulatory or health and safety reasons, on [***] prior written notice to Lonza;

13.2.4 by either Party, immediately, if the other Party becomes insolvent, is dissolved or liquidated, makes a general assignment for the benefit of its creditors, or files or has filed against it, a petition in bankruptcy or has a receiver appointed for a substantial part of its assets, provided that, in the case of an involuntary proceeding, such other Party may not terminate this Agreement if the petition is dismissed within [***] of filing; or

13.2.5 by Customer pursuant to Section 7.3.3, 7.4.4 or 14.

13.3 Consequences of Termination.

13.3.1 In the event of termination hereunder by Lonza under Section 13.2.1, or 13.2.4 Lonza shall submit to Customer an invoice, together with sufficient substantiating documentation, for (i) any applicable [***] and (ii) any applicable [***]. Customer shall pay such invoice in accordance with Section 8. At Customer’s direction, with regard to any [***].

13.3.2 In the event of termination hereunder by Customer under Clause 13.2.2, or 13.2.3, (i) any Purchase Order(s) issued prior to the termination date that have not been fulfilled will be cancelled and such cancelled Purchase Orders shall not be subject to the Cancellation Fee set forth in Section 6.7, and (ii) Lonza shall submit to Customer an invoice, together with sufficient substantiating documentation, for (a) the [***], and (b) [***]as set forth in Section 6.4, if applicable. Customer shall pay such invoice in accordance with Section 8. At Customer’s direction, with regard to any [***].

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13.3.3 In the event of termination hereunder by Customer under Clause 13.2.1, 13.2.4 or 13.2.5, (i) any Purchase Order(s) issued prior to the termination date that have not been fulfilled will be cancelled and such cancelled Purchase Orders shall not be subject to the Cancellation Fee set forth in Section 6.8, (ii) any [***], and (iii) [***]. In such event, Customer shall compensate Lonza only for [***].

13.3.4 In the event of termination by either Party, each Party agrees to return or destroy the other Party’s Confidential Information in accordance with Clause 12.4.

13.4 Survival. Sections 2.5, 4, 5, 8, 9, 10, 11, 12, 13.3, 13.4, 15.1, 15.3, 15.4, 15.5 and 15.6 shall survive the termination or expiration of this Agreement.

14Force Majeure

14.1 If either Party is prevented or delayed in the performance of any of its obligations under the Agreement by Force Majeure and gives written notice thereof to the other Party specifying the matters constituting Force Majeure together with such evidence as the affected Party reasonably can give and specifying the period for which it is estimated that such prevention or delay will continue, the affected Party shall be excused from the performance or the punctual performance of such obligations as the case may be from the date of such notice for so long as such cause of prevention or delay shall continue, provided that such Party is obligated to mitigate damages and to use best efforts to resume the fulfilment of its contractual obligations as soon as reasonably possible. Provided that, if such Force Majeure persists for a period of [***] or more, the Party not affected by such force majeure may terminate this Agreement by delivering written notice to the affected Party, with immediate effect.

14.2 “Force Majeure” shall be deemed to include any reason or cause beyond a Party’s reasonable control affecting the performance by the Party of its obligations under the Agreement, including, but not limited to, acts of God, strike, lockouts, labor troubles, restrictive governmental orders or decrees, riots, insurrection, war, or terrorists acts.

14.3 Force Majeure affecting services or production at Lonza’s Affiliates shall be regarded as an event of Force Majeure.

15Miscellaneous

15.1 Severability. If any provision hereof is or becomes at any time illegal, invalid or unenforceable in any respect, neither the legality, validity nor enforceability of the remaining provisions hereof shall in any way be affected or impaired thereby. The Parties hereto undertake to substitute any illegal, invalid or unenforceable provision by a provision which is as far as possible commercially equivalent considering the legal interests and the Purpose. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

15.2 Amendments/Assignment. Modifications and/or amendments of this Agreement must be in writing and signed by the Parties. Lonza may instruct one or more of its Affiliates to perform any of Lonza’s obligations contained in this Agreement only with prior written consent from Customer, but Lonza shall remain fully responsible in respect of those obligations. Subject thereto, neither Party may assign its interest under this Agreement without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed, provided, however that (a) either Party may assign

24

this Agreement to (i) any Affiliate of such Party or (ii) any third party in connection with the sale or transfer (by whatever method, including merger, consolidation, acquisition or other form of business combination) of all or substantially all of the assets of the business related to the Facility or providing the Services in the case of Lonza, or all or substantially all of the assets related to the Product in the case of Customer, and (b)Lonza shall be entitled to sell, assign and/or transfer its trade receivables resulting from this Agreement without the consent of the Customer. For purposes of this Clause 15.2, the terms “assign” and “assignment” shall include, without limitation (i) the sale or transfer or other assignment of all or substantially all of the assets of the Party or the line of business or Product to which this Agreement relates, and (ii) a merger, consolidation, acquisition or other form of business combination. Any purported assignment without a required consent shall be void. No assignment shall relieve any Party of responsibility for the performance of any obligation that accrued prior to the effective date of such assignment.

15.3 Notice.All notices must be written and sent to the address of the Party first set forth above. All notices must be given (a) by personal delivery, with receipt acknowledged, (b) by facsimile or electronic mail, (c) by prepaid certified or registered mail, return receipt requested, or (d) by prepaid recognized next business day delivery service. Notices will be effective upon receipt or at a later date stated in the notice.

15.4 Public Disclosures. It is understood that each Party may desire or be required to issue press releases or disclosures to the SEC or other applicable agency relating to this Agreement or activities hereunder. The Parties shall consult with each other reasonably and in good faith with respect to text and timing of such press releases and disclosures prior to the issuance thereof, provided that (i) neither Party may unreasonably withhold, condition or delay consent to such press releases or such disclosures to the SEC or other applicable agency, and (ii) either Party may issue such press releases or make such disclosures to the SEC or other applicable agency as it determines, based on advice of counsel, are reasonably necessary to comply with laws or regulations or for appropriate market disclosure. Each Party shall provide the other Party with advance notice of legally required disclosures to the extent practicable. The Parties will consult with each other on the provisions of this Agreement to be redacted in any filings made by a Party with the SEC or as otherwise required by applicable laws or regulations, provided that each Party may make any such filing it reasonably determines necessary under such applicable laws and regulations. After any initial press releases related to this Agreement, either Party may disclose, without the other Party’s consent, the existence of this Agreement, the identity of the other Party, and the terms of the Agreement which have already been publicly disclosed in accordance herewith. Notwithstanding the foregoing, Lonza shall not use the name of Customer, its Affiliates, or the names of their employees or representatives in any advertising materials without prior written consent of Customer, and Customer shall not use the name of Lonza, its Affiliates, or the names of their employees or representatives in any advertising materials without prior written consent of Lonza.

15.5 Authorized Disclosures. Customer may disclose the terms of this Agreement to any actual or potential acquiror or licensee to the Product, provided that: (i) such disclosure is solely for the purpose of such Third Party evaluating such acquisition or license opportunity with Customer; (ii) Customer redacts the financial terms of this Agreement (but Customer shall have the right to disclose the Batch Prices to any bona fide potential or actual acquirer or licensee who would bear and/or share the Batch Prices for the Product). Any party to whom such disclosure is made shall be under written obligations of confidentiality and non-use at least as stringent as those herein.

25

15.6 Governing Law/Jurisdiction. This Agreement is governed in all respects by the laws of [***]. The Parties agree to submit to the jurisdiction of the courts of [***].

15.7 Entire Agreement. This Agreement and its Appendices contain the entire agreement between the Parties as to the subject matter hereof and supersedes all prior and contemporaneous agreements with respect to the subject matter hereof. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. Each party acknowledges that an original signature or a copy thereof transmitted by facsimile or by .pdf shall constitute an original signature for purposes of this Agreement.

IN WITNESS WHEREOF, each of the Parties hereto has caused this Manufacturing Services Agreement to be executed by its duly authorized representative effective as of the date written above.

LONZA LTD

By: /s/ Bart A. M. Van Aarnhem

Name Bart A. M. Van Aarnhem

Title Senior Legal Counsel

By: /s/ Cordula Altekruger

Name Cordula Altekruger

Title Senior Legal Counsel

AMAG PHARMACEUTICALS, INC

By: /s/ William K. Heiden

Name William K. Heiden

Title CEO

26

APPENDIX A

Product Pricing

Parties agree that the Batch Price shall be:

Product VolumePrice per Batch ([***])

[***]Batches per Campaign                    [***]per Batch

Additional Batches: [***] (or more) per Campaign        [***] per Batch

Payment terms:

• Lonza shall invoice and Customer shall pay [***] of the Batch Price upon confirmation of the binding Purchase Order in accordance with Section 6.3, for facility reservation, Raw Materials procurement, manufacturing and preparation (the “Up-Front Payment”).

• Lonza shall invoice and Customer shall pay [***] of the Batch Price upon delivery of the Batch.

• Invoicing and payment shall be in accordance with Section 8.

[***], as defined in this Agreement.

[***]as defined in Section 1. Lonza will submit an invoice to Customer for the Specialty Material and Specialty Material Fee in accordance with Section 2.9, and Customer will pay such invoice in accordance with Section 8.

Additional Work Scope:

Any additional project needs that are not specifically called out within this Agreement or the Quality Agreement shall be invoiced and billed under a separate work order. 

27

APPENDIX B

Project Plan

28

APPENDIX C

Quality Agreement

[Attached]

29

APPENDIX D

Specifications

[Attached]

30

APPENDIX E

Change Order

Change Order – [insert number]

Dated: [insert date]

This is a Change Order of the purposes of Manufacturing Services Agreement between Lonza Ltd. and AMAGPharmaceuticals, Inc.dated _________________[insert date] (the “Agreement”).

Terms used but not defined in this Change Order shall have the meaning given to them in the Agreement.

Effective Date:    Day, Month, Year

End Date:    Day, Month, Year

Current Price: [***]

Revised Price: [***]

New Total Cost (if applicable): [***]

The following reasons have caused the Price to change (increase or decrease):

1.

EXECUTED as an AGREEMENT

Signed by LONZA LTD. ___________________________ Signature ___________________________ Name ___________________________ Title ___________________________ Date Signed for and on behalf of AMAG PHARMACEUTICALS, INC. ___________________________ Signature ___________________________ Name ___________________________ Title ___________________________ Date

31

EX-10.4

Exhibit 10.4

Portions of this Exhibit have been redacted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed. Information that was omitted has been noted in this document with a placeholder identified by the mark “[***]”.

August 6, 2019

Prasco, LLC

6125 Commerce Court

Mason, Ohio 45040

Attention: Chairman

Re:    Termination of Distribution and Supply Agreement

Dear Mr. Arington:

This letter (this “Letter”) is in reference to tn Distribution and Supply Agreement, by and between AMAG Pharmaceuticals, Inc. (“AMAG”) and Prasco, LLC (“Prasco”), dated as of December 20, 2017 (the “Agreement”) pursuant to which Prasco purchased and sold an authorized generic version of AMAG’s Makena® (hydroxyprogesterone caproate injection). All capitalized terms used but not defined herein shall have the meaning as set forth in the Agreement.

AMAG and Prasco have mutually determined that the arrangements contemplated by the Agreement are no longer in their best interests due to the commercial viability of the Product and, therefore, AMAG and Prasco have mutually agreed to terminate the Agreement pursuant to Section 10.4 of the Agreement effective as of August 6, 2019 (the “Termination Date”). The Parties hereby agree that, except as set forth in Section 12.2 of the Agreement and the agreements set forth in this Letter, the Agreement, including all of the rights and obligations of AMAG and Prasco thereunder, shall terminate and be of no further force and effect, and neither AMAG nor any of its affiliates has or will have any further liability or obligation to Prasco or any of its affiliates in connection with the Agreement effective as of the Termination Date.

In connection with the termination of the Agreement: (1) notwithstanding Section 10.8(i) of the Agreement, any outstanding Firm Order shall be automatically cancelled, and Manufacturer shall have no further obligation to supply Product, and Prasco shall have no further obligation to purchase Product, (2) the authorized sell-off period set forth in Section 10.8(iii) shall be extended such that Prasco shall be authorized and permitted to sell any remaining inventory of Product following the Termination Date [***] (the “Sell-Off Period”) subject to its obligations to share profits with AMAG pursuant to the Agreement, and (3) the Parties shall cooperate to effect an orderly wind-down of activities under the Agreement, including, at [***], the return or destruction of any remaining inventory not sold during the Sell-Off Period and [***] for such remaining inventory.

The terms of this Letter shall be deemed Confidential Information under the Agreement, and shall be subject to the provisions of Article 11 of the Agreement. This Letter may be executed and delivered in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. Any counterpart which may be delivered by facsimile or e-mail PDF shall be deemed the equivalent of an originally signed counterpart. This Letter shall constitute the entire agreement among the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. Each Party hereto acknowledges that, in entering into this Letter, it has not relied upon any representation or warranty made by the other Party, or any other person on such other Party’s behalf other than as set forth herein. This Letter shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of law principles.

[Signature Page Follows]

Please acknowledge your agreement to the foregoing by signing your name in the space provided below and returning a copy to me.

Very truly yours,

AMAG PHARMACEUTICALS, INC.

By:_/s/ Ted Myles________________________

Name: Ted Myles

Title: EVP & Chief Financial Officer

ACCEPTED AND AGREED

PRASCO, LLC

By:__/s/ E. Thomas Arington______

Name: E. Thomas Arington

Title: Chairman

Cc:

Jonathan M. Lapps

Scott Fruechtemeyer

Tony Casciano

Joseph D. Vittiglio

Kyle Haraldsen

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, William K. Heiden, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of AMAG Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 1, 2019
		/s/ William K. Heiden
		William K. Heiden
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Edward Myles, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of AMAG Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 1, 2019
		/s/ Edward Myles
		Edward Myles
		Executive Vice President of Finance, Chief Financial Officer and Treasurer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of AMAG Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William K. Heiden, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ William K. Heiden
	William K. Heiden
	President and Chief Executive Officer
	(Principal Executive Officer)
November 1, 2019

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of AMAG Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward Myles, Executive Vice President of Finance, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Edward Myles
	Edward Myles
	Executive Vice President of Finance, Chief Financial Officer and Treasurer
	(Principal Financial Officer)
November 1, 2019

XML

Earnings Per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

The components of basic and diluted earnings per share for the three and nine months ended September 30, 2019 and 2018 were as follows (in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss from continuing operations	$	(23,617	)	$	(64,678	)	$	(266,528	)	$	(148,592	)
Net income from discontinued operations	—			95,517			—			105,108
Net (loss) income	$	(23,617	)	$	30,839		$	(266,528	)	$	(43,484	)
Weighted average common shares outstanding	33,906			34,492			34,058			34,339
Basic and diluted net (loss) income per share:
Loss from continuing operations	$	(0.70	)	$	(1.88	)	$	(7.83	)	$	(4.33	)
Income from discontinued operations	—			2.77			—			3.06
Basic and diluted net (loss) income per share	$	(0.70	)	$	0.89		$	(7.83	)	$	(1.27	)

The following table sets forth the potential common shares issuable upon the exercise of outstanding options, the vesting of restricted stock units (“RSUs”), and the conversion of the Convertible Notes, which were excluded from our computation of diluted net loss per share because their inclusion would have been anti-dilutive (in thousands):

	Nine Months Ended September 30,
	2019	2018
Options to purchase shares of common stock	3,988	3,700
Shares of common stock issuable upon the vesting of RSUs	1,645	1,135
Warrants	—	1,008
2022 Convertible Notes	11,695	11,695
2019 Convertible Notes	—	790
Total	17,328	18,328

In connection with the issuance of the 2019 Convertible Notes in February 2014, we entered into convertible bond hedges. The convertible bond hedges are not included for purposes of calculating the number of diluted shares outstanding, as their effect would be anti-dilutive. The convertible bond hedges were terminated in February 2019 in connection with the maturity of the 2019 Convertible Notes.

XML

Acquisitions, Collaboration, License and Other Strategic Agreements

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Acquisitions, Collaboration, License and Other Strategic Agreements

ACQUISITIONS, COLLABORATION, LICENSE AND OTHER STRATEGIC AGREEMENTS

Our commercial strategy includes expanding our portfolio through the in-license or acquisition of additional pharmaceutical products or companies, including revenue-generating commercial products and development assets as well as forming alliances with other companies to facilitate the sale and distribution of our products. During the nine months ended September 30, 2019, we were a party to the following agreements:

Perosphere

On January 16, 2019, we acquired Perosphere pursuant to the Agreement and Plan of Merger (the “Perosphere Agreement”), dated as of December 12, 2018 between AMAG and Perosphere. Pursuant to the Perosphere Agreement, in January 2019, we paid approximately $50.0 million (the “Upfront Merger Consideration”), subject to adjustments for working capital, cash, transaction expenses and specified indebtedness. Of the Upfront Merger Consideration, approximately $40.0 million was funded from our available cash and approximately $10.0 million was deemed paid in connection with the cancellation of a convertible note in the principal amount of $10.0 million issued to us by Perosphere in October 2018. The purchase price was subject to customary post-closing adjustments under the Perosphere Agreement. In addition to the Upfront Merger Consideration, we used available cash to repay $12.0 million of Perosphere’s term loan indebtedness and approximately $6.2 million of Perosphere’s other liabilities. We are also required to pay regulatory and sales milestone payments to Perosphere as described in more detail above in Note P, “Commitments and Contingencies.” Further, we are a party to a clinical trial collaboration agreement with a pharmaceutical company, which we acquired through the Perosphere transaction, which provided for partial funding of the Phase 3 program for ciraparantag if certain clinical milestones are met. In August 2019, the pharmaceutical company informed us that it intends to terminate the agreement. Although we do not believe this company has grounds for termination, we are engaged in discussions with such partner to come to a mutually agreeable resolution.

Substantially all of the fair value of the assets acquired in conjunction with the Perosphere transaction was concentrated in the IPR&D asset. As a result, we accounted for this transaction as an asset acquisition under ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). The acquired IPR&D was charged to expense at acquisition, as it relates to a development stage compound with no alternative future use. A summary of the assets and liabilities acquired in exchange for cash consideration of $60.8 million and $10.0 million that was deemed paid in connection with the cancellation of the convertible note, described above, is presented in the following table (in millions):

Assets:
Cash	$	2.6
Operating lease right-of-use asset	0.8
Property and equipment	1.4
IPR&D	74.9
	$	79.7
Liabilities:
Accrued severance liabilities	$	(1.7	)
Deferred revenue	(6.4		)
Operating lease liability	(0.8		)
	$	(8.9	)

Excluded from the table above are contingent payments associated with achievement of potential regulatory and sales milestones as described in Note P “Commitments and Contingencies,” which were not deemed probable at the date of acquisition. The fair values of certain of the assets and liabilities acquired are classified as Level 3 estimates under the fair value hierarchy as they have been valued using unobservable inputs. These inputs include: (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of key development and regulatory objectives; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. The fair values of the assets and liabilities acquired were initially valued and recorded based on various market factors, including an analysis of estimated sales using a discount rate of approximately 34%.

Velo

In September 2018, we exercised our option to acquire the global rights to the AMAG-423 program, which we accounted for as an asset acquisition under ASU No. 2017-01. For more information on the AMAG-423 acquisition, see Note P, “Commitments and Contingencies.”

Prasco

In December 2017, we entered into a Distribution and Supply Agreement (the “Prasco Agreement”) with Prasco, LLC (“Prasco”), under which Prasco was granted an exclusive, non-sublicensable, nontransferable license to purchase, distribute and sell a generic version of the Makena IM product in the U.S. (the “Makena authorized generic”). In July 2018, Prasco launched the Makena authorized generic of both the single-dose and multi-dose IM injections and in August 2019, we and Prasco terminated the Prasco Agreement based on our determination that it was not commercially viable to continue the relationship and, therefore, we do not expect to ship any further authorized generic product to Prasco. Under the Prasco Agreement, we were responsible for the manufacture and supply of the Makena authorized generic to be sold to Prasco at a predetermined supply price. Prasco was also required to pay us a certain percentage of the net distributable profits from the sale of the Makena authorized generic. We accounted for revenue recognized under the Prasco Agreement in accordance with ASC 606. Pursuant to the terms of the Prasco Agreement, in certain circumstances we have reimbursed and may be required to reimburse Prasco for additional penalties incurred by Prasco as a result of our failure to supply a certain percentage of product ordered by Prasco in a prespecified timeframe. During the nine months ended September 30, 2019, we incurred $3.5 million of failure to supply penalties, the majority of which were incurred in the first quarter of 2019.

Antares

We are party to the Antares License Agreement, which grants us an exclusive, worldwide, royalty-bearing license, with the right to sublicense, to certain intellectual property rights, including know-how, patents and trademarks, to develop, use, sell, offer for sale and import and export the Makena auto-injector. Under the terms of the Antares License Agreement, as amended in March 2018, we are responsible for the clinical development and preparation, submission and maintenance of all regulatory applications in each country where we desire to market and sell the Makena auto-injector, including the U.S. We are also required to pay royalties to Antares as described in more detail above in Note P, “Commitments and Contingencies.” The Antares License Agreement terminates at the end of the Antares Royalty Term, but is subject to early termination by us for convenience and by either party upon an uncured breach by or bankruptcy of the other party. In March 2018, the Antares License Agreement was amended to, among other things, transfer the agreement to AMAG from our subsidiary, amend certain confidentiality provisions, and to provide for co-termination with the Antares Manufacturing Agreement (described below).

We are also party to a Manufacturing Agreement with Antares (the “Antares Manufacturing Agreement”) that sets forth the terms and conditions pursuant to which Antares agreed to sell to us on an exclusive basis, and we agreed to purchase, the fully packaged Makena auto-injector for commercial distribution. Antares remains responsible for the manufacture and supply of the device components and assembly of the Makena auto-injector. We are responsible for the supply of the drug to be used in the assembly of the finished auto-injector product. The Antares Manufacturing Agreement terminates at the expiration or earlier termination of the Antares License Agreement, but is subject to early termination by us for certain supply failure situations, and by either party upon an uncured breach by or bankruptcy of the other party or our permanent cessation of commercialization of the Makena auto-injector for efficacy or safety reasons.

Endoceutics

In February 2017, we entered into the Endoceutics License Agreement. Pursuant to the Endoceutics License Agreement, Endoceutics granted us the right to develop and commercialize pharmaceutical products containing dehydroepiandrosterone (“DHEA”), including Intrarosa, at dosage strengths of 13 mg or less per dose and formulated for intravaginal delivery, excluding any combinations with other active pharmaceutical ingredients, in the U.S. for the treatment of VVA and FSD. We accounted for the Endoceutics License Agreement as an asset acquisition under ASU 2017-01.

Upon the closing of the Endoceutics License Agreement, we made an upfront payment of $50.0 million and issued 600,000 shares of unregistered common stock to Endoceutics, which had a value of $13.5 million, as measured on April 3, 2017, the date of closing. In addition, we paid Endoceutics $10.0 million in 2017 upon the delivery by Endoceutics of Intrarosa launch quantities and $10.0 million in 2018 following the first anniversary of the closing. In 2017, we recorded a total of $83.5 million of consideration, of which $77.7 million was allocated to the Intrarosa developed technology intangible asset and $5.8 million was recorded as IPR&D expense based on their relative fair values. In addition, we are required to pay royalties and sales milestone payments to Endoceutics as described in more detail above in Note P, “Commitments and Contingencies.”

In the third quarter of 2017, Endoceutics initiated a clinical study with Intrarosa for the treatment of HSDD in post-menopausal women. Upon review of the full data set, Endoceutics recently determined not to pursue an additional clinical trial to support an HSDD indication. We had agreed to share the direct costs related to such studies based upon a negotiated allocation with us funding up to $20.0 million, of which we have paid approximately $6.0 million, which was recorded as research and development expense as incurred.

We have the exclusive right to commercialize Intrarosa for the treatment of VVA and FSD in the U.S., subject to the terms of the Endoceutics License Agreement. We have agreed to use commercially reasonable efforts to market, promote and otherwise commercialize Intrarosa for the treatment of VVA and, if approved, FSD in the U.S. Endoceutics has the right to directly conduct additional commercialization activities for Intrarosa for the treatment of VVA and FSD in the U.S. and has the right to conduct activities related generally to the field of intracrinology, in each case, subject to our review and approval and our right to withhold approval in certain instances. Each party’s commercialization activities and budget are described in a commercialization plan, which is updated annually.

In April 2017, we entered into an exclusive commercial supply agreement with Endoceutics pursuant to which Endoceutics, itself or through affiliates or contract manufacturers, agreed to manufacture and supply Intrarosa to us (the “Endoceutics Supply Agreement”) and is our exclusive supplier of Intrarosa in the U.S., subject to certain rights for us to manufacture and supply Intrarosa in the event of a cessation notice or supply failure (as such terms are defined in the Endoceutics Supply Agreement). Under the Endoceutics Supply Agreement, Endoceutics has agreed to maintain at all times a second source supplier for the manufacture of DHEA and the drug product. The Endoceutics Supply Agreement will generally remain in effect until the termination of the Endoceutics License Agreement.

The Endoceutics License Agreement expires on the date of expiration of all royalty obligations due thereunder unless earlier terminated in accordance with the Endoceutics License Agreement.

Palatin

In January 2017, we entered into the Palatin License Agreement under which we acquired (a) an exclusive license in all countries of North America (the “Palatin Territory”), with the right to grant sub-licenses, to research, develop and commercialize the Vyleesi products, a product for the treatment of acquired, generalized HSDD in pre-menopausal women, (b) a worldwide non-exclusive license, with the right to grant sub-licenses, to manufacture the Vyleesi Products, and (c) a non-exclusive license in all countries outside the Palatin Territory, with the right to grant sub-licenses, to research and develop (but not commercialize) the Vyleesi Products. The transaction closed in February 2017 and was accounted for as an asset acquisition under ASU 2017-01.

Under the terms of the Palatin License Agreement, in February 2017 we paid Palatin $60.0 million as a one-time upfront payment and subject to agreed-upon deductions reimbursed Palatin approximately $25.0 million for reasonable, documented,

out-of-pocket expenses incurred by Palatin in connection with the development and regulatory activities necessary to submit an NDA in the U.S. for Vyleesi for the treatment of HSDD in pre-menopausal women. During 2017, we fulfilled these payment obligations to Palatin. The $60.0 million upfront payment made in February 2017 to Palatin was recorded as IPR&D expense as the product candidate had not received regulatory approval. In June 2018, our NDA submission to the FDA for Vyleesi was accepted, which triggered a $20.0 million milestone payment, which we paid in the second quarter of 2018 and recorded as an IPR&D expense in the first quarter of 2018 when acceptance was deemed probable. In June 2019, the FDA approval of Vyleesi triggered a $60.0 million milestone payment to Palatin, which we paid in July 2019 and recorded as a developed technology intangible asset in the second quarter of 2019. In addition, we are required to pay royalties and regulatory and sales milestone payments to Palatin as described in more detail above in Note P, “Commitments and Contingencies.”

The Palatin License Agreement expires on the date of expiration of all royalty obligations due thereunder, unless earlier terminated in accordance with the Palatin License Agreement.

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Recently Adopted Accounting Pronouncements

9 Months Ended

Sep. 30, 2019

Accounting Changes and Error Corrections [Abstract]

Recently Adopted Accounting Pronouncements

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASC 842”). This standard requires an entity to recognize on its balance sheet assets and liabilities associated with the rights and obligations created by leases with terms greater than twelve months. We adopted the standard effective January 1, 2019. We chose to apply the provisions of ASC 842 as of the effective date with no restatement of prior periods or cumulative adjustment to retained earnings. Upon adoption, we elected to utilize the package of transition practical expedients, which allowed us to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. We also made accounting policy elections to not separate lease and non-lease components for our real estate lease and to not recognize leases with an initial term of twelve months or less within our condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis on our condensed consolidated statements of income over the lease term.

In preparation for adoption of the standard, we implemented internal controls to enable the preparation of financial information. The adoption of this standard resulted in the recognition of operating lease liabilities of $8.5 million and related ROU assets of $7.6 million on our condensed consolidated balance sheets as of January 1, 2019, but did not have an impact on our condensed consolidated statements of operations.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). This standard clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. We adopted ASU 2018-18 during the first quarter of 2019 and applied the provisions of this update retrospectively to all contracts that were not completed as of the date of our initial adoption of ASC 606. The adoption of ASU 2018-18 did not have a material impact on our financial position or results of operations.

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Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments necessary for a fair statement of our financial position and results of operations for the interim periods presented. Such adjustments consisted only of normal recurring items. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).

In accordance with GAAP for interim financial reports and the instructions for Form 10-Q and the rules of the Securities and Exchange Commission, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. Our accounting policies are described in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018 (our “Annual Report”). Interim results are not necessarily indicative of the results of operations for the full year. These interim financial statements should be read in conjunction with our Annual Report.

In August 2018, we completed the sale of our wholly-owned subsidiary, CBR Acquisition Holdings Corp, and the Cord Blood Registry^® (“CBR”) business to GI Partners (“GI”), a private equity investment firm, pursuant to the June 14, 2018 Stock Purchase Agreement between us and affiliates of GI. As of June 30, 2018, our CBR business met the criteria for classification as a discontinued operation. All historical operating results for CBR are therefore reflected within discontinued operations in the consolidated statements of operations for the three and nine months ended September 30, 2018. For additional information, see Note C, “Discontinued Operations.”

Principles of Consolidation

The accompanying condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates and Assumptions

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. The most significant estimates and assumptions are used to determine amounts and values of, but are not limited to: revenue recognition related to product and collaboration revenue; product sales allowances and accruals; allowance for doubtful accounts; marketable securities; inventory; acquisition date fair value and subsequent fair value estimates used to assess impairment of long-lived assets, including goodwill, in-process research and development (“IPR&D”) and other intangible assets; contingent consideration; debt obligations; certain accrued liabilities, including clinical trial accruals; income taxes, inclusive of valuation allowances; and equity-based compensation expense. Actual results could differ materially from those estimates.

Restricted Cash

We classified $0.5 million of our cash as restricted cash, a non-current asset on the balance sheet, as of September 30, 2019 and December 31, 2018. This amount represented the security deposit delivered to the landlord of our Waltham, Massachusetts headquarters in the form of an irrevocable letter of credit.

Concentrations and Significant Customer Information

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities, and accounts receivable. We currently hold our excess cash primarily in institutional money market funds, corporate debt securities, U.S. treasury and government agency securities and certificates of deposit. As of September 30, 2019, we did not have a material concentration in any single investment.

Our operations are located entirely within the U.S. We focus primarily on developing, manufacturing, and commercializing our products and product candidates. We perform ongoing credit evaluations of our customers and generally do not require collateral. The following table sets forth customers who represented 10% or more of our total revenues for the three and nine months ended September 30, 2019 and 2018:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
McKesson Corporation	38	%	25	%	37	%	26	%
AmerisourceBergen Drug Corporation	28	%	24	%	28	%	26	%
Cardinal Health	11	%	<10%		12	%	<10%

Our net accounts receivable primarily represent amounts due for products sold directly to wholesalers, distributors, specialty pharmacies, and our former authorized generic partner. Accounts receivable for our products are recorded net of reserves for estimated chargeback obligations, prompt payment discounts and any allowance for doubtful accounts. At September 30, 2019 and December 31, 2018, two and three customers, respectively, accounted for 10% or more of our accounts receivable balances, representing approximately 70% and 73% in the aggregate of our total accounts receivable, respectively.

We are currently dependent on a single supplier for Feraheme drug substance (produced in two separate facilities) as well as a single supplier for our Makena auto-injector product. We have been and may continue to be exposed to a significant loss of revenue from the sale of our products in the event that our suppliers and/or manufacturers are not able to fulfill demand for any reason.

Revenue Recognition

Product revenues

Effective January 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

a.Identify the contract(s) with a customer;

b.Identify the performance obligations in the contract;

c.Determine the transaction price;

d.Allocate the transaction price to the performance obligations in the contract; and

e.Recognize revenue when (or as) the performance obligations are satisfied.

We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, if the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Collaboration Revenues

When we enter into collaboration agreements, we assess whether the agreements fall within the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”) based on whether the arrangements involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. To the extent that the arrangement falls within the scope of ASC 808, we assess whether the payments between us and our collaboration partner fall within the scope of other accounting literature. If we conclude that payments from the collaboration partner to us represent consideration from a customer, such as license fees and contract research and development activities, we account for those payments within the scope of ASC 606. However, if we conclude that our collaboration partner is not a customer for certain activities and associated payments, such as for certain collaborative research, development, manufacturing and commercial activities, we present such payments as a reduction of research and development expense or general and administrative expense, based on where we present the related underlying expense.

Leases

Effective January 1, 2019, we adopted ASC Topic 842, Leases (“ASC 842”), and chose to apply the provisions of ASC 842 as of the effective date with no restatement of prior periods or cumulative adjustment to retained earnings. Upon adoption, we elected to utilize the package of transition practical expedients, which allowed us to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. We also made accounting policy elections to not separate lease and non-lease components for our real estate lease and to not recognize leases with an initial term of twelve months or less within our condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis on our condensed consolidated statements of income over the lease term. We did not have any material short-term leases accounted for under this policy during the six months ended September 30, 2019.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liability, and long-term operating lease liability on our condensed consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Our incremental borrowing rate is determined based on an evaluation of our creditworthiness and the prevailing market rates for collateralized debt with maturity dates commensurate with the term of each lease. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The lease payments used to determine our ROU assets may include lease incentives, stated rent increases, and escalation clauses linked to rates of inflation when determinable and are recognized in our ROU assets on our condensed consolidated balance sheet. In addition, certain lease agreements contain lease and non-lease components. With the exception of our real estate leases, we separate lease payments for the identified assets from any non-lease payments included in the agreement. For our real estate leases, we account for the lease and non-lease components as a single lease component. Additionally, for vehicle and certain equipment leases, we apply a portfolio approach to effectively account for the related ROU assets and operating lease liabilities.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

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Cover Page - shares	9 Months Ended
	Sep. 30, 2019	Oct. 28, 2019
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2019
Document Transition Report	false
Entity File Number	001-10865
Entity Registrant Name	AMAG Pharmaceuticals, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	04-2742593
Entity Address, Address Line One	1100 Winter Street,
Entity Address, City or Town	Waltham,
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02451
City Area Code	617
Local Phone Number	498-3300
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	AMAG
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		33,915,766
Entity Central Index Key	0000792977
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false

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Property and Equipment, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Property, plant and equipment, net
Property and equipment, gross	$ 14,899	$ 12,732
Less: accumulated depreciation	(6,987)	(5,211)
Property and equipment, net	7,912	7,521
Computer equipment and software
Property, plant and equipment, net
Property and equipment, gross	1,672	1,637
Furniture and fixtures
Property, plant and equipment, net
Property and equipment, gross	1,705	1,737
Leasehold improvements
Property, plant and equipment, net
Property and equipment, gross	4,859	2,938
Laboratory and production equipment
Property, plant and equipment, net
Property and equipment, gross	6,538	6,000
Construction in progress
Property, plant and equipment, net
Property and equipment, gross	$ 125	$ 420

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Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Payables and Accruals [Abstract]
Commercial rebates, fees and returns	$ 127,138	$ 80,520
Professional, license, and other fees and expenses	18,964	23,242
Salaries, bonuses, and other compensation	17,498	22,482
Research and development expense	3,467	1,067
Interest expense	4,020	2,226
Restructuring expense	1,198	0
Total accrued expenses	$ 172,285	$ 129,537

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (23,617)	$ 30,839	$ (266,528)	$ (43,484)
Other comprehensive loss:
Holding (losses) gains associated with marketable securities arising during period, net of tax	(167)	134	786	(253)
Total comprehensive (loss) income	$ (23,784)	$ 30,973	$ (265,742)	$ (43,737)

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Basis of Presentation and Summary of Significant Accounting Policies - Concentration and Significant Customer Information (Details) - facility	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Revenue from Contract with Customer, Product and Service Benchmark | Customer Concentration Risk | McKesson Corporation
Concentrations and Significant Customer Information
Concentration risk	38.00%	25.00%	37.00%	26.00%
Revenue from Contract with Customer, Product and Service Benchmark | Customer Concentration Risk | AmerisourceBergen Drug Corporation
Concentrations and Significant Customer Information
Concentration risk	28.00%	24.00%	28.00%	26.00%
Revenue from Contract with Customer, Product and Service Benchmark | Customer Concentration Risk | Cardinal Health
Concentrations and Significant Customer Information
Concentration risk	11.00%		12.00%
Accounts Receivable | Customer Concentration Risk | Two customers
Concentrations and Significant Customer Information
Concentration risk			70.00%
Accounts Receivable | Customer Concentration Risk | Three customers
Concentrations and Significant Customer Information
Concentration risk					73.00%
Feraheme
Concentrations and Significant Customer Information
Number of production facilities			2

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Debt (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of outstanding debt obligations

Our outstanding debt obligations as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30, 2019		December 31, 2018
2022 Convertible Notes	$	273,124	$	261,933
2019 Convertible Notes	—		21,276
Total long-term debt	273,124		283,209
Less: current maturities	—		21,276
Long-term debt, net of current maturities	$	273,124	$	261,933

Schedule of outstanding convertible debt

The outstanding balance of our 2022 Convertible Notes as of September 30, 2019 consisted of the following (in thousands):

	2022 Convertible Notes
Liability component:
Principal	$	320,000
Less: debt discount and issuance costs, net	46,876
Net carrying amount	$	273,124
Gross equity component	$	72,576

Schedule of total interest expense recognized related to the convertible debt

The following table sets forth total interest expense recognized related to the Convertible Notes during the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Contractual interest expense	$	2,600	$	2,734	$	7,867	$	8,202
Amortization of debt issuance costs	353		355		1,051		1,040
Amortization of debt discount	3,466		3,391		10,281		9,942
Total interest expense	$	6,419	$	6,480	$	19,199	$	19,184

Schedule of future annual principal payments on long-term debt

Future annual principal payments on our long-term debt as of September 30, 2019 were as follows (in thousands):

Period	Future Annual Principal Payments
Remainder of Year Ending December 31, 2019	$	—
Year Ending December 31, 2020	—
Year Ending December 31, 2021	—
Year Ending December 31, 2022	320,000
Year Ending December 31, 2023	—
Thereafter	—
Total	$	320,000

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Schedule of components of basic and diluted earnings per share

The components of basic and diluted earnings per share for the three and nine months ended September 30, 2019 and 2018 were as follows (in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss from continuing operations	$	(23,617	)	$	(64,678	)	$	(266,528	)	$	(148,592	)
Net income from discontinued operations	—			95,517			—			105,108
Net (loss) income	$	(23,617	)	$	30,839		$	(266,528	)	$	(43,484	)
Weighted average common shares outstanding	33,906			34,492			34,058			34,339
Basic and diluted net (loss) income per share:
Loss from continuing operations	$	(0.70	)	$	(1.88	)	$	(7.83	)	$	(4.33	)
Income from discontinued operations	—			2.77			—			3.06
Basic and diluted net (loss) income per share	$	(0.70	)	$	0.89		$	(7.83	)	$	(1.27	)

Schedule of anti-dilutive securities from computation of diluted net income (loss) per share

The following table sets forth the potential common shares issuable upon the exercise of outstanding options, the vesting of restricted stock units (“RSUs”), and the conversion of the Convertible Notes, which were excluded from our computation of diluted net loss per share because their inclusion would have been anti-dilutive (in thousands):

	Nine Months Ended September 30,
	2019	2018
Options to purchase shares of common stock	3,988	3,700
Shares of common stock issuable upon the vesting of RSUs	1,645	1,135
Warrants	—	1,008
2022 Convertible Notes	11,695	11,695
2019 Convertible Notes	—	790
Total	17,328	18,328

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Recently Adopted Accounting Pronouncements - Narrative (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease, liability	$ 7,338
Operating lease, right-of-use asset	6,642
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease, liability	7,300	$ 8,500
Operating lease, right-of-use asset	$ 6,600	$ 7,600

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Acquisitions, Collaboration, License and Other Strategic Agreements - Narrative (Details) - USD ($)			1 Months Ended			9 Months Ended		12 Months Ended		24 Months Ended
	Jan. 16, 2019	Apr. 03, 2017	Jun. 30, 2019	Jun. 30, 2018	Feb. 28, 2017	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Dec. 31, 2017	Mar. 31, 2019	Sep. 30, 2017
Collaborative Agreements
Payment for debt extinguishment						$ 0	$ 28,054,000
Endoceutics, Inc.
Collaborative Agreements
Consideration recorded									$ 83,500,000
Payments related to collaborative arrangement		$ 50,000,000.0
Number of shares issued under arrangement (in shares)		600,000
Net shares issued in connection with license agreement, value		$ 13,500,000
IPR&D expense									5,800,000
Palatin Technologies, Inc.
Collaborative Agreements
Payments related to collaborative arrangement					$ 60,000,000.0
Out-of-pocket expenses (up to)					$ 25,000,000.0
Intrarosa | Endoceutics, Inc.
Collaborative Agreements
Payments related to collaborative arrangement										$ 6,000,000.0
Out-of-pocket expenses (up to)											$ 20,000,000.0
Intrarosa | Endoceutics, Inc. | Developed Technology Rights
Collaborative Agreements
Finite-lived intangible assets									77,700,000
Intrarosa | Endoceutics, Inc. | Delivery Of Intrarosa Launch Quantities
Collaborative Agreements
Payments related to collaborative arrangement									$ 10,000,000.0
Intrarosa | Endoceutics, Inc. | First Anniversary Of Closing
Collaborative Agreements
Payments related to collaborative arrangement								$ 10,000,000.0
Vyleesi Products | Palatin Technologies, Inc. | Regulatory Milestone Achievement, Acceptance by U.S.Food and Drug Administration of New Drug Application
Collaborative Agreements
Payments related to collaborative arrangement				$ 20,000,000.0
Vyleesi Products | Palatin Technologies, Inc. | Regulatory Milestone Achievement, U.S.Food And Drug Administration Approval
Collaborative Agreements
Payments related to collaborative arrangement			$ 60,000,000.0
Failure To Supply A Certain Percentage Of Product | Prasco, LLC
Collaborative Agreements
Failure to supply, penalties						$ 3,500,000
Perosphere Pharmaceuticals Inc.
Collaborative Agreements
Consideration recorded	$ 50,000,000.0
Payments of asset acquisitions	40,000,000.0
Cancellation of convertible note	10,000,000.0
Other liabilities	6,200,000
Cash consideration	$ 60,800,000
Discount rate	34.00%
Perosphere Pharmaceuticals Inc. | Perosphere Convertible Note | Convertible Debt
Collaborative Agreements
Aggregate principal amount of debt issued	$ 10,000,000.0
Perosphere Pharmaceuticals Inc. | Perosphere Term Loan | Line of Credit
Collaborative Agreements
Payment for debt extinguishment	$ 12,000,000.0

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Stockholders' Equity (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019	Mar. 31, 2019	Jan. 01, 2019
Equity [Abstract]
Share repurchase program, remaining authorized amount	$ 26,800,000		$ 20,500,000
Share repurchase program, authorized amount		$ 20,000,000.0	$ 60,000,000.0
Common stock repurchased and retired (in shares)	1,074,800
Common stock repurchased and retired	$ 13,700,000

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Debt - 2023 Senior Notes (Details) - USD ($)	1 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2018	Oct. 31, 2017	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Aug. 31, 2015
Debt Instrument [Line Items]
Loss on debt extinguishment			$ 0	$ 35,922,000	$ 0	$ 35,922,000
Payment of premium on debt extinguishment					$ 0	28,054,000
Senior Notes | Senior Notes Due 2023
Debt Instrument [Line Items]
Aggregate principal amount of debt issued							$ 500,000,000.0
Interest rate							7.875%
Repurchase amount	$ 475,000,000.0	$ 25,000,000.0		$ 475,000,000.0		$ 475,000,000.0
Loss on debt extinguishment	35,900,000	$ 1,100,000
Payment of premium on debt extinguishment	$ 28,100,000

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Discontinued Operations - Summary of Net Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Costs and expenses:
Income from discontinued operations	$ 0	$ 5,838	$ 0	$ 18,873
Gain on sale of CBR business	0	89,581	0	89,581
Income tax (benefit) expense	0	(98)	0	3,346
Net income from discontinued operations	$ 0	95,517	$ 0	105,108
CBR business | Discontinued Operations, Held-for-sale or Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Service revenues, net		12,163		71,217
Costs and expenses:
Cost of services		1,576		12,559
Selling, general and administrative expenses		4,749		39,899
Total costs and expenses		6,325		52,458
Operating income		5,838		18,759
Other income		0		114
Income from discontinued operations		5,838		18,873
Gain on sale of CBR business		89,581		89,581
Income tax (benefit) expense		(98)		3,346
Net income from discontinued operations		$ 95,517		$ 105,108

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Revenue Recognition - Product Revenue Allowance and Accrual Activity (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Sep. 30, 2019
Contractual Adjustments
Balance at Beginning of Period	$ 77,774	$ 57,199	$ 57,199
Provisions related to current period sales	139,697	233,305
Adjustments related to prior period sales	4,475	4,200	8,700
Payments/returns relating to current period sales	(117,780)	(176,392)
Payments/returns relating to prior period sales	(20,239)	(40,538)
Balance at End of Period	83,927	77,774	83,927
Governmental Rebates
Balance at Beginning of Period	40,516	29,114	29,114
Provisions related to current period sales	27,296	44,539
Adjustments related to prior period sales	(1,438)	15,134	13,700
Payments/returns relating to current period sales	(4,899)	(11,909)
Payments/returns relating to prior period sales	(2,611)	(36,362)
Balance at End of Period	58,864	40,516	58,864
Revenue, Allowance [Roll Forward]
Balance at Beginning of Period	118,290	86,313	86,313
Provisions related to current period sales	166,993	277,844
Adjustments related to prior period sales	3,037	19,334
Payments/returns relating to current period sales	(122,679)	(188,301)
Payments/returns relating to prior period sales	(22,850)	(76,900)
Balance at End of Period	$ 142,791	$ 118,290	$ 142,791

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Fair Value Measurements - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Fair Value, Recurring - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Assets:
Cash equivalents	$ 25,047	$ 71,568
Marketable securities:
Available-for-sale securities	71,744
Total assets	96,791	212,483
Liabilities:
Total liabilities	293	359
Other
Liabilities:
Contingent consideration - MuGard	293	359
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Cash equivalents	25,047	71,568
Marketable securities:
Available-for-sale securities	0
Total assets	25,047	71,568
Liabilities:
Total liabilities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other
Liabilities:
Contingent consideration - MuGard	0	0
Significant Other Observable Inputs (Level 2)
Assets:
Cash equivalents	0	0
Marketable securities:
Available-for-sale securities	71,744
Total assets	71,744	140,915
Liabilities:
Total liabilities	0	0
Significant Other Observable Inputs (Level 2) | Other
Liabilities:
Contingent consideration - MuGard	0	0
Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	0	0
Marketable securities:
Available-for-sale securities	0
Total assets	0	0
Liabilities:
Total liabilities	293	359
Significant Unobservable Inputs (Level 3) | Other
Liabilities:
Contingent consideration - MuGard	293	359
Corporate debt securities
Marketable securities:
Available-for-sale securities	62,000	113,097
Corporate debt securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Marketable securities:
Available-for-sale securities	0	0
Corporate debt securities | Significant Other Observable Inputs (Level 2)
Marketable securities:
Available-for-sale securities	62,000	113,097
Corporate debt securities | Significant Unobservable Inputs (Level 3)
Marketable securities:
Available-for-sale securities	0	0
U.S. treasury and government agency securities
Marketable securities:
Available-for-sale securities	6,244	10,323
U.S. treasury and government agency securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Marketable securities:
Available-for-sale securities	0	0
U.S. treasury and government agency securities | Significant Other Observable Inputs (Level 2)
Marketable securities:
Available-for-sale securities	6,244	10,323
U.S. treasury and government agency securities | Significant Unobservable Inputs (Level 3)
Marketable securities:
Available-for-sale securities	0	0
Certificates of deposit
Marketable securities:
Available-for-sale securities	3,500	13,500
Certificates of deposit | Quoted Prices in Active Markets for Identical Assets (Level 1)
Marketable securities:
Available-for-sale securities	0	0
Certificates of deposit | Significant Other Observable Inputs (Level 2)
Marketable securities:
Available-for-sale securities	3,500	13,500
Certificates of deposit | Significant Unobservable Inputs (Level 3)
Marketable securities:
Available-for-sale securities	0	0
Commercial paper
Marketable securities:
Available-for-sale securities	0	3,995
Commercial paper | Quoted Prices in Active Markets for Identical Assets (Level 1)
Marketable securities:
Available-for-sale securities	0	0
Commercial paper | Significant Other Observable Inputs (Level 2)
Marketable securities:
Available-for-sale securities	0	3,995
Commercial paper | Significant Unobservable Inputs (Level 3)
Marketable securities:
Available-for-sale securities	$ 0	$ 0

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Schedule of effective income tax rate and income tax expense (benefit)

The following table summarizes our effective tax rate and income tax expense (benefit) from continuing operations for the three and nine months ended September 30, 2019 and 2018 (in thousands except for percentages):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Effective tax rate	(1		)%	4		%	—		%	(40		)%
Income tax expense (benefit)	$	232		$	(2,352	)	$	(26	)	$	42,204

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Inventories (Tables)

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Schedule of major classes of inventories

Our major classes of inventories were as follows as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Raw materials	$	8,814	$	9,388
Work in process	5,784		5,932
Finished goods	14,046		11,371
Total inventories	$	28,644	$	26,691

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Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

Net income from discontinued operations

The following is a summary of net income from discontinued operations for the three and nine months ended September 30, 2018:    

	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Service revenues, net	$	12,163		$	71,217
Costs and expenses:
Cost of services	1,576			12,559
Selling, general and administrative expenses	4,749			39,899
Total costs and expenses	6,325			52,458
Operating income	5,838			18,759
Other income	—			114
Income from discontinued operations	5,838			18,873
Gain on sale of CBR business	89,581			89,581
Income tax (benefit) expense	(98		)	3,346
Net income from discontinued operations	$	95,517		$	105,108

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Marketable Securities

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

MARKETABLE SECURITIES

As of September 30, 2019 and December 31, 2018, our marketable securities were classified as available-for-sale in accordance with accounting standards which provide guidance related to accounting and classification of certain investments in marketable securities. Available-for-sale marketable securities are those securities which we view as available for use in current operations, if needed. We generally classify our available-for-sale marketable securities as short-term investments on our condensed consolidated balance sheets even though the stated maturity date may be one year or more beyond the current balance sheet date. We report realized gains and losses as a separate line within the condensed consolidated statements of operations on a specific identification basis.

The following is a summary of our marketable securities as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Short-term marketable securities:*
Corporate debt securities	$	41,596	$	130	$	(9	)	$	41,717
Certificates of deposit	3,500		—		—			3,500
U.S. treasury and government agency securities	6,247		—		(3		)	6,244
Commercial paper	—		—		—			—
Total short-term marketable securities	$	51,343	$	130	$	(12	)	$	51,461
Long-term marketable securities:**
Corporate debt securities	$	20,076	$	207	$	—		$	20,283
Total long-term marketable securities	20,076		207		—			20,283
Total marketable securities	$	71,419	$	337	$	(12	)	$	71,744

* Represents marketable securities with a remaining maturity of less than one year.

** Represents marketable securities with a remaining maturity of one to three years classified as short-term on our condensed consolidated balance sheets.

	December 31, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Short-term marketable securities:*
Corporate debt securities	$	51,184	$	—	$	(236	)	$	50,948
U.S. treasury and government agency securities	7,647		—		(34		)	7,613
Commercial paper	3,995		—		—			3,995
Certificates of deposit	12,000		—		—			12,000
Total short-term marketable securities	$	74,826	$	—	$	(270	)	$	74,556
Long-term marketable securities:**
Corporate debt securities	$	62,530	$	52	$	(433	)	$	62,149
U.S. treasury and government agency securities	2,742		—		(32		)	2,710
Certificates of deposit	1,500		—		—			1,500
Total long-term marketable securities	66,772		52		(465		)	66,359
Total marketable securities	$	141,598	$	52	$	(735	)	$	140,915

* Represents marketable securities with a remaining maturity of less than one year.

** Represents marketable securities with a remaining maturity of one to three years classified as short-term on our condensed consolidated balance sheets.

Impairments and Unrealized Gains and Losses on Marketable Securities

We did not recognize any other-than-temporary impairment losses on our condensed consolidated statements of operations related to our marketable securities during the three and nine months ended September 30, 2019 and 2018. We considered various factors, including the length of time that each security was in an unrealized loss position and our ability and intent to hold these securities until the recovery of their amortized cost basis occurs. As of September 30, 2019, we had no material losses in an unrealized loss position for more than one year. Future events may occur, or additional information may become available, which may cause us to identify credit losses where we do not expect to receive cash flows sufficient to recover the entire amortized cost basis of a security and may necessitate the recording of future realized losses on securities in our portfolio. Significant losses in the estimated fair values of our marketable securities could have a material adverse effect on our earnings in future periods.

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Goodwill and Intangible Assets, Net

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

We test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Events that could indicate impairment and trigger an interim impairment assessment include, but are not limited to, an adverse change in current economic and market conditions, including a significant prolonged decline in market capitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverse action or assessment by a regulator, such as an adverse FDA decision related to Makena in light of the discussions and votes at the recent Advisory Committee meeting. Our annual impairment test date is October 31. We have determined that we operate in a single operating segment and have a single reporting unit.

During 2019, as a result of a number of business factors, including our market capitalization being below our carrying value, we performed qualitative interim impairment assessments of our goodwill balance as of each of the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019. We determined that it was not more likely than not that the fair value of our reporting unit was less than its carrying value and therefore, did not perform a further quantitative interim impairment test for any period. Our qualitative assessments were based on management’s estimates and assumptions, a number of which are dependent on external factors. To the extent actual results differ materially from these estimates and we experience negative developments in the areas discussed above in subsequent periods, an interim impairment assessment could be triggered, which could result in an impairment of goodwill.

Intangible Assets

Our developed technology intangible assets are related to certain of our commercial products. We assess intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. Events that could result in an impairment, or trigger an interim impairment assessment, include an adverse action or assessment by a regulator (such as an adverse FDA decision related to Makena, as discussed above), an adverse change in current economic and market conditions, or significant adverse changes in the long-range forecasts for a commercial product. When events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable, we calculate the excess of an intangible asset's carrying value over its undiscounted future cash flows. If the carrying value is not recoverable, an impairment loss is recognized based on the amount by which the carrying value exceeds the fair value. The inputs used in the fair value analysis fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value.

As of September 30, 2019 and December 31, 2018, our intangible assets consisted of the following (in thousands):

	September 30, 2019								December 31, 2018
			Accumulated		Cumulative						Accumulated		Cumulative
	Cost		Amortization		Impairments		Net		Cost		Amortization		Impairments		Net
Finite-lived intangible assets:
Makena base technology	$	797,100	$	400,496	$	396,604	$	—	$	797,100	$	400,495	$	319,246	$	77,359
Makena auto-injector developed technology	79,100		13,716		—		65,384		79,100		6,952		—		72,148
Intrarosa developed technology	77,655		15,193		—		62,462		77,655		10,129		—		67,526
Vyleesi developed technology	60,000		269		—		59,731		—		—		—		—
Total intangible assets	$	1,013,855	$	429,674	$	396,604	$	187,577	$	953,855	$	417,576	$	319,246	$	217,033

During the second quarter of 2019, Vyleesi received FDA approval, which triggered a $60.0 million milestone payment, which was capitalized as developed technology.

Late in the second quarter of 2019, we were notified that an additional manufacturing site for the Makena intramuscular (“IM”) products, which relates to the Makena base technology intangible asset, received FDA approval. However, the approval was received later than expected and the extended period of the stock-out caused our authorized generic partner to lose additional customers and market share, resulting in no shipments of IM to our authorized generic partner during that quarter. As a result of this loss of market share, we deemed it probable as of the end of the second quarter of 2019 that we would terminate the Distribution and Supply Agreement with our authorized generic partner. We do not expect to generate any future revenues from shipments of the IM products. Accordingly, we eliminated the Makena IM products from our long-term revenue forecast during the second quarter of 2019. These business factors were considered indicators of potential impairment for the Makena base technology intangible asset during the second quarter of 2019. We determined that the fair value of the Makena base technology intangible asset was zero at June 30, 2019, and as a result, we recorded an impairment charge for the full remaining value of the asset of $77.4 million, which was recorded within a separate operating expense line item on our condensed consolidated statements of operations. The Distribution and Supply Agreement with our authorized generic partner was terminated in August 2019.

As of September 30, 2019, the weighted average remaining amortization period for our finite-lived intangible assets was approximately 8.6 years. Total amortization expense for the nine months ended September 30, 2019 and 2018 was $12.1 million and $144.7 million, respectively. Amortization expense is recorded in cost of product sales on our condensed consolidated statements of operations. We expect amortization expense related to our finite-lived intangible assets to be as follows (in thousands):

	Estimated
	Amortization
Period	Expense
Remainder of Year Ending December 31, 2019	$	5,557
Year Ending December 31, 2020	22,229
Year Ending December 31, 2021	22,229
Year Ending December 31, 2022	22,229
Year Ending December 31, 2023	22,229
Thereafter	93,104
Total	$	187,577

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Restructuring Expenses - Components of Restructuring Expenses (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended	9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Sep. 30, 2018	Jun. 30, 2019	Sep. 30, 2019	Sep. 30, 2018
Restructuring Reserve [Roll Forward]
Accrued restructuring, beginning of period	$ 1,777			$ 0	$ 0
Restructuring charges	0		$ 0	7,420	7,420	$ 0
Payments		$ (579)		(5,643)
Accrued restructuring, end of period	1,198	1,777		1,777	1,198
Workforce reduction
Restructuring Reserve [Roll Forward]
Accrued restructuring, beginning of period	1,777			0	0
Restructuring charges				7,034
Payments		(579)		(5,257)
Accrued restructuring, end of period	1,198	1,777		1,777	1,198
Contract termination
Restructuring Reserve [Roll Forward]
Accrued restructuring, beginning of period	0			0	0
Restructuring charges				229
Payments		0		(229)
Accrued restructuring, end of period	0	0		0	0
Other
Restructuring Reserve [Roll Forward]
Accrued restructuring, beginning of period	0			0	0
Restructuring charges				157
Payments		0		(157)
Accrued restructuring, end of period	$ 0	$ 0		$ 0	$ 0

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Commitments and Contingencies - Operating Leases Maturity, Before Adoption of Topic 842 (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Year Ending December 31, 2019	$ 5,119
Year Ending December 31, 2020	4,075
Year Ending December 31, 2021	1,034
Year Ending December 31, 2022	0
Year Ending December 31, 2023	0
Total	$ 10,228

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Equity-Based Compensation - Equity-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Equity-based compensation expense
Total equity-based compensation expense	$ 4,974		$ 5,051	$ 13,716	$ 14,633
Income tax effect	0		0	0	0
After-tax effect of equity-based compensation expense	4,974		5,051	13,716	14,633
Cost of product sales
Equity-based compensation expense
Total equity-based compensation expense	225		281	626	588
Research and development
Equity-based compensation expense
Total equity-based compensation expense	691		568	2,051	1,896
Selling, general and administrative
Equity-based compensation expense
Total equity-based compensation expense	$ 4,058		$ 4,202	$ 11,039	$ 12,149
Restructuring Charges
Equity-based compensation expense
Total equity-based compensation expense		$ 700

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Debt - Total Interest Expense Recognized Related to the Convertible Notes (Details) - Convertible Debt - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Debt Instrument [Line Items]
Contractual interest expense	$ 2,600	$ 2,734	$ 7,867	$ 8,202
Amortization of debt issuance costs	353	355	1,051	1,040
Amortization of debt discount	3,466	3,391	10,281	9,942
Total interest expense	$ 6,419	$ 6,480	$ 19,199	$ 19,184

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Fair Value Measurements - Contingent Consideration (Details) $ in Millions		9 Months Ended
	Jun. 06, 2013	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($)
Other
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration (minimum)			$ 0.3
Contingent consideration (up to)			$ 0.6
Contingent consideration period	10 years
Other | Measurement Input, Discount Rate | Fair Value, Recurring | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration, measurement input			0.13
Contingent Consideration
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Reduced fair value of contingent consideration liability		$ 49.2

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Discontinued Operations - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain on sale of CBR business	$ 0	$ 89,581	$ 0	$ 89,581
Transaction costs			$ 0	14,111
Discontinued Operations, Held-for-sale or Disposed of by Sale | CBR business
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Capital expenditures				1,600
Depreciation and amortization expense				8,400
Gain on sale of CBR business		$ 89,581		89,581
Transaction costs				$ 14,100

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Revenue Recognition - Remaining Performance Obligation (Details)	Sep. 30, 2019
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, period	2 years

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of assets and liabilities measured at fair value on a recurring basis

The following tables represent the fair value hierarchy as of September 30, 2019 and December 31, 2018, for those assets and liabilities that we measure at fair value on a recurring basis (in thousands):

	Fair Value Measurements at September 30, 2019 Using:
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents	$	25,047	$	25,047	$	—	$	—
Marketable securities:
Corporate debt securities	62,000		—		62,000		—
U.S. treasury and government agency securities	6,244		—		6,244		—
Certificates of deposit	3,500		—		3,500		—
Commercial paper	—		—		—		—
Total marketable securities	$	71,744	$	—	$	71,744	$	—
Total assets	$	96,791	$	25,047	$	71,744	$	—
Liabilities:
Contingent consideration - MuGard	$	293	$	—	$	—	$	293
Total liabilities	$	293	$	—	$	—	$	293

	Fair Value Measurements at December 31, 2018 Using:
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents	$	71,568	$	71,568	$	—	$	—
Corporate debt securities	113,097		—		113,097		—
U.S. treasury and government agency securities	10,323		—		10,323		—
Certificates of deposit	13,500		—		13,500		—
Commercial paper	3,995		—		3,995		—
Total assets	$	212,483	$	71,568	$	140,915	$	—
Liabilities:
Contingent consideration - MuGard	359		—		—		359
Total liabilities	$	359	$	—	$	—	$	359

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Basis of Presentation and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Schedule of customers representing greater than 10% of revenue balances

The following table sets forth customers who represented 10% or more of our total revenues for the three and nine months ended September 30, 2019 and 2018:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
McKesson Corporation	38	%	25	%	37	%	26	%
AmerisourceBergen Drug Corporation	28	%	24	%	28	%	26	%
Cardinal Health	11	%	<10%		12	%	<10%

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Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2019

Payables and Accruals [Abstract]

Schedule of accrued expenses

Accrued expenses consisted of the following as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Commercial rebates, fees and returns	$	127,138	$	80,520
Professional, license, and other fees and expenses	18,964		23,242
Salaries, bonuses, and other compensation	17,498		22,482
Research and development expense	4,020		2,226
Interest expense	3,467		1,067
Restructuring expense	1,198		—
Total accrued expenses	$	172,285	$	129,537

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Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

The following tables represent the fair value hierarchy as of September 30, 2019 and December 31, 2018, for those assets and liabilities that we measure at fair value on a recurring basis (in thousands):

	Fair Value Measurements at September 30, 2019 Using:
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents	$	25,047	$	25,047	$	—	$	—
Marketable securities:
Corporate debt securities	62,000		—		62,000		—
U.S. treasury and government agency securities	6,244		—		6,244		—
Certificates of deposit	3,500		—		3,500		—
Commercial paper	—		—		—		—
Total marketable securities	$	71,744	$	—	$	71,744	$	—
Total assets	$	96,791	$	25,047	$	71,744	$	—
Liabilities:
Contingent consideration - MuGard	$	293	$	—	$	—	$	293
Total liabilities	$	293	$	—	$	—	$	293

	Fair Value Measurements at December 31, 2018 Using:
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents	$	71,568	$	71,568	$	—	$	—
Corporate debt securities	113,097		—		113,097		—
U.S. treasury and government agency securities	10,323		—		10,323		—
Certificates of deposit	13,500		—		13,500		—
Commercial paper	3,995		—		3,995		—
Total assets	$	212,483	$	71,568	$	140,915	$	—
Liabilities:
Contingent consideration - MuGard	359		—		—		359
Total liabilities	$	359	$	—	$	—	$	359

Cash Equivalents

Our cash equivalents are classified as Level 1 assets under the fair value hierarchy as these assets have been valued using quoted market prices in active markets and do not have any restrictions on redemption. As of September 30, 2019 and December 31, 2018 cash equivalents were primarily comprised of funds in money market accounts.

Marketable Securities

Our marketable securities are classified as Level 2 assets under the fair value hierarchy as the values of these assets are primarily determined from independent pricing services, which normally derive security prices from recently reported trades for identical or similar securities, making adjustments based upon other significant observable market transactions. At the end of each reporting period, we perform quantitative and qualitative analysis of prices received from third parties to determine whether prices are reasonable estimates of fair value. After completing our analysis, we did not adjust or override any fair value

measurements provided by our pricing services as of September 30, 2019. In addition, there were no transfers or reclassifications of any securities between Level 1 and Level 2 during the nine months ended September 30, 2019.

Contingent Consideration

We recorded contingent consideration related to the November 2014 acquisition of Lumara Health Inc (“Lumara Health”) for our Makena product and related to our June 2013 license agreement for MuGard (the “MuGard License Agreement”) with Abeona Therapeutics, Inc., under which we acquired the U.S. commercial rights for the management of oral mucositis and stomatitis (the “MuGard Rights”).

During the nine months ended September 30, 2018, we reduced the fair value of our Makena-related contingent consideration liability by approximately $49.2 million based primarily on actual Makena net sales to date and our expectations for future performance, which indicated that achievement of future milestones was not probable. This adjustment was based on our estimates, which were reliant on a number of external factors as well as the exercise of judgment.

The fair value measurements of contingent consideration obligations and the related intangible assets arising from business combinations are classified as Level 3 estimates under the fair value hierarchy as these items have been valued using unobservable inputs. These inputs include: (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of the factors on which the contingency is based; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement.

The fair value of the contingent royalty payments payable by us to Abeona under the MuGard License Agreement was determined based on various market factors, including an analysis of estimated sales using a discount rate of approximately 13%. As of September 30, 2019, we estimated that the undiscounted royalty amounts we could pay under the MuGard License Agreement, based on current projections, may range from approximately $0.3 million to $0.6 million over the remainder of the ten year period, which commenced on June 6, 2013, the acquisition date, which is our best estimate of the period over which we expect the majority of the asset’s cash flows to be derived.

We believe the estimated fair value of contingent consideration obligations is based on reasonable assumptions; however, our actual results may vary significantly from the estimated results.

Debt

We estimate the fair value of our debt obligations by using quoted market prices obtained from third-party pricing services, which are classified as Level 2 inputs. As of September 30, 2019, the estimated fair value of our 2022 Convertible Notes (as defined below) was $265.6 million, which differed from its carrying value. See Note R, “Debt” for additional information on our debt obligations.

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Current Liabilities

9 Months Ended

Sep. 30, 2019

Payables and Accruals [Abstract]

Current Liabilities

CURRENT LIABILITIES

Accrued expenses consisted of the following as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Commercial rebates, fees and returns	$	127,138	$	80,520
Professional, license, and other fees and expenses	18,964		23,242
Salaries, bonuses, and other compensation	17,498		22,482
Research and development expense	4,020		2,226
Interest expense	3,467		1,067
Restructuring expense	1,198		—
Total accrued expenses	$	172,285	$	129,537

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

These condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments necessary for a fair statement of our financial position and results of operations for the interim periods presented. Such adjustments consisted only of normal recurring items. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).

In accordance with GAAP for interim financial reports and the instructions for Form 10-Q and the rules of the Securities and Exchange Commission, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. Our accounting policies are described in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018 (our “Annual Report”). Interim results are not necessarily indicative of the results of operations for the full year. These interim financial statements should be read in conjunction with our Annual Report.

In August 2018, we completed the sale of our wholly-owned subsidiary, CBR Acquisition Holdings Corp, and the Cord Blood Registry^® (“CBR”) business to GI Partners (“GI”), a private equity investment firm, pursuant to the June 14, 2018 Stock Purchase Agreement between us and affiliates of GI. As of June 30, 2018, our CBR business met the criteria for classification as a discontinued operation. All historical operating results for CBR are therefore reflected within discontinued operations in the consolidated statements of operations for the three and nine months ended September 30, 2018. For additional information, see Note C, “Discontinued Operations.”

Principles of Consolidation

Principles of Consolidation

The accompanying condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates and Assumptions

Use of Estimates and Assumptions

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. The most significant estimates and assumptions are used to determine amounts and values of, but are not limited to: revenue recognition related to product and collaboration revenue; product sales allowances and accruals; allowance for doubtful accounts; marketable securities; inventory; acquisition date fair value and subsequent fair value estimates used to assess impairment of long-lived assets, including goodwill, in-process research and development (“IPR&D”) and other intangible assets; contingent consideration; debt obligations; certain accrued liabilities, including clinical trial accruals; income taxes, inclusive of valuation allowances; and equity-based compensation expense. Actual results could differ materially from those estimates.

Concentrations and Significant Customer Information

Concentrations and Significant Customer Information

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities, and accounts receivable. We currently hold our excess cash primarily in institutional money market funds, corporate debt securities, U.S. treasury and government agency securities and certificates of deposit.Our operations are located entirely within the U.S. We focus primarily on developing, manufacturing, and commercializing our products and product candidates. We perform ongoing credit evaluations of our customers and generally do not require collateral.

We are currently dependent on a single supplier for Feraheme drug substance (produced in two separate facilities) as well as a single supplier for our Makena auto-injector product. We have been and may continue to be exposed to a significant loss of revenue from the sale of our products in the event that our suppliers and/or manufacturers are not able to fulfill demand for any reason.

Our net accounts receivable primarily represent amounts due for products sold directly to wholesalers, distributors, specialty pharmacies, and our former authorized generic partner. Accounts receivable for our products are recorded net of reserves for estimated chargeback obligations, prompt payment discounts and any allowance for doubtful accounts.

Revenue Recognition

Revenue Recognition

Product revenues

Effective January 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

a.Identify the contract(s) with a customer;

b.Identify the performance obligations in the contract;

c.Determine the transaction price;

d.Allocate the transaction price to the performance obligations in the contract; and

e.Recognize revenue when (or as) the performance obligations are satisfied.

We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, if the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Collaboration Revenues

When we enter into collaboration agreements, we assess whether the agreements fall within the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”) based on whether the arrangements involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. To the extent that the arrangement falls within the scope of ASC 808, we assess whether the payments between us and our collaboration partner fall within the scope of other accounting literature. If we conclude that payments from the collaboration partner to us represent consideration from a customer, such as license fees and contract research and development activities, we account for those payments within the scope of ASC 606. However, if we conclude that our collaboration partner is not a customer for certain activities and associated payments, such as for certain collaborative research, development, manufacturing and commercial activities, we present such payments as a reduction of research and development expense or general and administrative expense, based on where we present the related underlying expense.

Variable Consideration

Under ASC 606, we are required to make estimates of the net sales price, including estimates of variable consideration (such as rebates, chargebacks, discounts, copay assistance and other deductions), and recognize the estimated amount as revenue, when we transfer control of the product to our customers. In addition, we estimated variable consideration related to our share of net distributable profits from our former authorized generic partner, Prasco LLC (“Prasco”). We estimate variable consideration for our product revenues using an “expected value” method.

Leases

Leases

Effective January 1, 2019, we adopted ASC Topic 842, Leases (“ASC 842”), and chose to apply the provisions of ASC 842 as of the effective date with no restatement of prior periods or cumulative adjustment to retained earnings. Upon adoption, we elected to utilize the package of transition practical expedients, which allowed us to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. We also made accounting policy elections to not separate lease and non-lease components for our real estate lease and to not recognize leases with an initial term of twelve months or less within our condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis on our condensed consolidated statements of income over the lease term. We did not have any material short-term leases accounted for under this policy during the six months ended September 30, 2019.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liability, and long-term operating lease liability on our condensed consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Our incremental borrowing rate is determined based on an evaluation of our creditworthiness and the prevailing market rates for collateralized debt with maturity dates commensurate with the term of each lease. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The lease payments used to determine our ROU assets may include lease incentives, stated rent increases, and escalation clauses linked to rates of inflation when determinable and are recognized in our ROU assets on our condensed consolidated balance sheet. In addition, certain lease agreements contain lease and non-lease components. With the exception of our real estate leases, we separate lease payments for the identified assets from any non-lease payments included in the agreement. For our real estate leases, we account for the lease and non-lease components as a single lease component. Additionally, for vehicle and certain equipment leases, we apply a portfolio approach to effectively account for the related ROU assets and operating lease liabilities.

Recently Issued, Proposed and Adopted Accounting Pronouncements

RECENTLY ISSUED AND PROPOSED ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by FASB or other standard setting bodies that are adopted by us as of the specified effective date.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This standard eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods and early adoption is permitted. We are currently evaluating the impact of our adoption of ASU 2018-13 on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 will be effective for us for fiscal years beginning on or after January 1, 2020, including interim periods within those annual reporting periods and early adoption is permitted. We are currently evaluating the impact of our adoption of ASU 2016-13 on our condensed consolidated financial statements.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASC 842”). This standard requires an entity to recognize on its balance sheet assets and liabilities associated with the rights and obligations created by leases with terms greater than twelve months. We adopted the standard effective January 1, 2019. We chose to apply the provisions of ASC 842 as of the effective date with no restatement of prior periods or cumulative adjustment to retained earnings. Upon adoption, we elected to utilize the package of transition practical expedients, which allowed us to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. We also made accounting policy elections to not separate lease and non-lease components for our real estate lease and to not recognize leases with an initial term of twelve months or less within our condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis on our condensed consolidated statements of income over the lease term.

In preparation for adoption of the standard, we implemented internal controls to enable the preparation of financial information. The adoption of this standard resulted in the recognition of operating lease liabilities of $8.5 million and related ROU assets of $7.6 million on our condensed consolidated balance sheets as of January 1, 2019, but did not have an impact on our condensed consolidated statements of operations.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). This standard clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. We adopted ASU 2018-18 during the first quarter of 2019 and applied the provisions of this update retrospectively to all contracts that were not completed as of the date of our initial adoption of ASC 606. The adoption of ASU 2018-18 did not have a material impact on our financial position or results of operations.

XML

Label	Element	Value
Accounting Standards Update 2014-09 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 1,136,000
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 1,136,000

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Equity-Based Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Equity-Based Compensation

EQUITY‑BASED COMPENSATION

We currently maintain three equity compensation plans; our 2019 Equity Incentive Plan (the “2019 Plan”), which was approved by our stockholders at our 2019 annual meeting and replaced our Fourth Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”), the Lumara Health Inc. Amended and Restated 2013 Incentive Compensation Plan (the “Lumara Health 2013 Plan”) and our 2015 Employee Stock Purchase Plan (“2015 ESPP”). All outstanding stock options granted under each of our equity compensation plans other than our 2015 ESPP have an exercise price equal to the closing price of a share of our common stock on the grant date.

Stock Options

The following table summarizes stock option activity for the nine months ended September 30, 2019:

	2019 Equity	2007 Equity		2013 Lumara		Inducement
	Plan	Plan		Equity Plan		Grants		Total
Outstanding at December 31, 2018	—	2,781,786		124,450		810,343		3,716,579
Granted	344,208	465,009		34,700		80,366		924,283
Exercised	—	(2,025	)	—		—		(2,025	)
Expired or terminated	—	(585,312	)	(26,275	)	(131,250	)	(742,837	)
Outstanding at September 30, 2019	344,208	2,659,458		132,875		759,459		3,896,000

Restricted Stock Units

The following table summarizes RSU activity for the nine months ended September 30, 2019:

	2019 Equity		2007 Equity		2013 Lumara		Inducement
	Plan		Plan		Equity Plan		Grants		Total
Outstanding at December 31, 2018	—		1,041,141		2,101		85,293		1,128,535
Granted	123,228		1,023,847		1,100		29,385		1,177,560
Vested	—		(354,563	)	(1,034	)	(44,909	)	(400,506	)
Expired or terminated	(1,800	)	(250,968	)	—		(7,500	)	(260,268	)
Outstanding at September 30, 2019	121,428		1,459,457		2,167		62,269		1,645,321

In February 2019, we granted RSUs under our 2007 Plan to certain members of our senior management covering a maximum of 365,591 shares of common stock. These performance-based RSUs will vest, if at all, on February 24, 2022, based on our total shareholder return performance measured against the median total shareholder return of a defined group of companies over a three-year period. As of September 30, 2019, the maximum shares of common stock that may be issued under these awards is 347,591. The maximum aggregate total fair value of these RSUs is $4.5 million, which is being recognized as expense over a period of three years from the date of grant, net of any actual forfeitures.

Equity-Based Compensation Expense

Equity-based compensation expense for the three and nine months ended September 30, 2019 and 2018 consisted of the following (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Cost of product sales	$	225	$	281	$	626	$	588
Research and development	691		568		2,051		1,896
Selling, general and administrative	4,058		4,202		11,039		12,149
Total equity-based compensation expense	4,974		5,051		13,716		14,633
Income tax effect	—		—		—		—
After-tax effect of equity-based compensation expense	$	4,974	$	5,051	$	13,716	$	14,633

In addition to the equity-based compensation expense presented in the table above, we incurred $0.7 million of equity-based compensation expense related to the restructuring activities during the first quarter of 2019, which is classified within restructuring expense on our condensed consolidated statement of operations for the nine months ended September 30, 2019.

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Debt

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Debt

DEBT

Our outstanding debt obligations as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30, 2019		December 31, 2018
2022 Convertible Notes	$	273,124	$	261,933
2019 Convertible Notes	—		21,276
Total long-term debt	273,124		283,209
Less: current maturities	—		21,276
Long-term debt, net of current maturities	$	273,124	$	261,933

 

Convertible Notes

The outstanding balance of our 2022 Convertible Notes as of September 30, 2019 consisted of the following (in thousands):

	2022 Convertible Notes
Liability component:
Principal	$	320,000
Less: debt discount and issuance costs, net	46,876
Net carrying amount	$	273,124
Gross equity component	$	72,576

In accordance with accounting guidance for debt with conversion and other options, we separately account for the liability and equity components of our 2022 Convertible Notes by allocating the proceeds between the liability component and the embedded conversion option (the “Equity Component”) due to our ability to settle the 2022 Convertible Notes in cash, common stock or a combination of cash and common stock, at our option. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation was performed in a manner that reflected our non-convertible debt borrowing rate for similar debt. The Equity Component of the 2022 Convertible Notes was recognized as a debt discount and represents the difference between the proceeds from the issuance of the 2022 Convertible Notes and the fair value of the liability of the 2022 Convertible Notes on the date of issuance. The excess of the principal amount of the liability component over its carrying amount is amortized to interest expense using the effective interest method over five years. The Equity Component is not remeasured as long as it continues to meet the conditions for equity classification.

2022 Convertible Notes

In the second quarter of 2017, we issued $320.0 million aggregate principal amount of convertible senior notes due in 2022 (the “2022 Convertible Notes”) and received net proceeds of $310.4 million from the sale of the 2022 Convertible Notes, after deducting fees and expenses of $9.6 million. The approximate $9.6 million of debt issuance costs primarily consisted of underwriting, legal and other professional fees, and we allocated these costs to the liability and equity components based on the allocation of the proceeds. Of the total $9.6 million of debt issuance costs, $2.2 million was allocated to the Equity Component and recorded as a reduction to additional paid-in capital and $7.4 million was allocated to the liability component and is now recorded as a reduction of the 2022 Convertible Notes on our condensed consolidated balance sheets. The portion allocated to the liability component is amortized to interest expense using the effective interest method over five years.

The 2022 Convertible Notes are governed by the terms of an indenture between us, as issuer, and Wilmington Trust, National Association, as the trustee. The 2022 Convertible Notes are senior unsecured obligations and bear interest at a rate of 3.25% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2017. The 2022 Convertible Notes will mature on June 1, 2022, unless earlier repurchased or converted. Upon conversion of the 2022 Convertible Notes, such 2022 Convertible Notes will be convertible into, at our election, cash, shares of our common stock, or a combination thereof, at a conversion rate of 36.5464 shares of common stock per $1,000 principal amount of the 2022 Convertible Notes, which corresponds to an initial conversion price of approximately $27.36 per share of our common stock.

The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of stock dividends and payment of cash dividends. At any time prior to the close of business on the business day immediately preceding March 1, 2022, holders may convert their 2022 Convertible Notes at their option only under the following circumstances:

1) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the 2022 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or

3) upon the occurrence of specified corporate events.

On or after March 1, 2022, until the close of business on the business day immediately preceding the maturity date, holders may convert all or any portion of their 2022 Convertible Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. The 2022 Convertible Notes were not convertible as of September 30, 2019.

We determined the expected life of the debt was equal to the five-year term on the 2022 Convertible Notes. The effective interest rate on the liability component was 9.49% for the period from the date of issuance through September 30, 2019. As of September 30, 2019, the “if-converted value” did not exceed the remaining principal amount of the 2022 Convertible Notes.

2019 Convertible Notes

In February 2014, we issued $200.0 million aggregate principal amount of the 2019 Convertible Notes. During 2017, we entered into privately negotiated transactions with certain investors to repurchase approximately $178.5 million aggregate principal amount of the 2019 Convertible Notes for an aggregate repurchase price of approximately $192.7 million, including accrued interest. The remaining $21.4 million of 2019 Convertible Notes matured on February 15, 2019 and were settled with cash.

Convertible Notes Interest Expense

The following table sets forth total interest expense recognized related to the Convertible Notes during the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Contractual interest expense	$	2,600	$	2,734	$	7,867	$	8,202
Amortization of debt issuance costs	353		355		1,051		1,040
Amortization of debt discount	3,466		3,391		10,281		9,942
Total interest expense	$	6,419	$	6,480	$	19,199	$	19,184

Convertible Bond Hedge and Warrant Transactions

In February 2014, we entered into convertible bond hedge transactions and separate warrant transactions of our common stock underlying the aggregate principal amount of the 2019 Convertible Notes with certain financial institutions (the “call spread counterparties”). In connection with the 2017 repurchases of the 2019 Convertible Notes, as discussed above, we entered into agreements with the call spread counterparties to terminate a portion of the then existing convertible bond hedge transactions in an amount corresponding to the amount of such 2019 Convertible Notes repurchased and to terminate a portion of the then-existing warrant transactions. In February 2019, the 2019 Convertible Notes matured and were settled with cash and the remaining bond hedge and warrant transactions expired.

2023 Senior Notes

In August 2015, we completed a private placement of $500.0 million aggregate principal amount of 7.875% Senior Notes due 2023 (the “2023 Senior Notes”). The 2023 Senior Notes were issued pursuant to an Indenture, dated as of August 17, 2015 (the “Indenture”), by and among us, certain of our subsidiaries acting as guarantors of the 2023 Senior Notes and Wilmington Trust, National Association, as trustee. In October 2017, we repurchased $25.0 million of the 2023 Senior Notes in a privately negotiated transaction, resulting in a loss on extinguishment of debt of $1.1 million. In September 2018, we repurchased the remaining $475.0 million of the 2023 Senior Notes at a premium of $28.1 million using the proceeds from the CBR sale, which resulted in a loss on extinguishment of debt of $35.9 million, inclusive of the premium paid.

Future Payments

Future annual principal payments on our long-term debt as of September 30, 2019 were as follows (in thousands):

Period	Future Annual Principal Payments
Remainder of Year Ending December 31, 2019	$	—
Year Ending December 31, 2020	—
Year Ending December 31, 2021	—
Year Ending December 31, 2022	320,000
Year Ending December 31, 2023	—
Thereafter	—
Total	$	320,000

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Goodwill and Intangible Assets, Net - Schedule of Intangible Assets (Details) - USD ($)	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018
Finite-lived intangible assets:
Finite-lived intangible assets, cost	$ 1,013,855,000		$ 953,855,000
Finite-lived intangible assets, accumulated amortization	429,674,000		417,576,000
Finite-lived intangible assets, cumulative impairments	396,604,000		319,246,000
Total	187,577,000		217,033,000
Makena base technology | Developed Technology Rights
Finite-lived intangible assets:
Finite-lived intangible assets, cost	797,100,000		797,100,000
Finite-lived intangible assets, accumulated amortization	400,496,000		400,495,000
Finite-lived intangible assets, cumulative impairments	396,604,000		319,246,000
Total	0	$ 0	77,359,000
Makena auto-injector developed technology | Developed Technology Rights
Finite-lived intangible assets:
Finite-lived intangible assets, cost	79,100,000		79,100,000
Finite-lived intangible assets, accumulated amortization	13,716,000		6,952,000
Finite-lived intangible assets, cumulative impairments	0		0
Total	65,384,000		72,148,000
Intrarosa developed technology | Developed Technology Rights
Finite-lived intangible assets:
Finite-lived intangible assets, cost	77,655,000		77,655,000
Finite-lived intangible assets, accumulated amortization	15,193,000		10,129,000
Finite-lived intangible assets, cumulative impairments	0		0
Total	62,462,000		67,526,000
Vyleesi developed technology | Developed Technology Rights
Finite-lived intangible assets:
Finite-lived intangible assets, cost	60,000,000		0
Finite-lived intangible assets, accumulated amortization	269,000		0
Finite-lived intangible assets, cumulative impairments	0		0
Total	$ 59,731,000		$ 0

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Income Taxes - Schedule of Effective Income Tax Rate and Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Effective tax rate	(1.00%)	4.00%	0.00%	(40.00%)
Income tax expense (benefit)	$ 232	$ (2,352)	$ (26)	$ 42,204

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues:
Revenues	$ 84,131	$ 122,238	$ 238,043	$ 385,881
Costs and expenses:
Cost of product sales	21,105	46,489	63,871	187,176
Research and development expenses	15,330	10,133	48,377	32,635
Acquired in-process research and development	0	12,500	74,856	32,500
Selling, general and administrative expenses	65,720	72,451	217,727	161,780
Impairment of intangible assets	0	0	77,358	0
Restructuring expenses	0	0	7,420	0
Total costs and expenses	102,155	141,573	489,609	414,091
Operating loss	(18,024)	(19,335)	(251,566)	(28,210)
Other income (expense):
Interest expense	(6,419)	(13,366)	(19,199)	(45,400)
Loss on debt extinguishment	0	(35,922)	0	(35,922)
Interest and dividend income	840	1,612	3,650	3,207
Gains on marketable securities, net	263	0	263	0
Other income (expense)	(45)	(19)	298	(63)
Total other expense, net	(5,361)	(47,695)	(14,988)	(78,178)
Loss from continuing operations before income taxes	(23,385)	(67,030)	(266,554)	(106,388)
Income tax expense (benefit)	232	(2,352)	(26)	42,204
Net loss from continuing operations	(23,617)	(64,678)	(266,528)	(148,592)
Discontinued operations:
Income from discontinued operations	0	5,838	0	18,873
Gain on sale of CBR business	0	89,581	0	89,581
Income tax (benefit) expense	0	(98)	0	3,346
Net income from discontinued operations	0	95,517	0	105,108
Net (loss) income	$ (23,617)	$ 30,839	$ (266,528)	$ (43,484)
Basic and diluted net (loss) income per share:
Loss from continuing operations (in dollars per share)	$ (0.70)	$ (1.88)	$ (7.83)	$ (4.33)
Income from discontinued operations (in dollars per share)	0	2.77	0	3.06
Basic and diluted net (loss) income per share (in dollars per share)	$ (0.70)	$ 0.89	$ (7.83)	$ (1.27)
Weighted average shares outstanding used to compute net (loss) per share (basic and diluted) (in shares)	33,906	34,492	34,058	34,339
Product Sales
Revenues:
Revenues	$ 84,107	$ 122,238	$ 237,812	$ 385,806
Other revenues
Revenues:
Revenues	$ 24	$ 0	$ 231	$ 75

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Description of Business

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business

DESCRIPTION OF BUSINESS

AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a pharmaceutical company focused on bringing innovative products to patients with unmet medical needs by leveraging our development and commercial expertise to invest in and grow our pharmaceutical products across a range of therapeutic areas. Our currently marketed products support the health of patients in the areas of maternal and women’s health, anemia management and cancer supportive care, including Feraheme^® (ferumoxytol injection) for intravenous use, Makena^® (hydroxyprogesterone caproate injection) auto-injector, Intrarosa^® (prasterone) vaginal inserts and MuGard^® Mucoadhesive Oral Wound Rinse. On June 21, 2019, Vyleesi™ (bremelanotide injection) was approved by the U.S. Food and Drug Administration (the “FDA”) for the treatment of acquired, generalized hypoactive sexual desire disorder (“HSDD”) in premenopausal women and became commercially available in September 2019. In addition to our approved products, our portfolio includes two product candidates, AMAG-423 (digoxin immune fab (ovine)), which is being studied for the treatment of severe preeclampsia, and ciraparantag, which is being studied as an anticoagulant reversal agent.

In January 2019, we acquired Perosphere Pharmaceuticals Inc. (“Perosphere”) through the merger of our wholly-owned subsidiary, Magellan Merger Sub, Inc., a Delaware corporation, with and into Perosphere, with Perosphere continuing as the surviving entity and our wholly-owned subsidiary (the “Merger”). As a result of the acquisition of Perosphere, we acquired the global rights to ciraparantag, an anticoagulant reversal agent, which is being investigated for patients treated with novel oral anticoagulants or low molecular weight heparin when reversal of the anticoagulant effect of these products is needed for emergency surgery, urgent procedures or due to life-threatening or uncontrolled bleeding. See Note Q, “Acquisitions, Collaboration, License and Other Strategic Agreements” for further details on the Perosphere acquisition.

Throughout this Quarterly Report on Form 10-Q, AMAG Pharmaceuticals, Inc. and our consolidated subsidiaries are collectively referred to as “the Company,” “AMAG,” “we,” “us,” or “our.”

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Acquisitions, Collaboration, License and Other Strategic Agreements (Tables)

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of assets acquired and liabilities assumed related to the asset acquisition

A summary of the assets and liabilities acquired in exchange for cash consideration of $60.8 million and $10.0 million that was deemed paid in connection with the cancellation of the convertible note, described above, is presented in the following table (in millions):

Assets:
Cash	$	2.6
Operating lease right-of-use asset	0.8
Property and equipment	1.4
IPR&D	74.9
	$	79.7
Liabilities:
Accrued severance liabilities	$	(1.7	)
Deferred revenue	(6.4		)
Operating lease liability	(0.8		)
	$	(8.9	)

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Schedule of changes in accumulated other comprehensive loss

The following table summarizes the changes in the accumulated balances of other comprehensive loss during the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Beginning balance	$	(3,032	)	$	(4,295	)	$	(3,985	)	$	(3,908	)
Holding (losses) gains associated with marketable securities arising during period, net of tax	(167		)	134			786			(253		)
Ending balance	$	(3,199	)	$	(4,161	)	$	(3,199	)	$	(4,161	)

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Basis of Presentation and Summary of Significant Accounting Policies - Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Restricted cash	$ 495	$ 495

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Revenue Recognition - Total Gross Product (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Provision for product sales allowances and accruals:
Revenues	$ 84,131	$ 122,238	$ 238,043	$ 385,881
Product Revenue
Disaggregation of Revenue [Line Items]
Gross product sales	254,073	238,856	704,976	776,458
Provision for product sales allowances and accruals:
Contractual adjustments	144,108	93,213	381,633	290,896
Governmental rebates	25,858	23,405	85,531	99,756
Total	169,966	116,618	467,164	390,652
Revenues	$ 84,107	$ 122,238	$ 237,812	$ 385,806

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Marketable Securities (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Short-term marketable securities:
Amortized Cost	$ 51,343,000		$ 51,343,000		$ 74,826,000
Gross Unrealized Gains	130,000		130,000		0
Gross Unrealized Losses	(12,000)		(12,000)		(270,000)
Estimated Fair Value	51,461,000		51,461,000		74,556,000
Long-term marketable securities:
Amortized Cost	20,076,000		20,076,000		66,772,000
Gross Unrealized Gains	207,000		207,000		52,000
Gross Unrealized Losses	0		0		(465,000)
Estimated Fair Value	20,283,000		20,283,000		66,359,000
Amortized Cost	71,419,000		71,419,000		141,598,000
Gross Unrealized Gains	337,000		337,000		52,000
Gross Unrealized Losses	(12,000)		(12,000)		(735,000)
Estimated Fair Value	71,744,000		71,744,000		140,915,000
Other-than-temporary impairment losses	0	$ 0	0	$ 0
Corporate debt securities
Short-term marketable securities:
Amortized Cost	41,596,000		41,596,000		51,184,000
Gross Unrealized Gains	130,000		130,000		0
Gross Unrealized Losses	(9,000)		(9,000)		(236,000)
Estimated Fair Value	41,717,000		41,717,000		50,948,000
Long-term marketable securities:
Amortized Cost	20,076,000		20,076,000		62,530,000
Gross Unrealized Gains	207,000		207,000		52,000
Gross Unrealized Losses	0		0		(433,000)
Estimated Fair Value	20,283,000		20,283,000		62,149,000
Certificates of deposit
Short-term marketable securities:
Amortized Cost	3,500,000		3,500,000		12,000,000
Gross Unrealized Gains	0		0		0
Gross Unrealized Losses	0		0		0
Estimated Fair Value	3,500,000		3,500,000		12,000,000
Long-term marketable securities:
Amortized Cost					1,500,000
Gross Unrealized Gains					0
Gross Unrealized Losses					0
Estimated Fair Value					1,500,000
U.S. treasury and government agency securities
Short-term marketable securities:
Amortized Cost	6,247,000		6,247,000		7,647,000
Gross Unrealized Gains	0		0		0
Gross Unrealized Losses	(3,000)		(3,000)		(34,000)
Estimated Fair Value	6,244,000		6,244,000		7,613,000
Long-term marketable securities:
Amortized Cost					2,742,000
Gross Unrealized Gains					0
Gross Unrealized Losses					(32,000)
Estimated Fair Value					2,710,000
Commercial paper
Short-term marketable securities:
Amortized Cost	0		0		3,995,000
Gross Unrealized Gains	0		0		0
Gross Unrealized Losses	0		0		0
Estimated Fair Value	$ 0		$ 0		$ 3,995,000

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Acquisitions, Collaboration, License and Other Strategic Agreements - Assets Acquired and Liabilities Assumed Related to the Business Combination (Details) - Perosphere Pharmaceuticals Inc. $ in Millions	Jan. 16, 2019 USD ($)
Assets:
Cash	$ 2.6
Operating lease right-of-use asset	0.8
Property and equipment	1.4
IPR&D	74.9
Total Assets	79.7
Liabilities:
Accrued severance liabilities	(1.7)
Deferred revenue	(6.4)
Operating lease liability	(0.8)
Total Liabilities	$ (8.9)

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Debt - Future Payments (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Debt Disclosure [Abstract]
Remainder of Year Ending December 31, 2019	$ 0
Year Ending December 31, 2020	0
Year Ending December 31, 2021	0
Year Ending December 31, 2022	320,000
Year Ending December 31, 2023	0
Thereafter	0
Total	$ 320,000

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Commitments and Contingencies (Details) - USD ($) $ in Thousands		1 Months Ended				3 Months Ended	9 Months Ended		59 Months Ended
	Sep. 25, 2019	Jan. 31, 2019	Sep. 30, 2018	Feb. 28, 2017	Jan. 31, 2017	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Jan. 01, 2019	Jun. 30, 2018	Nov. 30, 2014
Commitments
Operating lease, liability						$ 7,338	$ 7,338		$ 7,338
Operating lease, right-of-use asset						$ 6,642	$ 6,642		$ 6,642
Weighted average remaining operating lease term						2 years 1 month 6 days	2 years 1 month 6 days		2 years 1 month 6 days
Weighted average operating lease discount rate						4.63%	4.63%		4.63%
Lease cost						$ 1,400	$ 3,900
Operating cash outflows from operating leases							4,200
Right-of-use asset obtained in exchange for lease obligations							1,000
Minimum purchase commitments						50,500	50,500		$ 50,500
Contingent consideration paid							$ 50	$ 87
Amount of damages sought after by plaintiff	$ 50,000
Velo Bio, LLC | Regulatory Milestone Achievement
Commitments
Milestone payments			$ 5,000					5,000
Velo Bio, LLC | Regulatory Milestone Achievement, U.S.Food And Drug Administration Approval
Commitments
Milestone payments			30,000					30,000
Velo Bio, LLC | Annual Sales Milestone Achievements
Commitments
Milestone payments			240,000					240,000
Velo Bio, LLC | Commercial Milestone Payments
Commitments
Milestone payments			10,000					$ 10,000
Endoceutics, Inc. | Intrarosa | First Sales Milestone Achievement
Commitments
Potential milestone payment, triggering event, sales				$ 150,000
Future contingent payments (up to)				15,000
Endoceutics, Inc. | Intrarosa | Second Sales Milestone Achievement
Commitments
Potential milestone payment, triggering event, sales				300,000
Future contingent payments (up to)				30,000
Endoceutics, Inc. | Intrarosa | Third Sales Milestone Achievement
Commitments
Potential milestone payment, triggering event, sales				500,000
Future contingent payments (up to)				850,000
Endoceutics, Inc. | Intrarosa | Tiered Royalties
Commitments
Potential milestone payment, triggering event, sales				$ 150,000
Royalty percentage, maximum				25.00%
Net sales threshold, future contingent payments				$ 1,000,000
Period after first commercial sale				10 years
Palatin Technologies, Inc. | Vyleesi Products | First Sales Milestone Achievement
Commitments
Potential milestone payment, triggering event, sales					$ 250,000
Future contingent payments (up to)					25,000
Palatin Technologies, Inc. | Vyleesi Products | Regulatory Milestone Achievement, U.S.Food And Drug Administration Approval
Commitments
Future contingent payments (up to)					$ 60,000
Palatin Technologies, Inc. | Vyleesi Products | Tiered Royalties
Commitments
Period after first commercial sale					10 years
Palatin Technologies, Inc. | Vyleesi Products | Achievement of Certain Annual Sales Milestones over Course of License Agreement
Commitments
Future contingent payments (up to)					$ 300,000
Minimum
Commitments
Remaining operating lease term							1 year
Minimum | Velo Bio, LLC | Annual Sales Milestone Achievements
Commitments
Sales milestone targets			300,000
Maximum
Commitments
Remaining operating lease term							4 years
Maximum | Velo Bio, LLC | Annual Sales Milestone Achievements
Commitments
Sales milestone targets			$ 900,000
Lumara Health Inc.
Commitments
Contingent consideration (up to)												$ 350,000
Business acquisition, contingent consideration, liability											$ 50,000
Lumara Health Inc. | Annual Net Sales Milestone
Commitments
Contingent consideration paid									150,000
Accounting Standards Update 2016-02
Commitments
Operating lease, liability						7,300	$ 7,300		7,300	$ 8,500
Operating lease, right-of-use asset						$ 6,600	$ 6,600		$ 6,600	$ 7,600
Perosphere Pharmaceuticals Inc.
Commitments
Contingent consideration (up to)		$ 365,000
Perosphere Pharmaceuticals Inc. | Regulatory Milestone Achievement
Commitments
Contingent consideration (up to)		$ 140,000
Credited percentage		50.00%
Perosphere Pharmaceuticals Inc. | Milestone Achievement, Approval By European Medicines Agency
Commitments
Contingent consideration (up to)		$ 40,000
Perosphere Pharmaceuticals Inc. | Sales Milestones Achievement
Commitments
Contingent consideration (up to)		225,000
Perosphere Pharmaceuticals Inc. | First Sales Milestone Achievement
Commitments
Contingent consideration, milestone payment		20,000
Potential milestone payment, triggering event, sales		$ 100,000

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Basic and Diluted Earnings per Share
Net loss from continuing operations	$ (23,617)	$ (64,678)	$ (266,528)	$ (148,592)
Net income from discontinued operations	0	95,517	0	105,108
Net (loss) income	$ (23,617)	$ 30,839	$ (266,528)	$ (43,484)
Weighted average common shares outstanding (in shares)	33,906	34,492	34,058	34,339
Basic and diluted net (loss) income per share:
Loss from continuing operations (in dollars per share)	$ (0.70)	$ (1.88)	$ (7.83)	$ (4.33)
Income from discontinued operations (in dollars per share)	0	2.77	0	3.06
Basic and diluted net (loss) income per share (in dollars per share)	$ (0.70)	$ 0.89	$ (7.83)	$ (1.27)
Anti-dilutive securities (in shares)			17,328	18,328
Options to purchase shares of common stock
Basic and diluted net (loss) income per share:
Anti-dilutive securities (in shares)			3,988	3,700
Shares of common stock issuable upon the vesting of RSUs
Basic and diluted net (loss) income per share:
Anti-dilutive securities (in shares)			1,645	1,135
Warrants
Basic and diluted net (loss) income per share:
Anti-dilutive securities (in shares)			0	1,008
2022 Convertible Notes | Convertible Debt Securities
Basic and diluted net (loss) income per share:
Anti-dilutive securities (in shares)			11,695	11,695
2019 Convertible Notes | Convertible Debt Securities
Basic and diluted net (loss) income per share:
Anti-dilutive securities (in shares)			0	790

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Debt - Outstanding Convertible Note Balances (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Liability component:
Principal	$ 320,000
Long-term debt	273,124	$ 283,209
Convertible Debt | 2022 Convertible Notes
Liability component:
Principal	320,000
Less: debt discount and issuance costs, net	46,876
Long-term debt	273,124	$ 261,933
Gross equity component	$ 72,576

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Revenue Recognition

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue Recognition

REVENUE RECOGNITION

Our major sources of revenue during the reporting periods were product revenues from Makena, Feraheme, and Intrarosa.

Product Revenue and Allowances and Accruals

The following table provides information about disaggregated revenue by products for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Product sales, net
Feraheme	$	44,205	$	36,963	$	126,294	$	99,796
Makena	34,272		80,221		96,464		275,377
Intrarosa	5,607		4,925		14,898		10,331
Other	23		129		156		302
Total product sales, net	$	84,107	$	122,238	$	237,812	$	385,806

Total gross product sales were offset by product sales allowances and accruals for the three and nine months ended September 30, 2019 and 2018 as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Gross product sales	$	254,073	$	238,856	$	704,976	$	776,458
Provision for product sales allowances and accruals:
Contractual adjustments	144,108		93,213		381,633		290,896
Governmental rebates	25,858		23,405		85,531		99,756
Total	169,966		116,618		467,164		390,652
Product sales, net	$	84,107	$	122,238	$	237,812	$	385,806

The following table summarizes the product revenue allowance and accrual activity for the three and nine months ended September 30, 2019 (in thousands):

	Contractual			Governmental
	Adjustments			Rebates			Total
Balance at December 31, 2018	$	57,199		$	29,114		$	86,313
Provisions related to current period sales	233,305			44,539			277,844
Adjustments related to prior period sales	4,200			15,134			19,334
Payments/returns relating to current period sales	(176,392		)	(11,909		)	(188,301		)
Payments/returns relating to prior period sales	(40,538		)	(36,362		)	(76,900		)
Balance at June 30, 2019	$	77,774		$	40,516		$	118,290
Provisions related to current period sales	139,697			27,296			166,993
Adjustments related to prior period sales	4,475			(1,438		)	3,037
Payments/returns relating to current period sales	(117,780		)	(4,899		)	(122,679		)
Payments/returns relating to prior period sales	(20,239		)	(2,611		)	(22,850		)
Balance at September 30, 2019	$	83,927		$	58,864		$	142,791

We receive payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional.

During the three and nine months ended September 30, 2019, we recorded adjustments of $(1.4) million and $13.7 million, respectively, for Medicaid rebates received that related to prior period sales and $4.5 million and $8.7 million, respectively, for contractual adjustments related to prior period sales. We concluded that these adjustments represented changes in estimate during the three and nine months ended September 30, 2019 due to higher Medicaid and payer utilization and subsequent rebate obligations than anticipated based on our historical experience.

Variable Consideration

Under ASC 606, we are required to make estimates of the net sales price, including estimates of variable consideration (such as rebates, chargebacks, discounts, copay assistance and other deductions), and recognize the estimated amount as revenue, when we transfer control of the product to our customers. In addition, we estimated variable consideration related to our share of net distributable profits from our former authorized generic partner, Prasco LLC (“Prasco”). We estimate variable consideration for our product revenues using an “expected value” method. No amounts recognized as part of our product revenues were constrained as of September 30, 2019.

Collaboration Revenue

During the first quarter of 2019, in conjunction with the Perosphere transaction, we assumed responsibility for a clinical trial collaboration agreement with a pharmaceutical company. This agreement provides for milestone payments to us, provided we meet certain clinical obligations in connection with our ciraparantag program. We also acquired $6.4 million of deferred revenue related to this agreement, which represents the fair value of upfront milestone payments received by Perosphere under this agreement prior to acquisition. During the quarter ended September 30, 2019, we were informed by the pharmaceutical

company of its intention to terminate the clinical trial collaboration agreement. Although we do not believe this company has grounds for termination, we are engaged in discussions with such partner to come to a mutually agreeable resolution.

In accordance with ASC 808, we considered the nature and contractual terms of the arrangement and the nature of our business operations to determine the classification of payments under this agreement and concluded that the pharmaceutical company meets the definition of a customer. As a result, this agreement was accounted for under ASC 606. We determined that the promises to perform various research and development activities related to our ciraparantag program are not distinct because they are all necessary and highly interdependent with one another for the purpose of pursuing regulatory approval of ciraparantag. As such, these promises are combined into a single performance obligation, which is the submission for regulatory approval of ciraparantag in the U.S. and the European Union.

In order to evaluate the appropriate transaction price, we considered that the remaining $34.8 million of potential milestone payments relate to activities which cannot progress until FDA clearance is received for a device needed to conduct the future clinical trials. As a result, these amounts were excluded from the transaction price and fully constrained based on the probability of achievement, which is outside of our control. In addition, as of September 30, 2019, the transaction price is limited to the $6.3 million of deferred revenue acquired. We will reevaluate the transaction price, including all constrained amounts, at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust our estimate of the transaction price.

We will recognize revenue based on the transaction price determined at the end of each reporting period based on an input method in the form of research effort relative to expected research effort at the completion of the performance obligation. This is based on the relative costs of the research and development activities incurred and expected to be incurred in the future to satisfy the performance obligation, which is estimated to be completed over approximately two years. The estimated period of performance to satisfy the performance obligation and project cost is reviewed quarterly and adjusted, as needed, to reflect our current expectations regarding the costs and timing of the deliverable and will be updated in the event the agreement is terminated. These estimates are subject to a number of assumptions and actual results could differ materially from our assumptions in future periods.

As of September 30, 2019, deferred revenue related to the agreement amounted to $6.3 million, of which $1.1 million was included in current liabilities. No milestone payments were received during the nine months ended September 30, 2019.

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Property and Equipment, Net

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019			December 31, 2018
Computer equipment and software	$	1,672		$	1,637
Furniture and fixtures	1,705			1,737
Leasehold improvements	4,859			2,938
Laboratory and production equipment	6,538			6,000
Construction in progress	125			420
	14,899			12,732
Less: accumulated depreciation	(6,987		)	(5,211		)
Property and equipment, net	$	7,912		$	7,521

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Accumulated Other Comprehensive Loss

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in the accumulated balances of other comprehensive loss during the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Beginning balance	$	(3,032	)	$	(4,295	)	$	(3,985	)	$	(3,908	)
Holding (losses) gains associated with marketable securities arising during period, net of tax	(167		)	134			786			(253		)
Ending balance	$	(3,199	)	$	(4,161	)	$	(3,199	)	$	(4,161	)

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Property and Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Schedule of property and equipment, net

Property and equipment, net consisted of the following as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019			December 31, 2018
Computer equipment and software	$	1,672		$	1,637
Furniture and fixtures	1,705			1,737
Leasehold improvements	4,859			2,938
Laboratory and production equipment	6,538			6,000
Construction in progress	125			420
	14,899			12,732
Less: accumulated depreciation	(6,987		)	(5,211		)
Property and equipment, net	$	7,912		$	7,521

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Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Disaggregated revenue

The following table provides information about disaggregated revenue by products for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Product sales, net
Feraheme	$	44,205	$	36,963	$	126,294	$	99,796
Makena	34,272		80,221		96,464		275,377
Intrarosa	5,607		4,925		14,898		10,331
Other	23		129		156		302
Total product sales, net	$	84,107	$	122,238	$	237,812	$	385,806

Total gross product sales were offset by product sales allowances and accruals for the three and nine months ended September 30, 2019 and 2018 as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Gross product sales	$	254,073	$	238,856	$	704,976	$	776,458
Provision for product sales allowances and accruals:
Contractual adjustments	144,108		93,213		381,633		290,896
Governmental rebates	25,858		23,405		85,531		99,756
Total	169,966		116,618		467,164		390,652
Product sales, net	$	84,107	$	122,238	$	237,812	$	385,806

Product revenue allowance and accrual activity

The following table summarizes the product revenue allowance and accrual activity for the three and nine months ended September 30, 2019 (in thousands):

	Contractual			Governmental
	Adjustments			Rebates			Total
Balance at December 31, 2018	$	57,199		$	29,114		$	86,313
Provisions related to current period sales	233,305			44,539			277,844
Adjustments related to prior period sales	4,200			15,134			19,334
Payments/returns relating to current period sales	(176,392		)	(11,909		)	(188,301		)
Payments/returns relating to prior period sales	(40,538		)	(36,362		)	(76,900		)
Balance at June 30, 2019	$	77,774		$	40,516		$	118,290
Provisions related to current period sales	139,697			27,296			166,993
Adjustments related to prior period sales	4,475			(1,438		)	3,037
Payments/returns relating to current period sales	(117,780		)	(4,899		)	(122,679		)
Payments/returns relating to prior period sales	(20,239		)	(2,611		)	(22,850		)
Balance at September 30, 2019	$	83,927		$	58,864		$	142,791

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Commitments

Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business. These include commitments related to our facility, vehicle and equipment leases, purchases of inventory, debt obligations, and other purchase obligations.

Operating Lease Obligations

As of January 1, 2019, we had operating leases for our corporate headquarters and vehicles utilized by sales employees. Accordingly, we recorded operating lease liabilities of $8.5 million and related ROU assets of $7.6 million as of January 1, 2019 in connection with our adoption of ASC 842. During the first quarter of 2019, we acquired a lease for office space in conjunction with the Perosphere transaction, entered into a new lease for office equipment and terminated certain vehicle leases in conjunction with our restructuring activities. There was no material gain or loss recognized on the early termination of the vehicle leases. As of September 30, 2019, we had operating lease liabilities of $7.3 million and related ROU assets of $6.6 million. As of September 30, 2019, our leases have remaining terms of one to four years. The weighted average remaining lease term and discount rate for our operating leases was 2.1 years and 4.63% at September 30, 2019, respectively.

Lease costs for our operating leases were $1.4 million and $3.9 million for the three and nine months ended September 30, 2019, respectively. Operating cash outflows for operating leases were $4.2 million for the nine months ended September 30, 2019 and ROU assets obtained in exchange for lease obligations were $1.0 million during the nine months ended September 30, 2019.

Future minimum payments under our non-cancelable operating leases as of September 30, 2019 are as follows (in thousands):

Period	Future Minimum Lease Payments
Remainder of Year Ending December 31, 2019	$	1,073
Year Ending December 31, 2020	4,081
Year Ending December 31, 2021	1,881
Year Ending December 31, 2022	583
Year Ending December 31, 2023	53
Thereafter	—
Total	$	7,671
Less: Interest	333
Operating lease liability	$	7,338

Under the prior lease guidance, future minimum payments under our non-cancellable leases as of December 31, 2018 were as follows (in thousands):

Period	Future Minimum Lease Payments
Year Ending December 31, 2019	$	5,119
Year Ending December 31, 2020	4,075
Year Ending December 31, 2021	1,034
Year Ending December 31, 2022	—
Year Ending December 31, 2023	—
Total	$	10,228

Purchase Obligations

Purchase obligations primarily represent minimum purchase commitments for inventory. As of September 30, 2019, our minimum purchase commitments totaled $50.5 million.

Contingent Consideration Related to Business Combinations

In connection with our acquisition of Lumara Health in November 2014, we agreed to pay up to $350.0 million based on the achievement of certain sales milestones, of which $150.0 million has been paid to date. During the second quarter of 2018, we reversed the accrual for a $50.0 million milestone payment based on actual Makena net sales to date and our expectations for future performance, which indicated that achievement of the future milestone was not probable. As we update our analysis in future periods, actual results may vary significantly from the estimated results, which are reliant on a number of external factors as well as the exercise of judgment.

Contingent Regulatory and Commercial Milestone Payments

In January 2019, we acquired Perosphere, a privately-held biopharmaceutical company focused on developing ciraparantag, a small molecule anticoagulant reversal agent. Under and subject to the terms and conditions set forth in the Perosphere Agreement (described below), we are obligated to pay future contingent consideration of up to an aggregate of $365.0 million (the “Milestone Payments”), including (a) up to an aggregate of $140.0 million that becomes payable upon the achievement of specified regulatory milestones for ciraparantag (the “Regulatory Milestone Payments”), including a $40.0 million milestone payment upon approval of ciraparantag by the European Medicines Agency and (b) up to an aggregate of $225.0 million that becomes payable conditioned upon the achievement of specified sales milestones (the “Sales Milestone Payments”). If the final label approved for ciraparantag in the U.S. includes a boxed warning, the Regulatory Milestone Payments shall no longer be payable, and any previously paid Regulatory Milestone Payments shall be credited against 50% of any future Milestone Payments that otherwise becomes payable. The first Sales Milestone Payment of $20.0 million will be payable upon annual net sales of ciraparantag of at least $100.0 million. For more information on the Perosphere acquisition, see Note Q, “Acquisitions, Collaboration, License and Other Strategic Agreements.”

In September 2018, we exercised our option to acquire the global rights to AMAG-423 pursuant to an option agreement entered into in July 2015 with Velo Bio, LLC, a privately-held life-sciences company (“Velo”), the terms of which were amended at the time of exercise. In connection with the exercise of the option and consummation of the acquisition, we are responsible for completing the Phase 2b/3a clinical study that Velo initiated in the second quarter of 2017 and will incur all of the clinical, regulatory and other costs required to pursue FDA approval. We are obligated to pay Velo a $30.0 million milestone payment upon FDA approval of AMAG-423. In addition, we are obligated to pay sales milestone payments of up to $240.0 million in the aggregate, triggered at various annual net sales thresholds between $300.0 million and $900.0 million and low-single digit royalties based on net sales. Further, we have assumed additional obligations under a previous agreement entered into by Velo with a third-party, including a $5.0 million milestone payment upon regulatory approval and $10.0 million following the first commercial sale of AMAG-423, payable in quarterly installments as a percentage of quarterly gross commercial sales until the obligation is met. We are also obligated to pay the third-party low-single digit royalties based on net sales.

In connection with a license agreement we entered into with Endoceutics, Inc. (“Endoceutics”) in February 2017 (the “Endoceutics License Agreement”), we are required to pay Endoceutics certain sales milestone payments, including a first sales milestone payment of $15.0 million, which would be triggered when Intrarosa annual net U.S. sales exceed $150.0 million, and a second milestone payment of $30.0 million, which would be triggered when annual net U.S. sales of Intrarosa exceed $300.0 million. If annual net U.S. sales of Intrarosa exceed $500.0 million, there are additional sales milestone payments totaling up to $850.0 million, which would be triggered at various sales thresholds. We are also obligated to pay tiered royalties equal to a percentage of net U.S. sales of Intrarosa ranging from mid-teens for calendar year net sales up to $150.0 million to mid twenty percent for any calendar year net sales that exceed $1.0 billion for the commercial life of Intrarosa, with deductions (a) after the later of (i) the expiration date of the last to expire of a licensed patent containing a valid patent claim or (ii) ten years after the first commercial sale of Intrarosa for the treatment of vulvar and vaginal atrophy (“VVA”) or female sexual dysfunction (“FSD”) in the U.S. (as applicable), (b) for generic competition and (c) for third party payments, subject to an aggregate cap on such deductions of royalties otherwise payable to Endoceutics. For more information on the Endoceutics License Agreement, see Note Q, “Acquisitions, Collaboration, License and Other Strategic Agreements.”

In connection with a license agreement we entered into with Palatin Technologies, Inc. (“Palatin”) in January 2017 (the “Palatin License Agreement”), we were required to pay Palatin $60.0 million upon FDA approval of Vyleesi, which was paid in July 2019. We are also required to pay up to $300.0 million of aggregate sales milestone payments upon the achievement of

certain annual net sales milestones over the course of the license. The first sales milestone payment of $25.0 million will be triggered when Vyleesi annual net sales exceed $250.0 million. We are also obligated to pay tiered royalties on annual net sales in North America of the Vyleesi Products, on a product-by-product basis, in the Palatin Territory ranging from the high-single digits to the low double-digits. The royalties will expire on a product-by-product and country-by-country basis upon the latest to occur of (a) the earliest date on which there are no valid claims of Palatin patent rights covering such Vyleesi Product in such country, (b) the expiration of the regulatory exclusivity period for such Vyleesi Product in such country and (c) 10 years following the first commercial sale of such Vyleesi Product in such country. These royalties are subject to reduction in the event that: (x) we must license additional third-party intellectual property in order to develop, manufacture or commercialize a Vyleesi Product or (y) generic competition occurs with respect to a Vyleesi Product in a given country, subject to an aggregate cap on such deductions of royalties otherwise payable to Palatin. After the expiration of the applicable royalties for any Vyleesi Product in a given country, the license for such Vyleesi Product in such country would become a fully paid-up, royalty-free, perpetual and irrevocable license. For more information on the Palatin License Agreement, see Note Q, “Acquisitions, Collaboration, License and Other Strategic Agreements.”

In connection with a development and license agreement (the “Antares License Agreement”) with Antares Pharma, Inc. (“Antares”), we are required to pay royalties to Antares on net sales of the Makena auto-injector commencing on the launch of the Makena auto-injector in a particular country until the Makena auto-injector is no longer sold or offered for sale in such country or the Antares License Agreement is terminated (the “Antares Royalty Term”). The royalty rates range from high single digit to low double digits and are tiered based on levels of net sales of the Makena auto-injector and decrease after the expiration of licensed patents or where there are generic equivalents to the Makena auto-injector being sold in a particular country. Antares is also entitled to sales-based milestone payments upon the achievement of certain annual net sales. For more information on the Antares License Agreement, see Note Q, “Acquisitions, Collaboration, License and Other Strategic Agreements.”

Contingencies

Legal Proceedings

We accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonably estimate the amount of the loss. We review these accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. For certain matters referenced 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 any matters in which the likelihood of material loss is at least reasonably possible, we will provide disclosure of the possible loss or range of loss. If a reasonable estimate cannot be made, however, we will provide disclosure to that effect. We expense legal costs as they are incurred.

On August 29, 2019, Lunar Representative, LLC (“Plaintiff”), on behalf of the former equityholders of Lumara Health Inc. (“Lumara”), filed a complaint against us in the Delaware Court of Chancery, captioned Lunar Representative, LLC v. AMAG Pharmaceuticals, Inc. (No. 2019-0688-JTL). Plaintiff alleges that we did not exercise commercially reasonable efforts to market and sell the drug product Makena, and failed to achieve sales milestones for Makena, in breach of certain provisions of the September 28, 2014 Agreement and Plan of Merger between, among other parties, us and Lumara. On September 25, 2019, we filed a motion to dismiss the complaint. Plaintiff is seeking damages of $50.0 million, together with pre- and post-judgment interest, as well as attorneys’ fees and costs. At this time, based on available information, we are unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, of potential losses. We believe this lawsuit is without merit and intend to vigorously defend against the allegations.  

On or about April 6, 2016, we received Notice of a Lawsuit and Request to Waive Service of a Summons in a case entitled Plumbers’ Local Union No. 690 Health Plan v. Actavis Group et. al. (“Plumbers’ Union”), which was filed in the Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania and, after removal to federal court, is now pending in the United States District Court for the Eastern District of Pennsylvania (Civ. Action No. 16-65-AB). Thereafter, we were also made aware of a related complaint entitled Delaware Valley Health Care Coalition v. Actavis Group et. al. (“Delaware Valley”), which was filed with the Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania District Court of Pennsylvania (Case ID: 160200806). The complaints name K-V Pharmaceutical Company (“KV”) (Lumara Health’s predecessor company), certain of its successor entities, subsidiaries and affiliate entities (the “Subsidiaries”), along with a number of other pharmaceutical companies. We acquired Lumara Health in November 2014, a year after KV emerged from bankruptcy protection, at which time it, along with its then existing subsidiaries, became our wholly-owned subsidiary. We have not been served with process or waived service of summons in either case. The actions are being brought alleging unfair and deceptive trade practices with regard to certain pricing practices that allegedly resulted in

certain payers overpaying for certain of KV’s generic products. On July 21, 2016, the Plaintiff in the Plumbers’ Union case dismissed KV with prejudice to refiling and on October 6, 2016, all claims against the Subsidiaries were dismissed without prejudice. We are in discussions with Plaintiff’s counsel to similarly dismiss all claims in the Delaware Valley case. Because we have not been served with process in the Delaware Valley case, we are currently unable to predict the outcome or reasonably estimate the range of potential loss associated with this matter, if any.

On July 20, 2015, the Federal Trade Commission (the “FTC”) notified us that it was conducting an investigation into whether Lumara Health or its predecessor engaged in unfair methods of competition with respect to Makena or any hydroxyprogesterone caproate product. As previously disclosed, we provided the FTC with a response in August 2015. We believe we have fully cooperated with the FTC and we have had no further interactions with the FTC on this matter since our response in August 2015. For further information on this matter, see Note P, “Commitments and Contingencies” to our Annual Report.

We may periodically become subject to other legal proceedings and claims arising in connection with ongoing business activities, including claims or disputes related to patents that have been issued or that are pending in the field of research on which we are focused. Other than the above actions, we are not aware of any material claims against us as of September 30, 2019.

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Recently Issued and Proposed Accounting Pronouncements

9 Months Ended

Sep. 30, 2019

Accounting Changes and Error Corrections [Abstract]

Recently Issued and Proposed Accounting Pronouncements

RECENTLY ISSUED AND PROPOSED ACCOUNTING PRONOUNCEMENTS

From time to time, new accounting pronouncements are issued by FASB or other standard setting bodies that are adopted by us as of the specified effective date.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This standard eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods and early adoption is permitted. We are currently evaluating the impact of our adoption of ASU 2018-13 on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 will be effective for us for fiscal years beginning on or after January 1, 2020, including interim periods within those annual reporting periods and early adoption is permitted. We are currently evaluating the impact of our adoption of ASU 2016-13 on our condensed consolidated financial statements.

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Restructuring Expenses (Tables)

9 Months Ended

Sep. 30, 2019

Restructuring and Related Activities [Abstract]

Schedule of components of restructuring expenses

The following table displays charges taken related to restructuring activities during the nine months ended September 30, 2019 and a rollforward of the changes to the accrued balances as of September 30, 2019 (in thousands): 

	Workforce reduction			Contract termination			Other			Total
Balance accrued at December 31, 2018	$	—		$	—		$	—		$	—
2019 restructuring charges	7,034			229			157			7,420
Payments	(5,257		)	(229		)	(157		)	(5,643		)
Balance accrued at June 30, 2019	1,777			—			—			1,777
Payments	(579		)	—			—			(579		)
Balance accrued at September 30, 2019	$	1,198		$	—		$	—		$	1,198

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Equity-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Summary of details regarding stock option activity

The following table summarizes stock option activity for the nine months ended September 30, 2019:

	2019 Equity	2007 Equity		2013 Lumara		Inducement
	Plan	Plan		Equity Plan		Grants		Total
Outstanding at December 31, 2018	—	2,781,786		124,450		810,343		3,716,579
Granted	344,208	465,009		34,700		80,366		924,283
Exercised	—	(2,025	)	—		—		(2,025	)
Expired or terminated	—	(585,312	)	(26,275	)	(131,250	)	(742,837	)
Outstanding at September 30, 2019	344,208	2,659,458		132,875		759,459		3,896,000

Summary of details regarding restricted stock activity

The following table summarizes RSU activity for the nine months ended September 30, 2019:

	2019 Equity		2007 Equity		2013 Lumara		Inducement
	Plan		Plan		Equity Plan		Grants		Total
Outstanding at December 31, 2018	—		1,041,141		2,101		85,293		1,128,535
Granted	123,228		1,023,847		1,100		29,385		1,177,560
Vested	—		(354,563	)	(1,034	)	(44,909	)	(400,506	)
Expired or terminated	(1,800	)	(250,968	)	—		(7,500	)	(260,268	)
Outstanding at September 30, 2019	121,428		1,459,457		2,167		62,269		1,645,321

Schedule of equity-based compensation expense

Equity-based compensation expense for the three and nine months ended September 30, 2019 and 2018 consisted of the following (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Cost of product sales	$	225	$	281	$	626	$	588
Research and development	691		568		2,051		1,896
Selling, general and administrative	4,058		4,202		11,039		12,149
Total equity-based compensation expense	4,974		5,051		13,716		14,633
Income tax effect	—		—		—		—
After-tax effect of equity-based compensation expense	$	4,974	$	5,051	$	13,716	$	14,633

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 119,800	$ 253,256
Marketable securities	71,744	140,915
Accounts receivable, net	77,588	75,347
Inventories	28,644	26,691
Prepaid and other current assets	43,063	18,961
Note receivable	0	10,000
Total current assets	340,839	525,170
Property and equipment, net	7,912	7,521
Goodwill	422,513	422,513
Intangible assets, net	187,577	217,033
Operating lease right-of-use asset	6,642
Deferred tax assets	630	1,260
Restricted cash	495	495
Other long-term assets	0	1,467
Total assets	966,608	1,175,459
Current liabilities:
Accounts payable	26,554	14,487
Accrued expenses	172,285	129,537
Current portion of convertible notes, net	0	21,276
Current portion of operating lease liability	3,994
Current portion of deferred revenue	1,128	0
Current portion of acquisition-related contingent consideration	113	144
Total current liabilities	204,074	165,444
Long-term liabilities:
Convertible notes, net	273,124	261,933
Long-term operating lease liability	3,344
Long-term deferred revenue	5,171	0
Long-term acquisition-related contingent consideration	180	215
Other long-term liabilities	87	1,212
Total liabilities	485,980	428,804
Commitments and contingencies (Note P)
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 2,000,000 shares authorized; none issued	0	0
Common stock, par value $0.01 per share, 117,500,000 shares authorized; 33,915,509 and 34,606,760 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	339	346
Additional paid-in capital	1,292,458	1,292,736
Accumulated other comprehensive loss	(3,199)	(3,985)
Accumulated deficit	(808,970)	(542,442)
Total stockholders’ equity	480,628	746,655
Total liabilities and stockholders’ equity	$ 966,608	$ 1,175,459

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Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 8,814	$ 9,388
Work in process	5,784	5,932
Finished goods	14,046	11,371
Total inventories	$ 28,644	$ 26,691

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Goodwill and Intangible Assets, Net - Schedule of Expected Future Annual Amortization Expense related to Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Estimated Amortization Expense
Remainder of Year Ending December 31, 2019	$ 5,557
Year Ending December 31, 2020	22,229
Year Ending December 31, 2021	22,229
Year Ending December 31, 2022	22,229
Year Ending December 31, 2023	22,229
Thereafter	93,104
Total	$ 187,577	$ 217,033

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2017		34,083,112
Beginning balance at Dec. 31, 2017	$ 790,244	$ 341	$ 1,271,628	$ (3,908)	$ (477,817)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings (in shares)		439,845
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings	4	$ 4
Non-cash equity based compensation	14,599		14,599
Unrealized gains (losses) on securities, net of tax	(253)			(253)
Net loss	(43,484)				(43,484)
Ending balance (in shares) at Sep. 30, 2018		34,522,957
Ending balance at Sep. 30, 2018	762,246	$ 345	1,286,227	(4,161)	(520,165)
Beginning balance (in shares) at Jun. 30, 2018		34,390,068
Beginning balance at Jun. 30, 2018	726,903	$ 344	1,281,858	(4,295)	(551,004)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings (in shares)		132,889
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings	893	$ 1	892
Non-cash equity based compensation	3,477		3,477
Unrealized gains (losses) on securities, net of tax	134			134
Net loss	30,839				30,839
Ending balance (in shares) at Sep. 30, 2018		34,522,957
Ending balance at Sep. 30, 2018	$ 762,246	$ 345	1,286,227	(4,161)	(520,165)
Beginning balance (in shares) at Dec. 31, 2018	34,606,760	34,606,760
Beginning balance at Dec. 31, 2018	$ 746,655	$ 346	1,292,736	(3,985)	(542,442)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings (in shares)		278,474
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings	(1,787)	$ 3	(1,790)
Issuance of common stock under employee stock purchase plan (in shares)		105,075
Issuance of common stock under employee stock purchase plan	851	$ 1	850
Repurchase of common stock pursuant to the 2016 share repurchase program (in shares)		(1,074,800)
Repurchase of common stock pursuant to the share repurchase program	(13,730)	$ (11)	(13,719)
Non-cash equity based compensation	14,381		14,381
Unrealized gains (losses) on securities, net of tax	786			786
Net loss	$ (266,528)				(266,528)
Ending balance (in shares) at Sep. 30, 2019	33,915,509	33,915,509
Ending balance at Sep. 30, 2019	$ 480,628	$ 339	1,292,458	(3,199)	(808,970)
Beginning balance (in shares) at Jun. 30, 2019		33,899,954
Beginning balance at Jun. 30, 2019	499,507	$ 339	1,287,553	(3,032)	(785,353)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings (in shares)		15,555
Net shares issued in connection with the exercise of stock options and vesting of restricted stock units, net of withholdings	(69)		(69)
Non-cash equity based compensation	4,974		4,974
Unrealized gains (losses) on securities, net of tax	(167)			(167)
Net loss	$ (23,617)				(23,617)
Ending balance (in shares) at Sep. 30, 2019	33,915,509	33,915,509
Ending balance at Sep. 30, 2019	$ 480,628	$ 339	$ 1,292,458	$ (3,199)	$ (808,970)

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
AOCI Attributable to Parent, Net of Tax
Beginning balance	$ 499,507	$ 726,903	$ 746,655	$ 790,244
Holding (losses) gains associated with marketable securities arising during period, net of tax	(167)	134	786	(253)
Ending balance	480,628	762,246	480,628	762,246
Accumulated Other Comprehensive Loss
AOCI Attributable to Parent, Net of Tax
Beginning balance	(3,032)	(4,295)	(3,985)	(3,908)
Ending balance	$ (3,199)	$ (4,161)	$ (3,199)	$ (4,161)

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Stockholders' Equity

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Stockholders' Equity

STOCKHOLDERS’ EQUITY As of January 1, 2019, we had $20.5 million available under our previously approved share repurchase program to repurchase up to $60.0 million in shares of our common stock. In March 2019, our Board authorized additional repurchases of shares in an amount up to $20.0 million under this program. During the nine months ended September 30, 2019, we repurchased and retired 1,074,800 shares of common stock for $13.7 million. As of September 30, 2019, $26.8 million remains available for future repurchases under this program.

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Restructuring Expenses

9 Months Ended

Sep. 30, 2019

Restructuring and Related Activities [Abstract]

Restructuring Expenses

RESTRUCTURING EXPENSES

In February 2019, we completed a restructuring to combine our women’s health and maternal health sales forces into one integrated sales team, which will promote Intrarosa, the Makena auto-injector and Vyleesi. Approximately 110 employees were displaced through this workforce reduction. We recorded one-time restructuring charges of $7.4 million primarily related to severance and related benefits on our condensed consolidated statement of operations for the nine months ended September 30, 2019. We expect the restructuring charges incurred to date under this program to be substantially paid in cash by the end of the first quarter of 2020.

The following table displays charges taken related to restructuring activities during the nine months ended September 30, 2019 and a rollforward of the changes to the accrued balances as of September 30, 2019 (in thousands): 

	Workforce reduction			Contract termination			Other			Total
Balance accrued at December 31, 2018	$	—		$	—		$	—		$	—
2019 restructuring charges	7,034			229			157			7,420
Payments	(5,257		)	(229		)	(157		)	(5,643		)
Balance accrued at June 30, 2019	1,777			—			—			1,777
Payments	(579		)	—			—			(579		)
Balance accrued at September 30, 2019	$	1,198		$	—		$	—		$	1,198

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Description of Business (Details)	9 Months Ended
	Sep. 30, 2019 product_candidate
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of product candidates	2

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Operating lease maturity, after adoption of topic 842

Future minimum payments under our non-cancelable operating leases as of September 30, 2019 are as follows (in thousands):

Period	Future Minimum Lease Payments
Remainder of Year Ending December 31, 2019	$	1,073
Year Ending December 31, 2020	4,081
Year Ending December 31, 2021	1,881
Year Ending December 31, 2022	583
Year Ending December 31, 2023	53
Thereafter	—
Total	$	7,671
Less: Interest	333
Operating lease liability	$	7,338

Operating lease maturity, before adoption of topic 842

Under the prior lease guidance, future minimum payments under our non-cancellable leases as of December 31, 2018 were as follows (in thousands):

Period	Future Minimum Lease Payments
Year Ending December 31, 2019	$	5,119
Year Ending December 31, 2020	4,075
Year Ending December 31, 2021	1,034
Year Ending December 31, 2022	—
Year Ending December 31, 2023	—
Total	$	10,228

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Income Taxes - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ 232	$ (2,352)	$ (26)	$ 42,204
Effective tax rate	(1.00%)	4.00%	0.00%	(40.00%)

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	2,000,000	2,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	117,500,000	117,500,000
Common stock, shares issued (in shares)	33,915,509	34,606,760
Common stock, shares outstanding (in shares)	33,915,509	34,606,760

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Fair Value Measurements - Debt (Details) $ in Millions	Sep. 30, 2019 USD ($)
Senior Convertible Notes Due 2022 | Significant Other Observable Inputs (Level 2)
Debt
Fair value of debt	$ 265.6

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Goodwill and Intangible Assets, Net - Narrative (Details) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Finite-lived intangible assets:
Milestone payment accrued for FDA approval of Vyleesi		$ 60,000,000.0
Fair value of intangible asset	$ 187,577,000			$ 187,577,000		$ 217,033,000
Impairment of intangible assets	0	77,400,000	$ 0	$ 77,358,000	$ 0
Expected useful life				8 years 7 months 6 days
Amortization of intangible assets				$ 12,100,000	$ 144,700,000
Makena base technology | Developed Technology Rights
Finite-lived intangible assets:
Fair value of intangible asset	$ 0	$ 0		$ 0		$ 77,359,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities:
Net loss	$ (266,528)	$ (43,484)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	13,871	158,002
Impairment of intangible assets	77,358	0
Provision for bad debt expense	(12)	754
Amortization of premium/discount on purchased securities	(64)	96
Write-down of inventory	4,872	0
Gain on disposal of fixed assets	0	(99)
Non-cash equity-based compensation expense	14,381	14,599
Non-cash IPR&D expense	18,029	0
Loss on debt extinguishment	0	35,922
Amortization of debt discount and debt issuance costs	11,332	11,824
Gains on marketable securities, net	(263)	(1)
Change in fair value of contingent consideration	(16)	(49,175)
Deferred income taxes	408	43,747
Gain on sale of the CBR business	0	(89,581)
Transaction costs	0	(14,111)
Changes in operating assets and liabilities:
Accounts receivable, net	(2,229)	7,175
Inventories	(6,824)	3,587
Prepaid and other current assets	(24,075)	1,101
Accounts payable and accrued expenses	53,092	(4,280)
Deferred revenues	(101)	8,658
Other assets and liabilities	1,038	159
Net cash (used in) provided by operating activities	(105,731)	84,893
Cash flows from investing activities:
Proceeds from sales or maturities of marketable securities	85,321	60,146
Purchase of marketable securities	(14,815)	(64,400)
Purchase of developed technology	(60,000)	0
Proceeds from the sale of the CBR business	0	519,303
Capital expenditures	(2,098)	(1,913)
Net cash provided by investing activities	8,408	513,136
Cash flows from financing activities:
Long-term debt principal payments	0	(475,000)
Payments to settle convertible notes	(21,417)	0
Payment of premium on debt extinguishment	0	(28,054)
Payments of contingent consideration	(50)	(87)
Payments for repurchases of common stock	(13,730)	0
Proceeds from the issuance of common stock under the ESPP	851	0
Proceeds from the exercise of common stock options	30	2,635
Payments of employee tax withholding related to equity-based compensation	(1,817)	(2,632)
Net cash used in financing activities	(36,133)	(503,138)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(133,456)	94,891
Cash, cash equivalents, and restricted cash at beginning of the period	253,751	192,770
Cash, cash equivalents, and restricted cash at end of the period	120,295	287,661
Supplemental data for cash flow information:
Cash paid for taxes	456	5,041
Cash paid for interest	5,467	43,546
Non-cash investing and financing activities:
Settlement of note receivable in connection with Perosphere acquisition	$ 10,000	$ 0

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Revenue Recognition - Disaggregated Revenue By Products (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation of Revenue [Line Items]
Revenues	$ 84,131	$ 122,238	$ 238,043	$ 385,881
Feraheme
Disaggregation of Revenue [Line Items]
Revenues	44,205	36,963	126,294	99,796
Makena
Disaggregation of Revenue [Line Items]
Revenues	34,272	80,221	96,464	275,377
Intrarosa
Disaggregation of Revenue [Line Items]
Revenues	5,607	4,925	14,898	10,331
Other
Disaggregation of Revenue [Line Items]
Revenues	23	129	156	302
Product Revenue
Disaggregation of Revenue [Line Items]
Revenues	$ 84,107	$ 122,238	$ 237,812	$ 385,806

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Revenue Recognition - Narrative (Details) - USD ($)	3 Months Ended	6 Months Ended	9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Sep. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
Disaggregation of Revenue [Line Items]
Adjustments related to prior period sales. Medicaid rebates	$ (1,438,000)	$ 15,134,000	$ 13,700,000
Adjustments related to prior period sales, contractual adjustments	4,475,000	$ 4,200,000	8,700,000
Deferred revenue	6,300,000		6,300,000	$ 6,400,000
Current portion of deferred revenue	1,128,000		1,128,000		$ 0
Perosphere Pharmaceuticals Inc.
Disaggregation of Revenue [Line Items]
Potential milestone payment receivable, subject to FDA clearance	$ 34,800,000		34,800,000
Milestone payment received			$ 0

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Restructuring Expenses - Narrative (Details) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended	9 Months Ended
	Feb. 28, 2019 employee	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)
Restructuring and Related Activities [Abstract]
Employees displaced through workforce reduction | employee	110
Restructuring charges | $		$ 0	$ 0	$ 7,420	$ 7,420	$ 0

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Commitments and Contingencies - Operating Leases Maturity, After Adoption of Topic 842 (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Remainder of Year Ending December 31, 2019	$ 1,073
Year Ending December 31, 2020	4,081
Year Ending December 31, 2021	1,881
Year Ending December 31, 2022	583
Year Ending December 31, 2023	53
Thereafter	0
Total	7,671
Less: Interest	333
Operating lease liability	$ 7,338

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Equity-Based Compensation - Activity Related to Plans (Details) $ in Millions	1 Months Ended		9 Months Ended
	Mar. 31, 2019	Feb. 28, 2019 shares	Sep. 30, 2019 USD ($) plan shares
Equity compensation plans
Number of equity compensation plans | plan			3
Stock Options
Outstanding, beginning (in shares)			3,716,579
Granted (in shares)			924,283
Vested (in shares)			(2,025)
Expired or terminated (in shares)			(742,837)
Outstanding, ending (in shares)			3,896,000
Restricted Stock Units
Restricted Stock Units
Outstanding (in shares)			1,128,535
Granted (in shares)			1,177,560
Vested (in shares)			(400,506)
Expired or terminated (in shares)			(260,268)
Outstanding (in shares)			1,645,321
2019 Equity Incentive Plan
Stock Options
Outstanding, beginning (in shares)			0
Granted (in shares)			344,208
Vested (in shares)			0
Expired or terminated (in shares)			0
Outstanding, ending (in shares)			344,208
2019 Equity Incentive Plan | Restricted Stock Units
Restricted Stock Units
Outstanding (in shares)			0
Granted (in shares)			123,228
Vested (in shares)			0
Expired or terminated (in shares)			(1,800)
Outstanding (in shares)			121,428
2007 Equity Plan
Stock Options
Outstanding, beginning (in shares)			2,781,786
Granted (in shares)			465,009
Vested (in shares)			(2,025)
Expired or terminated (in shares)			(585,312)
Outstanding, ending (in shares)			2,659,458
2007 Equity Plan | Restricted Stock Units
Restricted Stock Units
Outstanding (in shares)			1,041,141
Granted (in shares)			1,023,847
Vested (in shares)			(354,563)
Expired or terminated (in shares)			(250,968)
Outstanding (in shares)			1,459,457
2007 Equity Plan | Performance Restricted Stock Units (RSUs)
Restricted Stock Units
Granted (in shares)		365,591
Award vesting period	3 years
Maximum shares that may be issued (in shares)			347,591
Fair value, performance- based RSUs | $			$ 4.5
Compensation expense, period for recognition			3 years
2013 Lumara Equity Plan
Stock Options
Outstanding, beginning (in shares)			124,450
Granted (in shares)			34,700
Vested (in shares)			0
Expired or terminated (in shares)			(26,275)
Outstanding, ending (in shares)			132,875
2013 Lumara Equity Plan | Restricted Stock Units
Restricted Stock Units
Outstanding (in shares)			2,101
Granted (in shares)			1,100
Vested (in shares)			(1,034)
Expired or terminated (in shares)			0
Outstanding (in shares)			2,167
Inducement Grants
Stock Options
Outstanding, beginning (in shares)			810,343
Granted (in shares)			80,366
Vested (in shares)			0
Expired or terminated (in shares)			(131,250)
Outstanding, ending (in shares)			759,459
Inducement Grants | Restricted Stock Units
Restricted Stock Units
Outstanding (in shares)			85,293
Granted (in shares)			29,385
Vested (in shares)			(44,909)
Expired or terminated (in shares)			(7,500)
Outstanding (in shares)			62,269

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Debt - Convertible Notes (Details)		3 Months Ended	9 Months Ended
	Feb. 15, 2019 USD ($)	Jun. 30, 2017 USD ($) day $ / shares	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)	Feb. 28, 2014 USD ($)
Debt Instrument [Line Items]
Extinguishment of debt			$ 21,417,000	$ 0
Convertible Notes due 2022 | Convertible Debt
Debt Instrument [Line Items]
Period of amortization of debt discount to interest expense using effective interest method		5 years	5 years
Aggregate principal amount of debt issued		$ 320,000,000.0
Proceeds from 2022 Convertible Notes		310,400,000
Payment of convertible debt issuance costs		9,600,000
Debt issuance costs		9,600,000
Debt issuance costs, allocated to equity component		2,200,000
Debt issuance costs allocated to the liability component		$ 7,400,000
Interest rate		3.25%
Debt conversion ratio		0.0365464
Initial conversion price of convertible notes into common stock (in usd per share) | $ / shares		$ 27.36
Debt term		5 years
Effective interest rate on liability component			9.49%
Convertible Notes due 2019 | Convertible Debt
Debt Instrument [Line Items]
Aggregate principal amount of debt issued						$ 200,000,000.0
Repurchase amount					$ 178,500,000
Repurchase price					$ 192,700,000
Extinguishment of debt	$ 21,400,000
Debt Instrument, Conversion, Period One | Convertible Notes due 2022 | Convertible Debt
Debt Instrument [Line Items]
Trading period | day		20
Consecutive trading period | day		30
Closing sales price of the entity's common stock that the conversion price must exceed or be equal in order for the notes to be convertible		130.00%
Debt Instrument, Conversion, Period Two | Convertible Notes due 2022 | Convertible Debt
Debt Instrument [Line Items]
Consecutive trading period | day		5
Closing sales price of the entity's common stock that the conversion price must exceed or be equal in order for the notes to be convertible		98.00%
Consecutive business days after any five consecutive trading day period during the note measurement period | day		5

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Debt - Schedule of Outstanding Debt Obligations (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Long-term debt	$ 273,124	$ 283,209
Less: current maturities	0	21,276
Long-term debt, net of current maturities	273,124	261,933
Convertible Debt | 2022 Convertible Notes
Debt Instrument [Line Items]
Long-term debt	273,124	261,933
Convertible Debt | 2019 Convertible Notes
Debt Instrument [Line Items]
Long-term debt	$ 0	$ 21,276

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Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The following table summarizes our effective tax rate and income tax expense (benefit) from continuing operations for the three and nine months ended September 30, 2019 and 2018 (in thousands except for percentages):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Effective tax rate	(1		)%	4		%	—		%	(40		)%
Income tax expense (benefit)	$	232		$	(2,352	)	$	(26	)	$	42,204

For the three and nine months ended September 30, 2019, we recognized an income tax expense of $0.2 million and an immaterial income tax benefit, respectively, representing an effective tax rate of (1)% and 0% respectively. The difference between the statutory federal tax rate of 21% and the effective tax rate for the three and nine months ended September 30, 2019, was primarily attributable to the valuation allowance established against our current period losses generated and the non-deductible IPR&D expense related to the Perosphere acquisition. We have established a valuation allowance on our deferred tax assets other than refundable alternative minimum tax (“AMT”) credits to the extent that our existing taxable temporary differences would not be available as a source of income to realize the benefits of those deferred tax assets. The income tax expense for the three months ended September 30, 2019 primarily related to state taxes. The income tax benefit for the nine months ended September 30, 2019 primarily related to the offset of the recognition of the income tax expense recorded in other comprehensive loss associated with the increase in the value of available-for-sale securities that we carried at fair market value during the period, partially offset by state income taxes.

For the three and nine months ended September 30, 2018, we recognized an income tax benefit of $2.4 million and an income tax expense of $42.2 million, respectively, representing an effective tax rate of 4% and (40)%, respectively. The difference between the statutory federal tax rate of 21% and the effective tax rates for the three and nine months ended September 30, 2018 was primarily attributable to the establishment of a valuation allowance on net deferred tax assets other than refundable AMT credits, the impact of non-deductible stock compensation and other non-deductible expenses, partially offset by a benefit from contingent consideration, state income taxes and orphan drug credits.

The primary driver of the increase in tax expense for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018 was state income taxes. The primary driver of the decrease in tax expense for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018 was the valuation allowance established.

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Discontinued Operations

9 Months Ended

Sep. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

On August 6, 2018, we completed the sale of our CBR business to GI Partners pursuant to the CBR Purchase Agreement. We determined that the sale of CBR represented a strategic shift that would have a major effect on our business and therefore met the criteria for classification as discontinued operations at June 30, 2018. All historical operating results for CBR were reflected within discontinued operations in the condensed consolidated statement of operations for the three and nine months ended September 30, 2018.

The following is a summary of net income from discontinued operations for the three and nine months ended September 30, 2018:    

	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Service revenues, net	$	12,163		$	71,217
Costs and expenses:
Cost of services	1,576			12,559
Selling, general and administrative expenses	4,749			39,899
Total costs and expenses	6,325			52,458
Operating income	5,838			18,759
Other income	—			114
Income from discontinued operations	5,838			18,873
Gain on sale of CBR business	89,581			89,581
Income tax (benefit) expense	(98		)	3,346
Net income from discontinued operations	$	95,517		$	105,108

The cash flows related to discontinued operations have not been segregated and are included in the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2018. For the nine months ended September 30, 2018, capital expenditures related to the CBR business were $1.6 million. Depreciation and amortization expense related to the CBR business for the same period was $8.4 million. Excluding the gain of $89.6 million recognized on the sale of the CBR business and the related transaction expenses of $14.1 million presented in the Condensed Consolidated Statement of Cash Flows, there were no other significant operating or investing non-cash items related to the CBR business for the nine months ended September 30, 2018.

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Inventories

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Inventories

INVENTORIES

Our major classes of inventories were as follows as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Raw materials	$	8,814	$	9,388
Work in process	5,784		5,932
Finished goods	14,046		11,371
Total inventories	$	28,644	$	26,691

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Goodwill and Intangible Assets, Net (Tables)

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of finite-lived intangible assets

As of September 30, 2019 and December 31, 2018, our intangible assets consisted of the following (in thousands):

	September 30, 2019								December 31, 2018
			Accumulated		Cumulative						Accumulated		Cumulative
	Cost		Amortization		Impairments		Net		Cost		Amortization		Impairments		Net
Finite-lived intangible assets:
Makena base technology	$	797,100	$	400,496	$	396,604	$	—	$	797,100	$	400,495	$	319,246	$	77,359
Makena auto-injector developed technology	79,100		13,716		—		65,384		79,100		6,952		—		72,148
Intrarosa developed technology	77,655		15,193		—		62,462		77,655		10,129		—		67,526
Vyleesi developed technology	60,000		269		—		59,731		—		—		—		—
Total intangible assets	$	1,013,855	$	429,674	$	396,604	$	187,577	$	953,855	$	417,576	$	319,246	$	217,033

Schedule of expected future annual amortization expense related to intangible assets

We expect amortization expense related to our finite-lived intangible assets to be as follows (in thousands):

	Estimated
	Amortization
Period	Expense
Remainder of Year Ending December 31, 2019	$	5,557
Year Ending December 31, 2020	22,229
Year Ending December 31, 2021	22,229
Year Ending December 31, 2022	22,229
Year Ending December 31, 2023	22,229
Thereafter	93,104
Total	$	187,577

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Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Summary of marketable securities

The following is a summary of our marketable securities as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Short-term marketable securities:*
Corporate debt securities	$	41,596	$	130	$	(9	)	$	41,717
Certificates of deposit	3,500		—		—			3,500
U.S. treasury and government agency securities	6,247		—		(3		)	6,244
Commercial paper	—		—		—			—
Total short-term marketable securities	$	51,343	$	130	$	(12	)	$	51,461
Long-term marketable securities:**
Corporate debt securities	$	20,076	$	207	$	—		$	20,283
Total long-term marketable securities	20,076		207		—			20,283
Total marketable securities	$	71,419	$	337	$	(12	)	$	71,744

* Represents marketable securities with a remaining maturity of less than one year.

** Represents marketable securities with a remaining maturity of one to three years classified as short-term on our condensed consolidated balance sheets.

	December 31, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Short-term marketable securities:*
Corporate debt securities	$	51,184	$	—	$	(236	)	$	50,948
U.S. treasury and government agency securities	7,647		—		(34		)	7,613
Commercial paper	3,995		—		—			3,995
Certificates of deposit	12,000		—		—			12,000
Total short-term marketable securities	$	74,826	$	—	$	(270	)	$	74,556
Long-term marketable securities:**
Corporate debt securities	$	62,530	$	52	$	(433	)	$	62,149
U.S. treasury and government agency securities	2,742		—		(32		)	2,710
Certificates of deposit	1,500		—		—			1,500
Total long-term marketable securities	66,772		52		(465		)	66,359
Total marketable securities	$	141,598	$	52	$	(735	)	$	140,915

* Represents marketable securities with a remaining maturity of less than one year.

** Represents marketable securities with a remaining maturity of one to three years classified as short-term on our condensed consolidated balance sheets.