Commitments and Contingencies

a. Leases

Descriptions of Lease Agreements

The Company leases laboratory and office facilities in Tarrytown, New York. The facilities leased by the Company in Tarrytown include (i) space in previously existing buildings, (ii) newly constructed space in two buildings ("Buildings A and B") that was completed in 2009, (iii) newly constructed space in a third building ("Building C") that was completed in 2011 and, (iv) under an April 2013 lease agreement, newly constructed laboratory and office space in two buildings ("Buildings D and E") that was completed in the third quarter of 2015. The lease agreements related to Buildings A, B, C, D, and E (collectively, the "Buildings") will expire in 2029; the remaining facilities under lease will expire in June 2024. The Tarrytown leases contain renewal options to extend the term of the lease, escalations at 2.5% per annum, and early termination options for various portions of the space. The leases provide for monthly payments over their respective terms (which, for Buildings A, B, C, D, and E were largely based on the landlord's cost of construction and tenant allowances) and additional charges for utilities, taxes, and operating expenses.

Certain premises under the Tarrytown lease are accounted for as operating leases. However, as described further below under "Facility Lease Obligations," for the Buildings that the Company is leasing, the Company is deemed, in substance, to be the owner of the landlord's Buildings in accordance with the application of FASB authoritative guidance.

The Company also leases certain other laboratory, office, and storage space and equipment under operating leases which expire at various times through 2022.

Commitments under Operating Leases

The estimated future minimum noncancelable lease commitments under operating leases, as of December 31, 2015, are as follows:



	Facilities		Equipment		Total
2016	$	10,894	$	4,594	$	15,488
2017	11,332		425		11,757
2018	11,607		140		11,747
2019	11,740		—		11,740
2020	11,375		—		11,375
Thereafter	50,746		—		50,746
	$	107,694	$	5,159	$	112,853

Rent expense under operating leases was:



Year Ended December 31,	Facilities		Equipment		Total
2015	$	14,659	$	543	$	15,202
2014	13,360		952		14,312
2013	9,404		471		9,875

In addition to its rent expense under operating leases for various facilities, the Company paid rental charges for utilities, real estate taxes, and operating expenses of $15.5 million, $13.6 million, and $11.5 million for the years ended December 31, 2015, 2014, and 2013, respectively.

Facility Lease Obligations

Based upon various factors, including the Company's involvement in the construction of the Buildings and its responsibility for directly paying for a substantial portion of tenant improvements, the Company is deemed, in substance, to be the owner of the landlord's Buildings in accordance with the application of FASB authoritative guidance. Consequently, in addition to capitalizing the tenant improvements, the Company capitalizes the landlord's costs of constructing these new facilities, offset by a corresponding lease obligation on the Company's Balance Sheet. The Company also recognizes, as additional facility lease obligation, reimbursements from the Company's landlord for tenant improvement costs that the Company incurred since such payments that the Company receives from its landlord are deemed to be a financing obligation. The Company allocates a portion of its lease payments on these facilities between the Buildings and the land on which the Buildings are constructed, based on the initial estimated relative fair values of the land and Buildings. The land element of the lease is treated for accounting purposes as an operating lease.

With respect to Buildings A and B, in 2009, monthly lease payments commenced and the buildings were placed in service by the Company. The imputed interest rate applicable to the Company's Buildings A and B facility lease obligation is approximately 11%. With respect to Building C, in 2011, monthly lease payments commenced and the building was placed in service by the Company. The imputed interest rate applicable to the Company's Building C facility lease obligation is approximately 10%. With respect to Buildings D and E, in 2015, monthly lease payments commenced and the buildings were placed in service by the Company. The imputed interest rate applicable to the Company's Buildings D and E facility lease obligation is approximately 7%. In 2015, 2014, and 2013, the Company recognized $9.7 million, $14.5 million, and $16.2 million, respectively, of interest expense in connection with the Buildings' facility lease obligations.

Facility lease obligations consist of the following:



	As of December 31,
	2015		2014
Buildings A and B	$	108,857	$	110,210
Building C	49,475		49,312
Buildings D and E	206,376		152,770
	$	364,708	$	312,292

The estimated future minimum noncancelable commitments under these facility lease obligations, as of December 31, 2015, are as follows:



	Buildings A and B		Building C		Buildings D and E		Total
2016	$	13,809	$	4,688	$	12,679	$	31,176
2017	14,079		4,818		13,016		31,913
2018	14,356		4,951		13,360		32,667
2019	14,640		5,088		13,714		33,442
2020	14,931		5,227		14,076		34,234
Thereafter	117,096		54,760		137,079		308,935
	$	188,911	$	79,532	$	203,924	$	472,367

b. Research Collaboration and Licensing Agreements

As part of the Company's research and development efforts, the Company enters into research collaboration and licensing agreements with other companies and universities. These agreements contain varying terms and provisions which include fees to be paid by the Company, services to be provided, and license rights to certain proprietary technology developed under the agreements. Some of these agreements may require the Company to pay additional amounts upon the achievement of various development and commercial milestones, contingent upon the occurrence of various future events. Additionally, some of the agreements contain provisions which require the Company to pay royalties, as defined, at rates that range from 0.5% to 16.5%, in the event the Company sells or licenses any proprietary products developed under the respective agreements. The Company also has contingent reimbursement obligations to its collaborators Sanofi and Bayer HealthCare once the applicable collaboration becomes profitable. See Note 3 for additional information.

In December 2011, the Company and Genentech, a member of the Roche Group, entered into a Non-Exclusive License and Partial Settlement Agreement (the "Original Genentech Agreement") that covered making, using, and selling EYLEA for the prevention of human eye diseases and disorders in the United States, and ended the litigation relating to those matters. Pursuant to the Original Genentech Agreement, the Company received a non-exclusive license to certain patents relating to VEGF receptor proteins, known as the Davis-Smyth patents, and other technology patents. The Original Genentech Agreement provided for the Company to make payments to Genentech based on U.S. sales of EYLEA commencing upon FDA approval of EYLEA in November 2011 through May 7, 2016. The Company made a one-time, non-refundable $60.0 million payment during 2012 upon cumulative U.S. sales of EYLEA reaching $400 million, and is obligated to pay royalties of 4.75% on cumulative U.S. sales of EYLEA between $400 million and $3 billion and 5.5% on any cumulative U.S sales of EYLEA over $3 billion. As the Company records net product sales of EYLEA, the Company is recognizing expense in connection with the Genentech Agreement using a blended mid-single digit royalty rate that reflects both the $60.0 million payment and the royalties payable on cumulative sales and that is based upon the Company's estimate of cumulative EYLEA sales through May 7, 2016.

Effective May 17, 2013, the Company entered into an Amended and Restated Non-Exclusive License and Settlement Agreement with Genentech (the "Amended Genentech Agreement"), which amended the Original Genentech Agreement to include all sales of EYLEA worldwide and ended the litigation relating to those matters. Under the Amended Genentech Agreement, the Company received a worldwide non-exclusive license to the Davis-Smyth patents, and certain other patents, owned or co-owned by Genentech for the prevention or treatment of eye diseases and eye disorders in a human through administration of EYLEA to the eye. Under the Amended Genentech Agreement, the Company is obligated to make payments to Genentech based on sales of EYLEA in the United States, and EYLEA manufactured in the United States and sold outside the United States, through May 7, 2016 using the same milestone and royalty rates as in the Original Genentech Agreement. EYLEA is sold outside the United States by affiliates of Bayer HealthCare under the Company's license and collaboration agreement. All payments to Genentech under the Original Genentech Agreement and the Amended Genentech Agreement have been or will be made by the Company. Bayer HealthCare shares in all such payments based on the proportion of EYLEA sales outside the United States to worldwide EYLEA sales and determined consistent with the license and collaboration agreement.

The Company recognizes royalty expense based on product sales of commercial productsunder various licensing agreements, including, for EYLEA sales both inside and outside of the United States, the Genentech agreements described above. For the years ended December 31, 2015, 2014, and 2013, the Company recorded royalty expense of $247.9 million, $169.9 million, and $128.1 million, respectively.