Commitments and Contingencies

Lease Obligations

The Company moved into its corporate headquarters to Boston, Massachusetts in January 2014. In December 2015, the Company entered into a lease agreement for 3215 Merryfield Row, San Diego, California. Please refer to Note L, “Long Term Obligations,” for additional information regarding both of these commitments.

As of December 31, 2017, future minimum commitments under the facility leases with initial terms of more than one year were as follows:



Year	Fan Pier Leases		San Diego Leases		Other Leases		Total Lease Commitments
	(in thousands)
2018	$	61,606	$	2,979	$	19,866	$	84,451
2019	72,589		5,324		15,002		92,915
2020	72,589		9,127		13,956		95,672
2021	72,589		9,127		12,163		93,879
2022	72,589		9,127		11,542		93,258
Thereafter	462,442		129,394		57,949		649,785
Total minimum lease payments	$	814,404	$	165,078	$	130,478	$	1,109,960

As of December 31, 2017, the Company’s total sublease income to be received related to its facility leases was $6.0 million, all of which relates to subleases expiring in 2018.

During 2017, 2016 and 2015, rental expense was $19.2 million, $19.1 million and $18.1 million, respectively. The majority of the Company’s lease payments related to the Fan Pier Leases are recorded as interest expense because the Company is deemed for accounting purposes to be the owner of the Buildings. Please refer to Note L, “Long Term Obligations,” for further information.

The Company has outstanding leases, which are accounted for as capital leases, for equipment and leasehold improvements. The capital leases bear interest at rates ranging from less than 1% to 9% per year. The following table sets forth the Company’s future minimum payments due under capital leases as of December 31, 2017:



Year	(in thousands)
2018	$	24,004
2019	10,252
2020	5,434
2021	3,676
2022	1,706
Thereafter	387
Total payments	45,459
Less: amount representing interest	(2,432		)
Present value of payments	$	43,027

In addition, the Company has committed to make potential future milestone and royalty payments pursuant to certain collaboration agreements. Payments generally become due and payable upon the achievement of certain developmental, regulatory and/or commercial milestones. Please refer to Note B, “Collaborative Arrangements and Acquisitions,” for further information.

Guaranties and Indemnifications

As permitted under Massachusetts law, the Company’s Articles of Organization and By-laws provide that the Company will indemnify certain of its officers and directors for certain claims asserted against them in connection with their service as an officer or director. The maximum potential amount of future payments that the Company could be required to make under these indemnification provisions is unlimited. However, the Company has purchased directors’ and officers’ liability insurance policies that could reduce its monetary exposure and enable it to recover a portion of any future amounts paid. No indemnification claims currently are outstanding, and the Company believes the estimated fair value of these indemnification arrangements is minimal.

The Company customarily agrees in the ordinary course of its business to indemnification provisions in agreements with clinical trial investigators and sites in its drug development programs, sponsored research agreements with academic and not-for-profit institutions, various comparable agreements involving parties performing services for the Company, and its real estate leases. The Company also customarily agrees to certain indemnification provisions in its drug discovery, development and commercialization collaboration agreements. With respect to the Company’s clinical trials and sponsored research agreements, these indemnification provisions typically apply to any claim asserted against the investigator or the investigator’s institution relating to personal injury or property damage, violations of law or certain breaches of the Company’s contractual obligations arising out of the research or clinical testing of the Company’s compounds or drug candidates. With respect to lease agreements, the indemnification provisions typically apply to claims asserted against the landlord relating to personal injury or property damage caused by the Company, to violations of law by the Company or to certain breaches of the Company’s contractual obligations. The indemnification provisions appearing in the Company’s collaboration agreements are similar to those for the other agreements discussed above, but in addition provide some limited indemnification for its collaborator in the event of third-party claims alleging infringement of intellectual property rights. In each of the cases above, the indemnification obligation generally survives the termination of the agreement for some extended period, although the Company believes the obligation typically has the most relevance during the contract term and for a short period of time thereafter. The maximum potential amount of future payments that the Company could be required to make under these provisions is generally unlimited. The Company has purchased insurance policies covering personal injury, property damage and general liability that reduce its exposure for indemnification and would enable it in many cases to recover all or a portion of any future amounts paid. The Company has never paid any material amounts to defend lawsuits or settle claims related to these indemnification provisions. Accordingly, the Company believes the estimated fair value of these indemnification arrangements is minimal.

Other Contingencies

The Company has certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a reserve for contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. There were no material contingent liabilities accrued as of December 31, 2017 or 2016.