9.	Leases and Facility Lease Obligation

Landsdowne and Sidney Streets, Cambridge, Massachusetts

The Company conducts the majority of its operations in a 100,000 square foot office and laboratory facility under a non-cancelable operating lease that extends to July 2019 and has two consecutive five-year renewal options. The Company maintains an outstanding letter of credit of $1.0 million in accordance with the terms of the amended lease in support of lease related obligations. In May 2012, the Company entered into a three-year operating lease agreement for an additional 26,000 square feet of office space. Rent expense amounted to $1.5 million and $1.4 million for the three-month periods ended June 30, 2013 and 2012, respectively, and $2.9 million and $2.7 million for the six-month periods ended June 30, 2013 and 2012, respectively. Future non-cancelable minimum annual rental payments through July 2019 under these leases are $3.3 million in 2013, $6.7 million in 2014, $6.2 million in 2015, $5.5 million in 2016, $5.6 million in 2017, and $9.0 million in total thereafter.

Binney Street, Cambridge, Massachusetts

In January 2013, the Company entered into a lease agreement for approximately 244,000 square feet of laboratory and office space in two adjacent, connected buildings which are under construction in Cambridge, Massachusetts, and are expected to be available for occupancy in early 2015. The Company has leased all of the rentable space in one of the two buildings and a portion of the available space in the second building. The Company had the option through June 2013 to elect to lease some or all of the remaining space in the second building (in full floor increments). The Company also has the right through June 2014 to elect to lease all of the rentable space in the second building on terms consistent with the committed space. In July 2013, the Company entered into a non-binding letter of intent to lease the remaining available space of approximately 140,000 square feet in the second building. The terms of the non-binding letter of intent are subject to further negotiation and the execution of a definitive agreement to amend the lease.

The initial term of the lease will be for 15 years from substantial completion of the buildings with options to renew for three terms of five years each at market-based rates. The base rent is subject to increases over the term of the lease. Based on the leased space that is committed, the non-cancelable minimum annual lease payments for the annual periods beginning upon commencement of the lease are $5.2 million, $6.3 million, $16.9 million, $19.3 million and $19.6 million in the first five years of the lease and $220.3 million in total thereafter, plus the Company’s share of the facility operating expenses and other costs that are reimbursable to the landlord under the lease (including optional tenant allowances, if elected).

In connection with the lease, the landlord is providing a tenant improvement allowance for the costs associated with the design, engineering, and construction of tenant improvements for the leased facility. The tenant improvements will be in accordance with the Company’s plans and include substantial fit-out of the building to construct appropriate laboratory and office space, subject to approval by the landlord. To the extent the stipulated tenant allowance provided by the landlord is exceeded, the Company is obligated to fund all costs incurred in excess of the tenant allowance. The scope of the planned tenant improvements do not qualify as “normal tenant improvements” under the lease accounting guidance. Accordingly, for accounting purposes, the Company is the deemed owner of the buildings during the construction period.

As construction progresses, the Company records the project construction costs incurred as an asset, along with a corresponding facility lease obligation, on the balance sheet for the total amount of project costs incurred whether funded by the Company or the landlord. Upon completion of the buildings, the Company will determine if the assets and corresponding financing obligation should continue to be carried under the accounting for a sale-leaseback transaction. Based on the current terms of the lease, the Company expects to continue to be the deemed owner of the buildings upon completion of the construction period.

As of June 30, 2013, the Company has recorded construction in progress and a facility lease obligation of $46.5 million.

In January 2013, the Company established a letter of credit as security for the lease of $5.8 million upon signing of the lease, which is supported by restricted cash.

Lausanne, Switzerland

In January 2013, the Company entered into a lease agreement for approximately 22,000 square feet of office space in a building under construction in Lausanne, Switzerland, which is expected to be available for occupancy in early 2014. The term of the lease will be ten years, with options for extension of the term and an early termination at the Company’s option after five years. Non-cancelable minimum annual lease payments are expected to be approximately $1.0 million in 2014, $1.1 million per year in 2015, 2016, 2017 and 2018 and $5.6 million in total thereafter.