9.	Leases and Facility Lease Obligation

Facility Leases

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 with two consecutive five-year renewal options. The Company maintains an outstanding letter of credit of $1.4 million in accordance with the terms of the amended lease. In May 2012, the Company entered into a three-year operating lease agreement for an additional 26,000 square feet of office space. Future non-cancelable minimum annual rental payments through July 2019 under these leases are approximately $1.8 million in 2014, $6.7 million in 2015, $5.9 million in 2016, $6.0 million in 2017, $6.1 million in 2018, and $3.6 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. Under the terms of the original lease, the Company leased all of the rentable space in one of the two buildings and a portion of the available space in the second building. In September 2013, the Company entered into a lease amendment to lease all of the remaining space, approximately 142,000 square feet, in the second building, for an aggregate of 386,000 square feet in both buildings. The terms of the lease amendment were consistent with the terms of the original lease. Construction of the core and shell of the building is expected to be completed in early 2015 at which time construction of tenant improvements in the building will commence. Construction of the tenant improvements is expected to be completed in late 2015 or early 2016.

In connection with this 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 fit-out of the buildings 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 consolidated 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 asset and corresponding financing obligation should continue to be carried on its consolidated balance sheet under the appropriate accounting guidance. 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 September 30, 2014, the Company has recorded construction in progress and a facility lease obligation of $171.3 million (including the current portion of the obligation of $5.0 million).

The initial term of the lease is 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 original and amended leased space, the non-cancelable minimum annual lease payments for the annual periods beginning upon commencement of the lease are $5.3 million, $8.4 million, $26.6 million, $30.4 million and $30.9 million in the first five years of the lease and $347.1 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. The Company has the right to sublease portions of the space and is currently planning to sublease approximately 170,000 square feet of the total of 386,000 square feet available.

The Company maintains a letter of credit as security for the lease of $9.2 million, 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 which the Company occupied in 2014. The term of the lease is for ten years, with options for extension of the term and an early termination at the Company’s option after five years. Future non-cancelable minimum annual lease payments under this lease are expected to be approximately $261,000 in 2014, $1.1 million in 2015, 2016, 2017 and 2018 and $5.5 million in total thereafter.

Total rent expense for the leases described above as well as other Company leases for the three-month and nine-month periods ended September 30, 2014 and 2013 was $1.9 million and $1.5 million, respectively, and $5.7 million and $4.4 million, respectively. Contingent rent expense for the three-month and nine-month periods ended September 30, 2014 and 2013 was $167,000 and $186,000, respectively, and $519,000 and $526,000, respectively. Total future non-cancelable minimum annual rental payments for the leases described above as well as other Company leases, for the next five years and thereafter are $2.3 million, $14.0 million, $15.6 million, $33.7 million, $37.6 million and $387.2 million, respectively, not including any offset from potential sublease payments.