10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2013

OR

o 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 000-24537

DYAX CORP.

(Exact name of registrant as specified in its charter)

Delaware (State of Incorporation)	04-3053198 (IRS Employer Identification No.)
55 Network Drive, Burlington, Massachusetts 01803 (Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (617) 225-2500

	Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Common Stock, $.01 Par Value	Name of each exchange on which registered: The NASDAQ Stock Market LLC (NASDAQ Global Market)

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No x

Indicate by checkmark 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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x or No ¨

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer o	Accelerated filer x	Non-accelerated filer o	Smaller reporting company o
		(do not check if a smaller reporting company)

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

The aggregate market value of the registrant's common stock held by non-affiliates of the registrant as of the last business day of the registrant's most recently completed fiscal second quarter, June 28, 2013, based on the last reported sale price of the registrant's common stock of $3.46 per share was $318,530,901.  The number of shares outstanding of the registrant's Common Stock, $.01 par value, as of February 28, 2014, was 126,065,222.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Definitive Proxy Statement for its 2014 Annual Meeting of Shareholders scheduled to be held on May 8, 2014, which Definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the registrant's fiscal year-end of December 31, 2013, are incorporated by reference into Part III of this Form 10-K.

As used in this Form 10-K, "Dyax," "the Company," "we," "our," and "us" refer to Dyax Corp., except where the context otherwise requires or as otherwise indicated.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements, including statements regarding:

●   the potential benefits and usage of KALBITOR® (ecallantide) for treating hereditary angioedema (HAE);

●   commercial potential  of KALBITOR, including revenues and costs;

●   prospects for clinical development of  DX-2930 and other potential product candidates to address disorders mediated by plasma kallikrein, which are referred to as PKM disorders;

●   plans to enter into additional collaborative and licensing arrangements for ecallantide and for other compounds in development;

●   the potential for market approval for KALBITOR in markets outside the United States;

●    estimates of potential markets for our products and product candidates;

●    prospects for future milestone payments and/or  royalties with respect to licensee product candidates in our Licensing and Funded Research Portfolio (LFRP);

●   the sufficiency of our cash, cash equivalents and short-term investments;

●   the effect of the expiration of certain of our phase display patents under our LFRP; and

●   expected future revenues, operating results and cash flows.

Statements that are not historical facts are based on our current expectations, beliefs, assumptions, estimates, forecasts and projections for our business and the industry and markets in which we compete. We often use the words or phrases of expectation or uncertainty like “guidance,” "believe," "anticipate," "plan," "expect," "intend," "project," "future," "may," "will," "could," "would" and similar words to help identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Such risks and uncertainties include, but are not limited to, those discussed later in this report under the section entitled "Risk Factors". Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether because of new information, future events or otherwise. Readers should carefully review the risk factors set forth in this and other reports or documents we file from time to time with the Securities and Exchange Commission.

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DYAX CORP.

ANNUAL REPORT ON FORM 10-K

For the year ended December 31, 2013

INDEX

Item No.		Page
PART I
1.	Business	3
1A.	Risk Factors	20
1B.	Unresolved Staff Comments	40
2.	Properties	40
3.	Legal Proceedings	40
4.	Mine Safety Disclosures	40
PART II
5.	Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	40
6.	Selected Consolidated Financial Data	41
7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	43
7A.	Quantitative and Qualitative Disclosures about Market Risk	54
8.	Financial Statements and Supplementary Data	55
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	91
9A.	Controls and Procedures	91
9B.	Other Information	92
PART III
10.	Directors, Executive Officers and Corporate Governance	93
11.	Executive Compensation	93
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	93
13.	Certain Relationships and Related Transactions, and Director Independence	94
14.	Principal Accounting Fees and Services	94
PART IV
15.	Exhibits, Financial Statement Schedules	94
	Signatures	100

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PART I

ITEM 1.          BUSINESS

OVERVIEW

We are a biopharmaceutical company focused on:

●   Hereditary Angioedema and Other Plasma-Kallikrein-Mediated Disorders

The principal focus of our efforts is to develop and commercialize treatments for hereditary angioedema and to identify other disorders that are mediated by plasma kallikrein.

We developed KALBITOR on our own, and since 2010, we have been selling it in the United States for the treatment of acute attacks of HAE.  We are also developing DX-2930, a fully human monoclonal antibody inhibitor of plasma kallikrein, which we believe is a candidate to treat HAE prophylactically.  The safety, tolerability, and kallikrein inhibition results of a Phase 1a clinical study in healthy volunteers support advancing the DX-2930 development program into a Phase 1b study in HAE patients in mid-2014.

We have also completed development of a biomarker assay that should assist us in detecting the activation of plasma kallikrein in patient blood.  We intend to use this assay to potentially expedite the development of DX-2930 and to potentially determine if plasma kallikrein activation occurs with other PKM disorders.

●   Licensing and Funded Research Portfolio

We have a portfolio of product candidates being developed by licensees using our phage display technology.  This portfolio currently includes multiple product candidates in various stages of clinical development, including three in Phase 3 trials, for which we are eligible to receive future royalties and/or milestone payments.  We expect our revenues from the LFRP to experience growth beginning in 2014 to the extent that our licensees commercialize product candidates that gain marketing approval.

HEREDITARY ANGIOEDEMA AND OTHER PKM DISORDERS

We are focused on identifying and developing treatments for patients who experience PKM angioedema.  Plasma kallikrein, an enzyme found in blood, produces bradykinin, a protein that causes blood vessels to enlarge or dilate, which can cause swelling known as angioedema.  Plasma kallikrein is believed to be a key component in the regulation of inflammation and contact activation pathways.  Excess plasma kallikrein activity plays a role in HAE and could potentially play a role in a number of inflammatory diseases, including Crohn’s disease, psoriasis, rheumatoid arthritis, and various mast cell disorders.

HAE AND KALBITOR

HAE is a rare, genetic disorder characterized by severe, debilitating and often painful swelling, which can occur in the abdomen, face, hands, feet and airway.  HAE is caused by a deficiency of C1-INH activity, a naturally occurring molecule that inhibits plasma kallikrein, a key mediator of inflammation, and other serine proteases in the blood.  It is estimated that HAE affects approximately 1 in 50,000 people around the world.  The U.S. Hereditary Angioedema Association estimates that there are approximately 6,500 HAE patients in the United States.

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Our product, ecallantide, was approved by the U.S. Food and Drug Administration (FDA) under the brand name KALBITOR for treatment of HAE in patients 16 years of age and older regardless of anatomic location. KALBITOR, a potent, selective and reversible plasma kallikrein inhibitor,was the first subcutaneous HAE treatment approved in the United States.

United States Sales and Marketing

We have a commercial organization to support sales of KALBITOR in the United States, including a field-based team of approximately 25 professionals, consisting of sales representatives, market access and field advocates and corporate account directors.  At this time, our commercial organization is sized to market KALBITOR in the United States, where patients are treated primarily by a limited number of specialty physicians consisting mainly of allergists and immunologists.

KALBITOR Access®

To facilitate access to KALBITOR in the United States, we have established the KALBITOR Access program.  This program, managed by Sonexus Health, is designed as a one-stop point of contact for information about KALBITOR.  This program offers treatment support services for patients with HAE and their healthcare providers. KALBITOR case managers provide comprehensive product and disease information, treatment site coordination, financial assistance for qualified patients and reimbursement facilitation services.

Distribution

KALBITOR is currently distributed through a limited network of wholesale, hospital and specialty pharmacy arrangements.  This network includes Walgreens Infusion Services, which is our largest provider of on-demand nursing services that provides home administration of KALBITOR by healthcare professionals to eligible HAE patients.  The Walgreens agreement has a term through December 2014 and will renew annually unless amended or terminated by the parties.

In addition, we may enter into other arrangements to provide HAE patients with broader opportunities to access KALBITOR.

Post-Marketing Commitment

In 2010, we initiated a four-year Phase 4 observational study, which was scheduled to enroll 200 HAE patients over a three-year period, to evaluate immunogenicity and hypersensitivity with exposure to KALBITOR for treatment of acute attacks of HAE. Although the enrollment target was not met, the FDA has allowed us to maintain the original three-year enrollment schedule.  We concluded enrollment in February 2013 and expect to provide a final report to the FDA in 2014.

Manufacturing

We have established a commercial supply chain that consists of third parties to manufacture, test and transport KALBITOR.  All third party manufacturers involved in the KALBITOR manufacturing process are required to comply with current Good Manufacturing Practices, or cGMPs.

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To date, ecallantide drug substance used in the production of KALBITOR has been manufactured in the United Kingdom by Fujifilm Diosynth Biotechnologies (UK) Ltd. (Fujifilm).  Under our agreement with Fujifilm, they have committed to be available to manufacture bulk drug substance through 2020.

The shelf-life of our frozen ecallantide drug substance is four years.  Ecallantide drug substance is filled, labeled and packaged into the final form of KALBITOR drug product by Jubilant Hollister-Stier (JHS) Contract Manufacturing Services at its facilities in Spokane, Washington under a commercial supply agreement. This process is known in the industry as the "fill and finish" process.  KALBITOR in its "filled and finished" form has additional refrigerated shelf-life of four years.  Our commercial supply agreement with JHS runs through 2018 and may be terminated with two years prior notice.  In November 2013, JHS received a Warning Letter from the FDA.  They are working to resolve issues raised in the Warning Letter.  If JHS fails to correct the issues cited in the Warning Letter, further filling of KALBITOR may be adversely impacted.

Our current inventory of filled and finished drug product, together with drug substance inventory when filled, is sufficient to supply all ongoing studies relating to ecallantide and to meet anticipated KALBITOR market demand into 2018.

Single-Injection KALBITOR Formulation

We are in the process of developing a new formulation of ecallantide, which is intended to allow for a convenient single subcutaneous injection of KALBITOR, instead of the current formulation that requires three subcutaneous injections.  We completed a bioequivalence clinical study that successfully demonstrated bioequivalence between the current formulation and the new single-injection formulation.  We are now conducting ongoing stability testing of the new formulation.  While stability testing and the regulatory review process are ongoing, we will continue to assess the commercial path forward for this program.   

KALBITOR Outside of the United States

In markets outside of the United States, we work with international partners to seek approval and commercialize ecallantide for HAE and other angioedema indications.  We have entered into license agreements with several such companies that have regulatory, distribution and sales capabilities in their designated territories.

CMIC – In Japan, we entered into an agreement with CMIC Co., Ltd to develop and commercialize subcutaneous ecallantide for the treatment of HAE and other angioedema indications.  CMIC was solely responsible for all costs associated with development, regulatory activities and commercialization of ecallantide for all angioedema indications in Japan.  CMIC’s clinical development plan was established in consultation with the Japanese regulatory authorities and CMIC completed a twelve-patient pharmacokinetic study and an open-label study of ten patients.

In December 2013, CMIC terminated their agreement with us effective June 4, 2014.   At that time, all rights to develop and commercialize ecallantide in Japan will be returned to us and we have no obligations to CMIC in connection with, or following, the termination.  CMIC intends to organize the data from the clinical studies into a format that could be submitted for approval to regulatory authorities in Japan.  Upon receipt of this data, we intend to evaluate the regulatory and commercial paths forward with respect to ecallantide in Japan.

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CVie – In February 2013, we entered into an agreement with CVie Therapeutics (CVie), a subsidiary of Lee’s Pharmaceutical Holdings Ltd., to develop and commercialize KALBITOR for the treatment of HAE and other angioedema indications in China.

Under the terms of the exclusive license agreement, we received a $1.0 million upfront payment and are eligible to receive future development, regulatory and sales milestones.  We are also eligible to receive royalties on net product sales.  CVie is solely responsible for all costs associated with development, regulatory activities, and the commercialization of KALBITOR in its licensed territories.  In addition, CVie will purchase drug product from us on a cost-plus basis for commercial supply. CVie is presently evaluating regulatory and commercial options for its territory.

Novellus –In January 2013, we entered into an agreement with Novellus Biopharma AG (Novellus) to develop and commercialize KALBITOR for the treatment of HAE and other angioedema indications in select countries in Latin America, including Argentina, Brazil, Chile, Colombia, Mexico and Venezuela.

Under the terms of the exclusive license agreement, we have received certain upfront payments and are eligible to receive future regulatory and sales milestones.  We are also eligible to receive royalties on net product sales.  Novellus is solely responsible for all costs associated with development, regulatory activities, and the commercialization of KALBITOR in its licensed territories.  In addition, Novellus will purchase drug product from us on a cost-plus basis for commercial supply.  Novellus is presently evaluating regulatory and commercial options for its territory.

DX-2930 - ANTIBODY FOR HAE AND OTHER PKM DISORDERS

Based on our knowledge of angioedema and the kallikrein-kinin pathway, we are developing DX-2930, a potent and specific fully human monoclonal antibody that is an inhibitor of plasma kallikrein.  DX-2930 is an investigational product candidate to prophylactically treat HAE and other PKM disorders.It has the potential for subcutaneous administration, with a half-life that could enable less frequent dosing than currently available prophylactic HAE therapies and an advantageous immunogenicity profile.

We have completed a series of preclinical pharmacokinetic and tolerability studies and found DX-2930 to have relevant activity in animal models.  We initiated a Phase 1a clinical study in August 2013, evaluating the safety and tolerability of a single subcutaneous administration of DX-2930.   In February 2014, we determined that results from this clinical study met the study goals.

The Phase 1a study was a randomized, double blind, placebo-controlled, single-dose-escalating trial in healthy subjects.  Subjects received a single dose of DX-2930 [0.1, 0.3, 1.0, or 3.0 mg/kg] or placebo by subcutaneous injection, with 6 subjects receiving active drug and 2 subjects receiving placebo per dose level.  A total of 32 subjects were enrolled, randomized, and dosed.

Study results demonstrated that DX-2930 was well tolerated at all dose levels.  There were no serious adverse events or evidence of dose-limiting toxicity.  The pharmacokinetic profile of DX-2930 demonstrated linear, dose-dependent exposure and a mean elimination half-life of 17 to 20 days across dose groups, following a single injection to healthy subjects.  Pharmacodynamic results from two different exploratory biomarker assays confirmed ex vivo plasma kallikrein inhibition in a dose and time dependent manner.

The safety, tolerability, and kallikrein inhibition results of the Phase 1a study support advancing the DX-2930 development program into a Phase 1b study in mid-2014.  The Phase 1b study will be a blinded, multi-center, repeat-dose, and dose-escalation study exploring DX-2930 in patients with HAE.

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Biomarker Assay Program

We have completed development of a biomarker assay that should assist in detecting the activation of plasma kallikrein in patient blood.  Confirmation of the role of plasma kallikrein in HAE will enable us to better understand the contact activation pathway and explore other disorders that result in inflammation and pain.  We intend to use this assay to potentially expedite the development of DX-2930 and to potentially determine if plasma kallikrein activation occurs with other PKM disorders, such as Crohn’s disease, psoriasis, rheumatoid arthritis and various mast cell disorders.

LICENSING AND FUNDED RESEARCH PORTFOLIO

We leverage our proprietary phage display technology and libraries through our LFRP licenses and collaborations.  To date, we have recognized approximately $200 million of revenue under the LFRP licenses, primarily related to license fees and milestones.  The product candidates in the LFRP portfolio have the potential to generate greater revenues for us if and when one or more of the product candidates that are discovered by our licensees receive marketing approval and are commercialized.

LFRP Product Development

Currently within our LFRP portfolio, there are multiple revenue-generating product candidates in clinical development.  Our licensees and collaborators also have additional product candidates in various stages of preclinical development.  Our LFRP licensees and collaborators are responsible for all costs associated with development of these product candidates.  We expect our revenues under the LFRP portfolio to experience growth beginning in 2014, to the extent that our licensees begin to commercialize product candidates that gain marketing approval.

The chart and program information below, which are based on information publicly disclosed by our licensees, provide a summary of the status of clinical stage product candidates under the LFRP for which we are eligible to receive future milestones and/or royalties, to the extent these candidates are developed and commercialized.  Certain of these product candidates are in multiple clinical trials for various indications.

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Licensee	Compound	Target	Indication	Status
Eli Lilly/Imclone	Ramucirumab (IMC-1121b)	VEGFR-2/KDR	Gastric cancer (REGARD)	Filing
			Gastric cancer (RAINBOW)	Phase 3
			NSCLC (REVEL)	Phase 3
			Hepatocellular cancer (REACH)	Phase 3
			Colorectal cancer (RAISE)	Phase 3
			Various indications	Phase 2
			Solid tumors	Phase 1
Eli Lilly/Imclone	Necitumumab (IMC-11F8)	EGFR	Squamous NSCLC	Phase 3
			Various indications	Phase 2
			Squamous NSCLC	Phase 1/2
Amgen	Trebananib (AMG 386)*	Ang-1/Ang-2	Ovarian cancer (TRINOVA-1, -2 and -3)	Phase 3
Merrimack/Sanofi	MM-121	ErbB3	Breast cancer	Phase 2
			Breast cancer	Phase 2
			Ovarian cancer	Phase 2
			Various indications	Phase 1
Biogen Idec	ANTI-LINGO-1 (BIIB 033)	LINGO-1	Acute optic neuritis (RENEW)	Phase 2
			Multiple sclerosis (SYNERGY)	Phase 2
Merrimack	MM-141	IGF-1R & ErbB3	Solid tumors	Phase 1
Amgen	AMG 780	Ang-2	Solid tumors	Phase 1
Eli Lilly/Imclone	IMC-3C5	VEGFR-3	Solid tumors	Phase 1
Baxter	Anti-MIF	MIF	Solid tumors	Phase 1
Undisclosed	Not identified	Not identified	Not identified	Phase 1

LFRP Phase 3 Product Candidates

Ramucirumab (IMC-1121B)

Ramucirumab is a fully human monoclonal antibody being developed by Eli Lilly and Company (Lilly).  The compound is directed against the vascular endothelial growth factor receptor 2 (VEGFR2) and is thought to inhibit angiogenesis, a process by which blood vessels supply blood to tumors.  Ramucirumab is being studied for use as a treatment in multiple oncology indications.  The following are the Lilly ramucirumab development programs that are currently in or have completed Phase 3:

Gastric cancer

Lilly has completed two Phase 3 clinical trials, referred to as REGARD and RAINBOW, in advanced gastric cancer.  REGARD was a randomized, double-blind, placebo-controlled study of ramucirumab and best supportive care (BSC) in patients with advanced gastric cancer following progression after initial chemotherapy.

In 2012, Lilly announced that the REGARD trial met its primary endpoint of improved overall survival and also showed prolonged progression-free survival.  Based on the REGARD clinical data, Lilly filed a Biologics License Application (BLA) with the FDA for the approval of ramucirumab as a second-line, single-agent treatment for advanced gastric cancer.  Lilly anticipates FDA action on this application in the second quarter of 2014.  If approved, ramucirumab will be the first FDA-approved product for advanced gastric cancer.  Lilly has also applied to the European Medicines Agency (EMA) for a Marketing Authorization Application (MAA) for the same indication.

The RAINBOW trial was a randomized, double-blind, placebo-controlled study of ramucirumab and paclitaxel, compared to placebo and paclitaxel, in patients with advanced gastric cancer following progression after initial chemotherapy.  In 2013, Lilly announced that RAINBOW met its primary endpoint of improved overall survival and a secondary endpoint of improved progression-free survival.  Lilly is in the process of filing regulatory applications in the United States and Europe based on this data.

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Non-small cell lung cancer (NSCLC)

Lilly has completed a randomized, double-blind Phase 3 clinical trial of ramucirumab plus chemotherapy versus chemotherapy alone in patients with second-line NSCLC.   This study, referred to as REVEL, was completed in 2013 and Lilly announced positive top-line data in February 2014.  The REVEL trial showed a statistically significant improvement in the primary endpoint of overall survival in the ramucirumab arm compared to the control arm.  It also showed a statistically significant improvement in progression-free survival in the ramucirumab arm versus the control arm.  Lilly intends to submit the first application of these data to regulatory authorities in 2014.

Hepatocellular carcinoma (HCC)

Lilly is conducting a randomized, double-blind Phase 3 clinical trial of ramucirumab and BSC versus placebo and BSC as second line treatment in patients with HCC, after first line therapy with sorafenib.   The estimated primary completion date for this study, which is referred to as REACH, is March 2014 and Lilly expects to have top-line data results in the second half of 2014.

Colorectal cancer

Lilly has a randomized, double-blind Phase 3 clinical trial of ramucirumab plus folinic acid, 5-flurouracil and irinotecan (FOLFIRI) versus placebo plus FOLFIRI in second line metastatic colorectal cancer.  The estimated primary completion date for this trial, which is referred to as RAISE, is November 2014 and Lilly expects to have top-line data results in 2015.

In addition, ramucirumab is in multiple earlier-stage clinical trials.

Necitumumab (IMC-11F8)

Necitumumab is a fully human monoclonal antibody being developed by Lilly that is designed to block the ligand binding site of the human epidermal growth factor receptor (EGFR).  Activation of EGFR has been correlated with malignant progression, induction of angiogenesis and inhibition of apoptosis or cell death.

Necitumumab is being studied for use as a treatment in squamous non-small cell lung cancer, or NSCLC.

Lilly has completed a randomized, open-label Phase 3 clinical trial, referred to as SQUIRE, for necitumumab in combination with gemcitabine-cisplatin chemotherapy versus gemcitabine-cisplatin chemotherapy alone, for first-line squamous NSCLC.  In 2013, Lilly announced that SQUIRE met its primary endpoint of increased overall survival.  Lilly expects to submit a BLA and MAA for this indication by year-end 2014.

In addition, necitumumab is in multiple earlier-stage clinical trials for other indications.

Trebananib (AMG 386)

Amgen Inc. is developing trebananib, a peptibody that inhibits the interaction between the endothelial cell-selective Tie2 receptor and its ligands angiopoietin-1 and -2 (Ang1 and Ang2).  By inhibiting this interaction, Amgen believes trebananib could interrupt angiogenesis, which is important to tumor cell growth.

Trebananib is being studied for use as a treatment in ovarian cancer through three Phase 3 trials, referred to as TRINOVA-1, TRINOVA-2 and TRINOVA-3.  TRINOVA-1 is a randomized, double-blind study with trebananib plus paclitaxel versus placebo plus paclitaxel in recurrent ovarian cancer.  In 2013, Amgen announced that TRINOVA-1 met its primary endpoint of progression-free survival.  Amgen expects to complete the analysis of overall survival data, a secondary endpoint of TRINOVA-1, in the second half of 2014.

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TRINOVA-2 is a randomized, double-blind study of trebananib plus pegylated liposomal doxorubicin (PLD) or placebo plus PLD in women with recurrent partially platinum sensitive or resistant epithelial ovarian, primary peritoneal or fallopian tube cancer.  The estimated primary completion date for this clinical trial is in the second quarter of 2014.

TRINOVA-3 is a randomized, double-blind study of trebananib with paclitaxel and carboplatin or placebo with paclitaxel and carboplatin in the first-line treatment of epithelial ovarian, primary peritoneal or fallopian tube cancers.  The estimated primary completion date for this clinical trial is 2016.

LFRP Phase 2 Product Candidates

MM-121 (SAR256212)

Merrimack Pharmaceuticals is developing MM-121, a fully human monoclonal antibody that targets ErbB3, a cell surface receptor implicated in tumor growth and survival.  By inhibiting ErbB3 signaling, MM-121 is designed to restore sensitivity, delay resistance and enhance the anti-tumor effect of other drugs when used  in combination therapy.  Sanofi and Merrimack entered into an exclusive, global license and collaboration agreement for MM-121 in 2009.  These companies are currently exploring MM-121 in a number of oncology indications.  Currently, the most advanced programs are in Phase 2 clinical trials.

Breast cancer

Merrimack has an ongoing randomized, open-label Phase 2 trial of preoperative use of MM-121 with paclitaxel in HER2-negative breast cancer.  This study is intended to demonstrate whether the addition of MM-121 with paclitaxel is more effective than treatment of paclitaxel alone when administered as part of the neoadjuvant treatment in HER2-negative locally advanced operable breast cancer patients.  Results from this study are expected in the first half of 2014.

Ovarian cancer

Merrimack has an ongoing randomized, open-label Phase 2 trial of MM-121 with paclitaxel in platinum resistant or refractory recurrent/advanced ovarian cancers.  The estimated primary completion date for this this trial is in the fourth quarter of 2014.

Anti-LINGO-1 (BIIB 033)

Biogen Idec is developing Anti-LINGO-1 a fully human monoclonal antibody that targets LINGO-1, a protein expressed selectively in the central nervous system that is known to negatively regulate axonal myelination and axonal regeneration.  Currently, there are two ongoing Phase 2 clinical trials.

Acute optic neuritis (AON)

Biogen Idec has an ongoing Phase 2 clinical trial of Anti-LINGO-1 in AON.  This trial is a randomized, double-blind, parallel-group, placebo controlled Phase 2 study in subjects with their first episode of AON.  Results from this study are expected in the second half of 2014.

Multiple sclerosis (MS)

In 2013, Biogen Idec initiated a randomized, double-blind, parallel-group, dose-ranging Phase 2 clinical trial investigating Anti-LINGO-1 used concurrently with Avonex in subjects with relapsing forms of multiple sclerosis.  Data from this study, which is referred to as SYNERGY, are expected in the second half of 2015.

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Cross-Licensed Technology

The use of our antibody library that is part of the LFRP involves technology that we have cross-licensed from other biotechnology companies, including Affimed Therapeutics AG, Affitech A/S, Biosite, Inc. (now owned by Alere Inc.), Cambridge Antibody Technology Limited or CAT (now known as MedImmune Limited and owned by AstraZeneca), Domantis Limited (a wholly owned subsidiary of GlaxoSmithKline), Genentech, Inc. and XOMA Ltd.  Under the terms of our cross-license agreement with CAT, we are required to make milestone and low single-digit royalty payments to CAT in connection with antibody products developed and commercialized by our licensees.  These payments are passed through to CAT from our licensees.  None of our other cross-license agreements contain financial obligations applicable to our LFRP licensees or collaborators.

HealthCare Royalty Partners

In 2012, we completed an agreement with an affiliate of HealthCare Royalty Partners, formerly Cowen Healthcare Partners and referred to as HC Royalty, to refinance our existing loans with HC Royalty.  At December 31, 2013, the aggregate principal amount of the loans was $84.5 million, consisting of a $22.8 million Tranche A Loan and a $61.7 million Tranche B Loan. The loans bear interest at a rate of 12% per annum, payable quarterly.  The loans will mature in August 2018, and can be repaid without penalty beginning in August 2015.

In connection with the loans, we entered into a security agreement granting HC Royalty a security interest in the intellectual property related to the LFRP, and the revenues generated through our licenses of the intellectual property related to the LFRP. The security agreement does not apply to our internal drug development or to any of our co-development programs for HAE.

Under the terms of the loan agreement, we are required to repay the loans based on the annual net LFRP receipts.  Until September 30, 2016, required payments are equal to the sum of 75% of the first $15.0 million in specified annual LFRP receipts and 25% of specified annual LFRP receipts over $15.0 million.  After September 30, 2016, and until the maturity date or the complete repayment of the loans, HC Royalty will receive 90% of all specified LFRP receipts.  If the HC Royalty portion of LFRP receipts for any quarter exceeds the interest for that quarter, the principal balance will be reduced.  Any unpaid principal will be due upon the maturity of the loans.  If the HC Royalty portion of LFRP revenues for any quarterly period is insufficient to cover the cash interest due for that period, the deficiency may be added to the outstanding principal or paid in cash, at our election. In December 2016 and August 2017, which are five years from the issuance dates of the Tranche A and Tranche B Loans, we must repay $1.1 million and $2.9 million, respectively, representing additional accumulated principal above the original loan amounts.

COMPETITION

The biopharmaceutical industry is characterized by continuous intense competition and rapid technological change.  New developments occur constantly and are expected to continue to occur.  Discoveries or commercial developments by our competitors or others may render some or all of our technologies, products or potential products obsolete or non-competitive.

Our business is focused on HAE and other PKM disorders.  Therefore our principal competitors are companies that either are already marketing products or are developing new products for these disorders, as described below.

For KALBITOR as a treatment for HAE, our principal competitors include:

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●   Manufacturers of corticosteroids, including danazol, which are used to treat prophylactically a significant number of identified HAE patients.

●   Shire plc— Shire markets its bradykinin receptor antagonist, known as Firazyr® (icatibant), which is administered subcutaneously. Firazyr is approved in the United States, Europe, and certain other countries for the treatment of acute HAE attacks in adult patients.  The U.S. and EU labels allow for patients to self-administer Firazyr following training by their healthcare provider.  Firazyr has orphan drug designations from the FDA and in Europe.

In January 2014, Shire completed the acquisition of ViroPharma Inc., which markets Cinryze®, an intravenously-administered, plasma-derived C1-esterase inhibitor.  Cinryze is approved in the United States for routine prophylaxis against angioedema attacks in adolescent and adult patients with HAE.  It has orphan drug designation from the FDA, which has also approved patient labeling for Cinryze to include self-administration for routine prophylaxis once a patient is properly trained by their healthcare provider. Cinryze is also approved in the EU for the treatment and pre-procedure prevention and routine prevention of angioedema attacks in adults and adolescents with severe and recurrent attacks of HAE or for patients who are inadequately managed with repeated acute treatment. The EU approval includes a self-administration option for appropriately trained patients. ViroPharma is conducting a Phase 2 trial evaluating subcutaneous administration of Cinryze.

·   CSL Behring— CSL Behring markets a plasma-derived C1-esterase inhibitor, known as Berinert®, which is administered intravenously. Berinert is approved in the United States for the treatment of acute abdominal, facial or laryngeal attacks of HAE in adults and adolescents, and has orphan drug designation from the FDA. The FDA has approved labeling for Berinert to include self-administration after proper training by a healthcare professional.  Berinert is also approved in the EU, Japan and several rest-of-world markets for the treatment of acute attacks of HAE.  CSL Behring announced in December 2013 that they had commenced an international Phase 3 study of a volume-reduced subcutaneous formulation of C1-INH.

●   Pharming Group NV—Ruconest™ is a recombinant C1-esterase inhibitor, which is administered intravenously, and is approved in the EU for the treatment of acute HAE attacks in adult patients.  In November 2012, Pharming and its U.S. partner Salix (formerly Santarus), announced positive topline data from their Phase 3 trial for Ruconest. Pharming's recombinant C1-esterase inhibitor has Fast Track status from the FDA and orphan drug designations from the FDA and in Europe.

Other competitors for the treatment of HAE are companies that are developing small molecule plasma kallikrein inhibitors, including BioCryst, which is in a Phase 2 clinical trial evaluating its investigational candidate for prophylaxis against HAE attacks.

A significant number of companies compete with us in the antibody technology space by offering licenses and/or research services to pharmaceutical and biotechnology companies. Our phage display technology is one of several in vitro display technologies available to generate libraries of compounds that can be leveraged to discover new antibody products. Companies that compete with us in the display technology space include BioInvent, XOMA, Adimab and several others. Additional platforms that pharmaceutical and biotechnology companies use to identify antibodies that bind to a desired target are in vivo technology platforms which use direct immunization of mice or other species to generate fully human antibodies. Competitors in this space include GenMab, arGEN-X and several others. There are also a number of new technologies directed to the generation of candidate compounds with novel scaffolds that may possess similar properties to monoclonal antibodies.

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In addition to the technologies described above, many large pharmaceutical companies have either acquired antibody discovery technologies or developed humanized murine antibodies derived from hybridomas.  Pharmaceutical companies also develop orally available small molecule compounds directed to the targets for which we and others are seeking to develop antibody, peptide and/or protein products.

Furthermore, we may also experience competition from companies that have acquired or may acquire other technologies from universities and other research institutions and that may impact our competitive position.

PATENTS AND PROPRIETARY RIGHTS

Our success is dependent upon our ability to obtain patent protection for our products and technologies, to defend and enforce our issued patents, including patents related to phage display, and to avoid the infringement of patents issued to others.

Our proprietary position in the field of phage display is based upon patent rights, technology, proprietary information, trade secrets and know-how.  Our patents and patent applications related to specific aspects of our phage display libraries, including claiming our currently licensed antibody phage display libraries and methods of making and using such libraries, include issued patents in the United States, Europe, Australia, Canada, and Japan, and pending patent applications in the United States, Europe and other countries.  These patent rights are expected to expire in 2021 or later (not including any term extension from the addition of patent term adjustment by the United States Patent and Trademark Office).  Patent rights claiming our currently licensed antibody libraries include United States Patent No. 8,288,322, which expires April 17, 2021 and issued patents in Australia, Canada and Europe.  We have filed a petition in the United States Patent Office for reconsideration and recalculation of the patent term adjustment for United States Patent No. 8,288,322 based on an erroneous calculation of the patent's term by the United States Patent Office.  This petition, which is expected to be successful based on recent district court rulings, could extend the patent's expiration date by 2,473 days, from the current expiry of April 17, 2021 to January 24, 2028.  Additionally, patent rights claiming our currently licensed peptide libraries include issued patents in Canada, Japan and Europe.  We have filed suit in the United States District Court for the District of Columbia to obtain a patent term adjustment for United States Patent No. 7,413,537 based on an erroneous calculation of the patent's term by the United States Patent Office.  This action, which is expected to be successful based on a recent ruling by the United States Court of Appeals for the Federal Circuit, could extend the patent's expiration date by 1,614 days, from the current expiry of March 1, 2014to May 1, 2017.

With respect to KALBITOR (ecallantide), our patent rights include United States Patent No. 5,795,865, which originally expired on August 18, 2015, received a final determination with a patent term extension of 1,645 days bringing the new expiration to February 18, 2020.  Additionally, with respect to the following patents:  6,057,287 expires on August 18, 2015; 7,064,107 expires on June 6, 2023; 7,153,829 expires on July 2, 2023; 7,166,576 expires on September 27, 2024;  7,235,530 expires on September 27, 2024; 7,276,480 expires on December 1, 2023; 7,628,983 expires on February 11, 2015; 7,718,617, expires on August 26, 2024; 7,811,991 expires on February 26, 2024; 7,704,949 expires on June 6, 2023; 7,851,442 expires on September 9, 2023; 8,034,775 expires on June 6, 2023; 7,550,427 expires on August 30, 2024;  8,188,045 expires on June 6, 2023; 8,124,586 expires on June 6, 2023; 8,637,454 expires on April 5, 2030; and European Patent Nos. 0739355 expire on January 11, 2015; 1531791 expires on June 6, 2023; 1941867 expires on June 6, 2023; 1542710 expires on June 6, 2023; and 1663281 expires on August 30, 2024.  In addition, there are issued patents in Australia, Canada and Japan that claim sequences of peptides that have human kallikrein inhibitory activity, including the sequence for KALBITOR, and polynucleotide sequences encoding these peptides, as well as methods of using such peptides.

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For our other therapeutic product candidates, we file for patent protection on groups of antibodies, peptides and small proteins that we identify using phage display.

There are no legal challenges to our phage display patent rights or our other issued or pending patents in the United States. However, European Patent No. 1578903, a patent directed to certain phage display embodiments, is presently under opposition at the European Patent Office.  We cannot assure that additional challenges will not be brought in the future.  We plan to protect our patent rights in a manner consistent with our product development and business strategies.  If we bring legal action against an alleged infringer of any of our patents, we expect the alleged infringer to claim that our patent is invalid, not infringed, or not enforceable for one or more reasons, thus subjecting that patent to a judicial determination of infringement, validity and enforceability.  In addition, in certain situations, an alleged infringer could seek a declaratory judgment of non-infringement, invalidity or unenforceability of one or more of our patents.  We cannot be sure that we will have sufficient resources to enforce or defend our patents against any such challenges or that a challenge will not result in an adverse judgment against us or the loss of one or more of our patents.  Uncertainties resulting from the initiation and continuation of any patent or related litigation, including those involving our patent rights, could have a material adverse effect on our ability to maintain and expand our licensing program and collaborations, and to compete in the marketplace.

Our phage display patent rights are central to our non-exclusive patent licensing program and our performance under our related agreement with HC Royalty.  We offer non-exclusive licenses under our phage display patent rights to companies and non-profit institutions in the fields of therapeutics, diagnostics and other select fields.  In jurisdictions where we have not applied for, obtained, or maintained patent rights, we will be unable to prevent others from developing or selling products or technologies derived using phage display.  In addition, in jurisdictions where we have phage display patent rights, we cannot assure that we will be able to prevent others from selling or importing products or technologies derived using phage display.

We are aware that other parties have patents and pending applications to various products and processes relating to phage display technology.  Through licensing our phage display patent rights, we have secured a limited ability to practice under some of the third party patent rights relating to phage display technology.  These rights are a result of our standard license agreement, which contains a covenant by the licensee that it will not sue us under the licensee's phage display improvement patents.  In addition, we have sought and obtained affirmative rights of license or ownership under certain patent rights relating to phage display technology owned by other parties.  For example, in addition to our amended license agreement with CAT, we have entered into licensing agreements with Affimed Therapeutics, Affitech, Biosite, Domantis and Genentech, Inc. under which we granted each of those companies rights to practice our phage display patents and in return received rights to practice under their phage display related patents.  These types of agreements in which each party licenses technology to the other are referred to as cross-licensing agreements.  We have also entered into a cross-licensing agreement with XOMA Ireland Limited under which we received a license to use XOMA's antibody expression technology to develop antibody products for ourselves and our collaborators.  We also received a license from XOMA to produce antibodies.  In exchange we agreed to pay XOMA a license fee and a royalty in connection with the sale of any of our antibody products.  We also granted XOMA a license to our phage display patents and agreed to provide them with limited quantities of our antibody phage display libraries.

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Under the terms of our amended and restated license agreement with CAT, we were granted a worldwide license under their antibody phage display patents to discover and develop antibody products.  In consideration for this license, CAT is eligible to receive milestone payments and low single-digit royalty payments in connection with antibody products developed and commercialized by us or our licensees under the agreement.

Under the agreement, we also granted CAT a worldwide license to use our antibody libraries to discover and develop antibody products.  In consideration for this license, we will receive no milestone payments but are eligible to receive low single-digit royalty payments on antibody products developed by CAT or its licensees under the agreement.

GOVERNMENT REGULATION

The preclinical study and clinical testing, manufacture, labeling, storage, record keeping, advertising, promotion, export, and marketing, among other things, of our products and product candidates, including KALBITOR and those of our licensees, are subject to extensive regulation by governmental authorities in the United States and other countries.  In the United States, pharmaceutical products are regulated by the FDA under the Federal Food, Drug, and Cosmetic Act and other laws, including, in the case of biologics, the Public Health Service Act and the Biologics Price Competition and Innovation Act portion of the Patient Protection and Affordable Care Act of 2010.  KALBITOR is regulated by the FDA as a biologic.  Biologics require the submission of a BLA and approval by FDA prior to being marketed in the United States.  Manufacturers of biologics may also be subject to state regulation.  Failure to comply with FDA requirements, both before and after product approval, may subject us and/or our partners, contract manufacturers, and suppliers to administrative or judicial sanctions, including FDA refusal to approve applications, issuance of warning letters, product recalls, product seizures, total or partial suspension of production activities or distribution, fines and/or criminal prosecution.

The steps required before a biologic may be approved for marketing in the United States generally include:

·   preclinical laboratory tests and animal tests;

·   submission to the FDA of an Investigational New Drug application (IND) for human clinical testing, which must become effective before human clinical trials may commence;

·   adequate and well-controlled human clinical trials to establish the safety and efficacy of the product;

·   submission to the FDA of a BLA;

·   FDA pre-approval inspection of product manufacturers; and

·   FDA review and approval of BLA.

Preclinical studies include laboratory evaluation and animal studies to assess the potential safety and efficacy of the product candidate.  Preclinical safety tests must be conducted in compliance with FDA regulations relating to good laboratory practices.  The results of the preclinical tests, manufacturing information and analytical data are submitted to the FDA as part of an IND, which must become effective before human clinical trials may be commenced.  An IND application will automatically become effective 30 days after receipt by the FDA, unless the FDA before that time raises concerns about the drug candidate or the conduct of the trials as outlined in the IND.  The IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed.  We cannot assure you that submission of an IND will result in FDA authorization to commence clinical trials or that once commenced, other concerns will not arise.

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Clinical trials involve the administration of the investigational product to healthy volunteers or to patients, under the supervision of qualified principal investigators.  Each clinical study at each participating clinical site must be reviewed and approved by an independent institutional review board, prior to the recruitment of subjects.

Clinical trials are typically conducted in three sequential phases, but the phases may overlap and different trials may be initiated with the same drug candidate within the same phase of development in similar or differing patient populations.

Phase 1 studies may be conducted in a limited number of patients, but are usually conducted in healthy volunteer subjects.  The drug candidate is usually tested for safety and, as appropriate, for absorption, metabolism, distribution, excretion, pharmaco-dynamics and pharmaco-kinetics.

Phase 2 usually involves studies in a larger, but still limited patient population to evaluate preliminarily the efficacy of the drug candidate for specific, targeted indications; to determine dosage tolerance and optimal dosage; and to identify possible short-term adverse effects and safety risks.

Phase 3 studies are undertaken to further evaluate clinical efficacy of a drug candidate against specific endpoints and to test further for safety within an expanded patient population at geographically dispersed clinical study sites.  Phase 1, Phase 2 or Phase 3 testing might not be completed successfully within any specific time period, if at all, with respect to any of our product candidates and those of our licensees.  Results from one trial are not necessarily predictive of results from later trials.  Furthermore, the FDA may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.

The results of the preclinical studies and clinical trials and other detailed information, including information on the manufacture and composition of the product candidate, are submitted to the FDA as part of a BLA requesting approval to market the product candidate.  Under the Prescription Drug User Fee Act, as amended, the required fees payable to the FDA for reviewing a BLA, as well as annual fees for commercial manufacturing establishments and for approved products, can be substantial.  Each BLA submitted to the FDA for approval is typically reviewed for administrative completeness and reviewability within 45 to 60 days following submission of the application.  If found complete, the FDA will "file" the BLA, thus triggering a full review of the application.  The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable.  The FDA's established goals for the review of a BLA are six months for Priority applications and 12 months for Standard applications, whereupon a review decision is to be made.  The FDA, however, may not approve a drug within these established guidelines and its review goals are subject to change from time to time.  Further, the outcome of the review, even if generally favorable, may not result in an actual approval but an "action letter" may be issued that describes additional work that must be done before the application can be approved.  Before approving a BLA, the FDA may inspect the facilities at which the product is manufactured and will not approve the product for marketing unless cGMP compliance is satisfactory.  The FDA may deny approval of a BLA if applicable statutory or regulatory criteria are not satisfied, or may require additional testing or information, which can delay the approval process.  FDA approval of any application may include many delays, or it may never be granted.  If a product is approved, the approval will impose limitations on the indicated uses for which the product may be marketed, may require that warning statements be included in the product labeling, and may require that additional studies be conducted following approval as a condition of the approval, and may impose restrictions and conditions on product distribution, prescribing or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval.  To market a product for other indicated uses, or to make certain manufacturing or other changes requires additional FDA review and approval of a BLA Supplement or new BLA.  Further post--marketing testing and surveillance to monitor the safety or efficacy of a product is required.  Also, product approvals may be withdrawn if compliance with regulatory standards is not maintained or if safety or manufacturing problems occur following initial marketing.  New government requirements may be established that could delay or prevent regulatory approval of our product candidates under development.

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Under the Patient Protection and Affordable Care Act of 2010 an abbreviated approval process is currently available for generic or “follow-on” biologic products that are demonstrated to be biosimilar to or interchangeable with an FDA-licensed biological product.  The FDA has issued guidance documents on biosimilar product development and expects to issue additional guidance.  The FDA will consider multiple factors as part of its biosimilarity assessment, including, but not limited to, the product’s complexity, formulation, and stability; as well as usefulness of biochemical and functional characterizations.  Although it is unclear how the abbreviated approval process will impact our business, it could have a material adverse impact as follow-on products may be significantly less costly to bring to market and may be priced significantly lower than our products might be.

Both before and after the FDA approves a product, the manufacturer and the holder or holders of the BLA for the product are subject to comprehensive regulatory oversight.  For example, quality control and manufacturing procedures must conform to cGMP requirements, and the FDA periodically inspects manufacturing facilities to assess compliance with cGMP.  Accordingly, manufacturers must continue to spend time, money and effort to maintain cGMP compliance.

Orphan Drug Designation

We have received orphan drug designation from the FDA for KALBITOR and DX-2930.  Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a "rare disease or condition" that generally is a disease or condition that affects fewer than 200,000 individuals in the United States.  Orphan drug designation must be requested before submitting a BLA.  After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are publicly disclosed by the FDA.  Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.  If a product which has an orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, meaning the FDA may not approve any other applications to market the same drug for the same indication for a period of seven years, except in limited circumstances.

Regulation Pertaining to Sales and Marketing

We are subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claims laws. Anti-kickback laws generally prohibit a prescription drug manufacturer from soliciting, offering, receiving, or paying any remuneration to generate business, including the purchase or prescription of a particular drug. Although the specific provisions of these laws vary, their scope is generally broad and there may be no regulations, guidance or court decisions that clarify how the laws apply to particular industry practices. There is a possibility that our practices might be challenged under the anti-kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third party payers (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws. Violations of fraud and abuse laws may be punishable by criminal or civil sanctions, including fines and civil monetary penalties, and exclusion from federal health care programs (including Medicare and Medicaid). Federal and state authorities are paying increased attention to enforcement of these laws within the pharmaceutical industry and private individuals have been active in alleging violations of the laws and bringing suits on behalf of the government under the federal civil False Claims Act. If we were subject to allegations concerning, or were convicted of violating, these laws, our business could be harmed.

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Laws and regulations have been enacted by the federal government and various states to regulate the sales and marketing practices of pharmaceutical manufacturers. These laws and regulations generally limit financial interactions between manufacturers and health care providers or require disclosure to the government and public of such interactions. The laws include federal “sunshine” provisions enacted in 2010 as part of the comprehensive federal health care reform legislation. The sunshine provisions apply to pharmaceutical manufacturers with products reimbursed under certain government programs and require those manufacturers to disclose annually to the federal government (for re-disclosure to the public) certain payments made to physicians and certain other healthcare practitioners or to teaching hospitals. State laws may also require disclosure of pharmaceutical pricing information and marketing expenditures. Many of these laws and regulations contain ambiguous requirements. Given the lack of clarity in laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinent federal and state laws and regulations. Outside the U.S., other countries have implemented requirements for disclosure of financial interactions with healthcare providers and additional countries may also consider or implement such laws.

Federal and state governments also have pursued direct methods to reduce the cost of drugs for which they pay. We participate in state government-managed Medicaid programs as well as certain other qualifying federal and state government programs where discounts and mandatory rebates are provided to participating state and local government entities. We also participate in other programs with government entities, the most significant of which are the U.S. Department of Defense and the U.S. Department of Veterans Affairs. These entities receive minimum discounts based on a defined “non-federal average manufacturer price” for purchases. Additional programs in which we participate provide mandatory discounts for outpatient medicines purchased by certain Public Health Service entities and “disproportionate share” hospitals (hospitals meeting certain criteria regarding the percentage of needy population served).

In connection with several of these government programs, we are required to report prices to various government agencies. Pricing calculations vary among programs. The calculations are complex and are often subject to interpretation by the reporting entities, government agencies and the courts. Our methodologies for calculating these prices could be challenged under false claims laws or other laws. We could make a mistake in calculating reported prices and required discounts, which could result in retroactive liability to government agencies. Government agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. If we make these mistakes or if governmental agencies make these changes, we could face, in addition to prosecution under federal and state false claims laws, substantial liability and civil monetary penalties, exclusion of our products from reimbursement under government programs, criminal fines or imprisonment, or prosecutors may impose a Corporate Integrity Agreement, Deferred Prosecution Agreement, or similar arrangement.

Foreign Regulation

In addition to regulations in the United States, we are subject to a variety of foreign regulatory requirements governing human clinical trials and marketing approval for drugs.  The foreign regulatory approval process includes all of the risks associated with FDA approval set forth above, as well as additional country-specific regulations.  Whether or not we obtain FDA approval for a product, we must obtain further approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries.  The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval.  The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

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For example, under European Union regulatory systems, we may submit marketing authorizations either under a centralized or decentralized procedure.  The centralized procedure provides for the grant of a single marketing authorization that is valid for all European Union member states.  The decentralized procedure provides for mutual recognition of national approval decisions, and the holder of a national marketing authorization may submit an application to the remaining member states.

Reimbursement

Sales of pharmaceutical products depend in significant part on the coverage and reimbursement policies of government programs, including Medicare and Medicaid in the United States, and other third-party payers.  These health insurance programs may restrict coverage of some products by using payer formularies under which only selected drugs are covered, variable co-payments that make drugs that are not preferred by the payer more expensive for patients, and by using utilization management controls, such as requirements for prior authorization or prior failure on another type of treatment.  Payers may impose these obstacles to coverage for higher-priced drugs.  Consequently, KALBITOR may be subject to payer-driven restrictions.

In some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed.  The requirements governing drug pricing vary widely from country to country.  For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices and/or reimbursement of medicinal products for human use.  A member state may approve a specific price or level of reimbursement for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market.

In furtherance of our efforts to facilitate patient access to KALBITOR in the United States, we have created the KALBITOR Access program, a treatment support service for patients with HAE and their healthcare providers.  KALBITOR case managers provide education about HAE and KALBITOR and help facilitate solutions for reimbursement, coverage and treatment site coordination.

OUR CORPORATE INFORMATION

We are a Delaware corporation, incorporated in 1989, and merged with Protein Engineering Corporation in 1995.  Our principal executive offices are located at 55 Network Drive, Burlington, Massachusetts 01803, and our telephone number is (617) 225-2500.  Our web site address is www.dyax.com.

Segment Information

We provide segment information in Note 13 to our Consolidated Financial Statements included in Item 8 of this report.  We are incorporating that information into this section by this reference.

Employees

As of February 1, 2014, we had 120 employees, including 15 Ph.D.’s and/or M.D.’s.  Approximately 47 of our employees are in research and development, and 73 in marketing, business development and administration.  Our workforce is non-unionized, and we believe that our relations with employees are good.

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Additional Information

We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 available without charge through our website, www.dyax.com, as soon as reasonably practicable after filing them with the Securities and Exchange Commission.  Information contained on the website is not part of this report.

ITEM 1A.       RISK FACTORS

You should carefully consider the following risk factors before you decide to invest in our Company and our business because these risk factors may have a significant impact on our business, operating results, financial condition, and cash flows. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the following risks actually occurs, our business, financial condition and results of operations could be materially and adversely affected.

Risks Related To Our Business

We have a history of net losses, expect to incur additional net losses and may never achieve or sustain profitability.

We have incurred net losses on an annual basis since our inception.  As of December 31, 2013 we had an accumulated deficit of approximately $534.0 million.  We expect to incur additional net losses in 2014 and beyond, as our research, development, preclinical testing, clinical trial and commercial activities continue.

Currently, we generate a significant amount of our revenue from product sales and it is possible that we will never have substantially more product sales revenue.  We also generate limited revenue from collaborators through license and milestone fees, and maintenance fees that we receive under the LFRP.  To become profitable, we must either generate higher product sales from the commercialization of KALBITOR and other product candidates, such as DX-2930, increase receipts from our licensees’ product candidates in our LFRP, or reduce costs.  It is possible that we will never have sufficient product sales revenue or receive sufficient receipts on our licensed product candidates or licensed technology in order to achieve or sustain future profitability.

Our revenues and operating results have fluctuated significantly in the past, and we expect this to continue in the future.

Our revenues and operating results have fluctuated significantly on a quarterly and year to year basis.  We expect these fluctuations to continue in the future.  Fluctuations in revenues and operating results will depend on:

·   the amount of future sales of KALBITOR and costs to manufacture and commercialize the product, including sales variability due to fluctuating rates of treatment by patients and the amount of KALBITOR ordered by the distribution channel;

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·   the cost and timing of our research and development, manufacturing and commercialization activities;

·   the establishment of new collaboration and licensing arrangements;

·   the timing and results of the clinical trials for DX-2930;

·   the timing, receipt and amount of payments, if any, from current and prospective collaborators and licensees, including the completion of certain milestones by licensees with product candidates in the LFRP; and

·   the effect of revenue recognition and other generally accepted accounting principles.

Our revenues and costs in any period are not reliable indicators of our future operating results.  If the revenues we recognize are less than the revenues we expect for a given fiscal period, then we may be unable to reduce our expenses quickly enough to compensate for the shortfall.  In addition, our fluctuating operating results may fail to meet the expectations of securities analysts or investors which may cause the price of our common stock to decline.

We may need additional capital in the future and may be unable to generate the capital that we will need to sustain our operations.

We require significant capital to fund our operations and to develop and commercialize our product candidates.  Our future capital requirements will depend on many factors, including:
 

·   future sales levels of KALBITOR and any other commercial products that we may develop and the profitability of such sales, if any;

·   the timing, progress and cost to develop, obtain regulatory approvals for and commercialize our product candidates;

·   maintaining or expanding our existing collaborative and license arrangements and entering into additional arrangements on terms that are favorable to us;

·   the amount and timing of milestone and royalty payments from our collaborators and licensees related to their progress in developing and commercializing their products;

·   the costs to manufacture, or have third parties manufacture, the materials used in KALBITOR, DX-2930 and any of our other product candidates;

·   competing technological and market developments;

·   the costs of prosecuting, maintaining, defending and enforcing our patents and other intellectual property rights;

·   the amount and timing of additional capital equipment purchases; and

·   the overall condition of the financial markets.

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We expect that existing cash, cash equivalents and investments together with anticipated cash flow from product sales and existing product development, collaborations and license fees will be sufficient to support our current operations for at least the next twelve months.  We may need additional funds if our cash requirements exceed our current expectations, if we generate less revenue than we expect or, if we pursue additional product development.

We may seek additional funding through collaborative arrangements, public or private financings, or other means.  We may not be able to obtain financing on acceptable terms or at all, and we may not be able to enter into additional collaborative arrangements.  Arrangements with collaborators or others may require us to relinquish rights to certain of our technologies, product candidates or products.  The terms of any financing may adversely affect the holdings or the rights of our stockholders.  If we are unable to obtain funding on a timely basis, we may be required to curtail significantly our research, development or commercialization programs which could adversely affect our business prospects.

Any new biopharmaceutical product candidates we develop, including DX-2930, must undergo rigorous clinical trials which could substantially delay or prevent their development or marketing.

We are developing DX-2930, a fully human monoclonal antibody inhibitor of plasma kallikrein, which could be a candidate to treat HAE prophylactically.  Before we can commercialize DX-2930, or any biopharmaceutical product candidate, we must engage in a rigorous clinical trial and regulatory approval process mandated by the FDA and analogous foreign regulatory agencies.  This process is lengthy and expensive, and approval is never certain. Positive results from preclinical studies and early clinical trials do not ensure positive results in late stage clinical trials designed to permit application for regulatory approval.  We cannot accurately predict when planned clinical trials will begin or be completed.  Many factors affect patient enrollment, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, alternative therapies, competing clinical trials and new drugs approved for the conditions that we are investigating.  Therefore, our future trials may take longer to enroll patients than we anticipate.  Such delays may increase our costs and slow down our product development and the regulatory approval process.  Our product development costs will also increase if we need to perform more or larger clinical trials than planned.  The occurrence of any of these events will delay our ability to commercialize products, generate revenue from product sales and impair our ability to become profitable, which may cause us to have insufficient capital resources to support our operations.

Products that we or our collaborators develop could take a significantly longer time to gain regulatory approval than we expect or may never gain approval.  If we or our collaborators do not receive these necessary approvals we will not be able to generate substantial product or royalty revenues and may not become profitable.  We and our collaborators may encounter significant delays or excessive costs in our efforts to secure regulatory approvals.  Factors that raise uncertainty in obtaining these regulatory approvals include the following:

·   we or our collaborators must demonstrate through clinical trials that the proposed product is safe and effective for its intended use;

·   we have limited experience in conducting the clinical trials necessary to obtain regulatory approval; and

·   data obtained from preclinical and clinical activities are subject to varying interpretations, which could delay, limit or prevent regulatory approvals.

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Regulatory authorities may delay, suspend or terminate clinical trials at any time if they believe that the patients participating in trials are being exposed to unacceptable health risks or if they find deficiencies in the clinical trial procedures.  There is no guarantee that we will be able to resolve such issues, either quickly, or at all.  In addition, our or our collaborators' failure to comply with applicable regulatory requirements may result in criminal prosecution, civil penalties and other actions that could impair our ability to conduct our business.

We depend heavily on sales of our lead product, KALBITOR, which was approved in the United States for treatment of acute attacks of HAE in patients 16 years and older.

Our product sales depend on KALBITOR in the United States and whether physicians, patients and healthcare payers choose KALBITOR over alternative treatments.  The continuing product sales of KALBITOR and our prospects for increasing product sales and cash flow will depend on multiple factors, including the following:

·   the number of patients with HAE who are diagnosed with the disease and identified to us;

·   the number of patients with HAE who may be treated with KALBITOR;

·   acceptance of KALBITOR in the medical community;

·   the frequency of HAE patients' use of KALBITOR to treat their acute attacks of HAE;

·   HAE patients' ability to obtain and maintain sufficient coverage or reimbursement by third-party payers for the use of KALBITOR;

·   our ability to effectively market and distribute KALBITOR in the United States;

·   competition from other products approved for the treatment of HAE;

·   the maintenance of marketing approval of KALBITOR in the United States and the receipt and maintenance of marketing approval from foreign regulatory authorities;

·   our maintenance of commercial manufacturing and distribution capabilities for KALBITOR through third-parties; and

·   our ability to maintain sufficient inventories to supply KALBITOR for patient use.

If we are unable to continue sales of KALBITOR in the United States and commercialize ecallantide in additional countries or if we are significantly delayed or limited in doing so, our business prospects would be adversely affected.

Because the target patient population of KALBITOR for treatment of HAE is small and has not been definitively determined, we must be able to successfully identify HAE patients and achieve a significant market share in order to achieve or maintain profitability.

The prevalence of HAE patients, which has been estimated at approximately 1 in 50,000 people around the world, has not been definitively determined.  There can be no guarantee that any of our programs will be effective at identifying HAE patients.  The number of HAE patients in the United States may turn out to be lower than estimated or patients may not utilize treatment with KALBITOR for all or any of their acute HAE attacks.  All or any of these factors would adversely affect our results of operations and business prospects.

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If HAE patients are unable to obtain and maintain reimbursement for KALBITOR from government health administration authorities, private health insurers and other organizations, KALBITOR may be too costly for regular use and our ability to generate product sales would be harmed.

We may not be able to sell KALBITOR on a profitable basis or our profitability may be reduced if we are required to sell our product at lower than anticipated prices or if reimbursement is unavailable or limited in scope or amount.  KALBITOR is more expensive than traditional drug treatments and most patients require some form of third party insurance coverage and/or patient financial assistance provided by us in order to afford its cost.  Our future revenues and profitability will be adversely affected if HAE patients cannot depend on governmental, private and other third-party payers, such as Medicare and Medicaid in the United States or any other country specific governmental organizations, to defray the cost of KALBITOR.  If these entities refuse to provide coverage and reimbursement with respect to KALBITOR or determine to provide a lesser level of coverage and reimbursement than anticipated, KALBITOR may be too costly for general use, and physicians may not prescribe it.

In addition to potential restrictions on insurance coverage, the amount of reimbursement for KALBITOR may also reduce our ability to profitably commercialize KALBITOR.  In the United States and elsewhere, there have been, and we expect there will continue to be, actions and proposals to control and reduce healthcare costs.  Government and other third-party payers are challenging the prices charged for healthcare products and increasingly limiting and attempting to limit both coverage and level of reimbursement for prescription drugs.

It is possible that we will never have sufficient KALBITOR sales revenue in order to achieve or sustain future profitability.

We may not be able to maintain or expand market acceptance among the medical community or patients for KALBITOR, which would prevent us from achieving or maintaining profitability in the future.

We cannot be certain that KALBITOR will continue to maintain or gain additional market acceptance among physicians, patients, healthcare payers, and others.  We cannot predict whether physicians, other healthcare providers, government agencies or private insurers will prefer other therapies for HAE.  Medical doctors' willingness to prescribe, and patients' willingness to accept and use, KALBITOR depends on many factors, including prevalence and severity of adverse side effects , effectiveness of our marketing strategies and the pricing of KALBITOR, publicity concerning KALBITOR or competing products, HAE patients’ ability to obtain and maintain third-party coverage or reimbursement, and competition from alternative treatments.  In addition, the number of acute attacks that are treated with KALBITOR will vary from patient to patient depending upon a variety of factors.

If KALBITOR fails to maintain or increase market acceptance it would adversely affect our results of operations and business prospects.

Competition and technological change may make our potential products and technologies less attractive or obsolete.

We compete in industries characterized by continuous intense competition and rapid technological change.  New developments occur and are expected to continue to occur constantly and at a rapid pace.

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Our business is focused on HAE and other PKM disorders.  Our principal competitors are companies that either are already marketing products or are developing new products for these disorders.  A description of our competition is provided in Item 1, “Business - Competition”.

Many of our competitors have greater financial resources and experience than we do.  Discoveries or commercial developments by our competitors or others may render some or all of our technologies, products or potential products obsolete or non-competitive.

If we fail to comply with continuing regulations, we could lose our approvals to market KALBITOR, and our business would be adversely affected.

We cannot guarantee that we will be able to maintain our regulatory approval for KALBITOR in the United States. We and our current and future partners, contract manufacturers and suppliers are subject to rigorous and extensive regulation by the FDA, other federal and state agencies, and governmental authorities in other countries.  These regulations continue to apply after product approval, and cover, among other things, testing, manufacturing, quality control, labeling, advertising, promotion, adverse event reporting requirements, and export of biologics.

As a condition of approval for marketing KALBITOR in the United States and other jurisdictions, the FDA or governmental authorities in those jurisdictions may require us to conduct additional clinical trials.  For example, in connection with the approval of KALBITOR in the United States, we have agreed to conduct a Phase 4 clinical study to evaluate immunogenicity and hypersensitivity with exposure to KALBITOR for treatment of acute attacks of HAE.  The FDA can propose to withdraw approval if new clinical data or any other information shows that KALBITOR is not safe for use or determines that such study is inadequate.  We are required to report any serious and unexpected adverse experiences and certain quality problems with KALBITOR to the FDA and other health agencies.  We, the FDA or another health agency may have to notify healthcare providers of any such developments.  The discovery of any previously unknown problems with KALBITOR or its manufacturer may result in updates to the product label, restrictions on KALBITOR commercialization and the manufacturer or manufacturing facility, including withdrawal of KALBITOR from the market.  Certain changes to an approved product, including the way it is manufactured or promoted, often require prior regulatory approval before the product as modified may be marketed.

Our third-party manufacturing facilities were subjected to inspection prior to grant of marketing approval and are subject to continued review and periodic inspections by the regulatory authorities.  Any third party we would use to manufacture KALBITOR for sale must also be licensed by applicable regulatory authorities.  Although we have established a corporate compliance program, we cannot guarantee that we or our third party vendors are and will continue to be in compliance with all applicable laws and regulations. Failure to comply with the laws, including statutes and regulations, administered by the FDA or other agencies could result in:

·   administrative and judicial sanctions, including warning letters;

·   fines and other civil penalties;

·   withdrawal of a previously granted approval to sell;

·   interruption of production;

·   operating restrictions;

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·   product recall or seizure; injunctions; and

·   criminal prosecution.

The discovery of previously unknown problems with KALBITOR, or with the facility used to produce the product could result in a regulatory authority imposing restrictions on us, or could cause us to voluntarily adopt such restrictions, including withdrawal of KALBITOR from the market.

If we do not maintain our regulatory approval to sell KALBITOR in the United States, our results of operations and business prospects will be materially harmed.

If the use of KALBITOR is found to harm people, or is perceived to harm patients even when such harm is unrelated to KALBITOR, our regulatory approvals could be revoked or otherwise negatively affected and we could be subject to costly and damaging product liability claims.

The testing, manufacturing, marketing and sale of drugs for use in humans exposes us to product liability risks.  Side effects and other problems from using KALBITOR could:

·   lessen the frequency with which physicians decide to prescribe KALBITOR;

·   encourage physicians to stop prescribing KALBITOR to their patients who previously had been prescribed KALBITOR;

·   cause serious adverse events and give rise to product liability claims against us; and

·   result in our need to withdraw or recall KALBITOR from the marketplace.

The likelihood of occurrence of these risks is unknown at this time.

We have tested KALBITOR in only a limited number of patients.  As more patients begin to use KALBITOR, new risks and side effects may be discovered.  Risks previously viewed as inconsequential could be determined to be significant.  Previously unknown risks and adverse effects of KALBITOR may be discovered in connection with unapproved, or off-label, uses of KALBITOR.  We do not promote, or in any way support or encourage the promotion of KALBITOR for off-label uses in violation of relevant law, but current regulations allow physicians to use products for off-label uses.  In the event of any new risks or adverse effects discovered as new patients are treated for HAE, regulatory authorities may modify or revoke their approvals and we may be required to conduct additional clinical trials, make changes in labeling of KALBITOR, reformulate KALBITOR or make changes and obtain new approvals for our and our suppliers' manufacturing facilities.  We may experience a significant drop in the potential sales of KALBITOR, an increase in costs, experience harm to our reputation and the reputation of KALBITOR in the marketplace or become subject to government investigations or lawsuits, including class actions.  Any of these results could decrease or prevent any sales of KALBITOR or substantially increase the costs and expenses of commercializing and marketing KALBITOR.

We may be sued by people who use KALBITOR, whether as a prescribed therapy, during a clinical trial, during an investigator initiated study, or otherwise.  Any informed consents or waivers obtained from people who enroll in our trials or use KALBITOR may not protect us from liability or litigation.  Our product liability insurance may not cover all potential types of liabilities or may not cover certain liabilities completely.  Moreover, we may not be able to maintain our insurance on acceptable terms.  Negative publicity relating to the use of KALBITOR or a product candidate, or to a product liability claim, may make it more difficult, or impossible, for us to market and sell KALBITOR.  As a result of these factors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results of operations.

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During the course of treatment, patients may suffer adverse events, including death, for reasons that may or may not be related to KALBITOR.  Such events could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market KALBITOR, or require us to suspend or abandon our commercialization efforts.  Even in a circumstance in which we do not believe that an adverse event is related to KALBITOR, the investigation into the circumstance may be time-consuming, costly or  inconclusive.  These investigations may interrupt our sales efforts, delay our regulatory approval process in other countries, or impact and limit the type of regulatory approvals KALBITOR receives or maintains.

If we are unable to maintain effective sales, marketing and distribution capabilities, or enter into agreements with third parties to do so, we will be unable to successfully commercialize KALBITOR.

We are marketing and selling KALBITOR ourselves in the United States and have only limited experience with marketing, sales or distribution of drug products. If we are unable to adequately sell, market and distribute KALBITOR, either ourselves or by entering into agreements with others, or to maintain such capabilities, we will not be able to successfully sell KALBITOR.  In that event, we will not be able to generate significant product sales.  We cannot guarantee that we will be able to maintain our own capabilities or enter into and maintain any purchase and distribution agreements with third-parties on acceptable terms, if at all.

In the United States, we sell KALBITOR to customers including wholesalers, specialty pharmacies and a limited number of hospitals.  Our distributors do not set or determine demand for KALBITOR.  We expect our distribution arrangements to continue for the foreseeable future through an extension or replacement of our current agreements.  Our ability to successfully commercialize KALBITOR will depend, in part, on the extent to which we are able to provide adequate distribution of KALBITOR to patients through our distributors.  It is possible that our distributors could change their policies or fees, or both, sometime in the future.  This could result in their refusal to distribute smaller volume products such as KALBITOR, or cause higher product distribution costs, lower margins or the need to find alternative methods of distributing KALBITOR.  Although we have contractual remedies to mitigate these risks and we also believe we could find alternative distributors on relatively short notice, our product sales during that period of time may suffer and we may incur additional costs to replace a distributor.  A significant reduction in product sales to our distributors, any cancellation of orders they have made with us or any failure to pay for the products we have shipped to them could materially and adversely affect our results of operations and financial condition.

We have hired sales and marketing professionals for the commercialization of KALBITOR throughout the United States.  Even with these sales and marketing personnel, we may not have the necessary size and experience of the sales and marketing force and the appropriate distribution capabilities necessary to successfully market and sell KALBITOR.  Establishing and maintaining sales, marketing and distribution capabilities are expensive and time-consuming.  Our expenses associated with maintaining the sales force and distribution capabilities may be disproportional compared to the revenues we may be able to generate on sales of KALBITOR.  We cannot guarantee that we will be successful in commercializing KALBITOR and a failure to do so would adversely affect our business prospects.

The timing of sales to our distributors and the amount of KALBITOR they keep as inventory have a significant impact on the amount of our product sales in a particular period and we may not be able to accurately predict future purchases by our distributors.

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Our sales of KALBITOR are made primarily to a network of distributors, which, in turn, resell KALBITOR to end user customers.  Product in the distribution channel consists of supply held by these distributors.  Our product sales in a particular period may be affected by increases or decreases in the distribution channel inventory levels.  While we attempt to assist our distributors in maintaining targeted inventory levels of KALBITOR, we may not be successful in achieving those targeted levels.  Attempting to assist our distributors in maintaining targeted inventory levels of KALBITOR involves the exercise of judgment and use of assumptions about future uncertainties including end user customer demand and, as a result, actual demand may differ from our estimates.

Although our distributors typically buy KALBITOR from us in quantities they consider necessary to satisfy projected end user demand, we may not be able to accurately predict their future buying practices.  For example, distributors may engage in speculative purchases of KALBITOR in excess of the current market demand in anticipation of future price increases.  Therefore, during any given period, sales to a distributor may be above or below actual patient demand for KALBITOR during the same period, resulting in fluctuations in the amount of product in the distribution channel.  If distribution channel inventory levels are substantially different from end user demand, we could experience variability in product sales from period to period.

We are dependent on a single contract manufacturer to produce ecallantide drug substance and another to fill, label and package ecallantide drug product into the final form, which may adversely affect our ability to commercialize KALBITOR.

We currently rely on Fujifilm to produce the bulk drug substance used in the manufacture of KALBITOR.  Ecallantide drug substance is filled, labeled and packaged into the final form of KALBITOR drug product by Jubilant Hollister-Stier (JHS) under a commercial supply agreement.  Our business faces risks of difficulties with, and interruptions in, performance by Fujifilm or JHS, the occurrence of which could adversely impact the availability and/or sales of KALBITOR in the future.  The failure of Fujifilm or JHS to supply manufactured product on a timely basis or at all, or to manufacture our drug substance in compliance with our specifications or applicable quality requirements or in volumes sufficient to meet demand could adversely affect our ability to sell KALBITOR, could harm our relationships with collaborators or customers and could negatively affect our revenues and operating results.  If the operations of Fujifilm or JHS are disrupted, we may be forced to secure alternative sources of supply, which may be unavailable on commercially acceptable terms, may cause delays in our ability to deliver products to customers, may increase our costs and negatively affect our operating results.

In addition, failure to comply with applicable good manufacturing practices and other governmental regulations and standards could be the basis for action by the FDA or corresponding foreign agency to withdraw approval for KALBITOR and for other regulatory action, including recall or seizure of product, fines, imposition of operating restrictions, total or partial suspension of production or injunctions.  For example, in November 2013, JHS received a Warning Letter from the FDA.  They are working to resolve issues raised in the Warning Letter. If JHS fails to correct the issues cited in the Warning Letter, deliveries of KALBITOR from JHS to us may be adversely impacted.

We have a long-term commercial supply agreement with Fujifilm, under which they have committed to be available to manufacture ecallantide drug substance through 2020.  In addition, we believe that our existing supply of ecallantide drug substance will be sufficient to supply all ongoing studies relating to ecallantide and KALBITOR and to meet anticipated market demand into 2018.  These estimates are subject to changes in market conditions and other factors beyond our control.  If Fujifilm or JHS is unable to dependably meet our demands for ecallantide drug substance or product, it could adversely affect our ability to further develop and commercialize KALBITOR, generate revenue from product sales, increase our costs and negatively affect our operating results.

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If we market KALBITOR in a manner that violates healthcare fraud and abuse laws, we may be subject to civil or criminal penalties.

In addition to FDA and related regulatory requirements, we are subject to health care "fraud and abuse" laws, such as the federal False Claims Act, the anti-kickback provisions of the federal Social Security Act, and other state and federal laws and regulations.  Federal and state anti-kickback laws prohibit, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any health care item or service reimbursable under Medicare, Medicaid, or other federally or state financed health care programs.  This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers and prescribers, patients, purchasers and formulary managers.  Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly.  Practices that involve remuneration intended to induce prescribing, purchasing, or recommending may be subject to scrutiny if they do not qualify for an exemption or safe harbor.
 

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid.  Pharmaceutical companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in promotion for uses that the FDA has not approved, or "off-label" uses, that caused claims to be submitted to Medicaid for non-covered off-label uses; and submitting inflated best price information to the Medicaid Rebate Program.

Although based on their medical judgment, physicians are permitted to prescribe products for indications other than those cleared or approved by the FDA, manufacturers are prohibited from promoting their products for such off-label uses.  We market KALBITOR in the U.S. according to its FDA approved label for acute attacks of HAE in patients 16 years and older and provide promotional materials to physicians regarding the use of KALBITOR for this indication.  Although we believe our marketing, promotional materials do not constitute off-label promotion of KALBITOR, the FDA may disagree.  If the FDA determines that our promotional materials, training or other activities constitute off-label or misleading promotion of KALBITOR, it could request that we modify our training or promotional materials or other activities or subject us to regulatory enforcement actions, including the issuance of a warning letter, injunction, seizure, civil fine and criminal penalties.  It is also possible that other federal, state or foreign enforcement authorities might take action if they believe that the alleged improper promotion led to the submission and payment of claims for an unapproved use.  This could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.  Even if it is later determined we are not in violation of these laws, we may be faced with negative publicity, incur significant expenses defending our position and have to divert significant management resources from other matters.

The majority of states have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.  Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer's products from reimbursement under government programs, criminal fines, and imprisonment.  Even if we ultimately are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which would also harm our financial condition.  Because of the breadth of these laws and the narrowness of the safe harbors and because government scrutiny in this area is high, it is possible that some of our business activities could come under scrutiny.

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In recent years several states have enacted legislation requiring pharmaceutical companies to establish marketing compliance programs, file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials, and other activities.  In addition, as part of health care reform, the federal government has enacted the Physician Payment Sunshine Act and related regulations.  Beginning in 2014, manufacturers of drugs will be required to publicly report gifts, payments or other transfers of value made to physicians and teaching hospitals.  Many of these requirements are new and uncertain, and the penalties for failure to comply with these requirements are unclear.  Although we have established compliance policies that comport with the Code of Interactions with Healthcare Providers adopted by Pharmaceutical Research Manufacturers of America (PhRMA Code), the Office of Inspector General's (OIG) Compliance Program Guidance for Pharmaceutical Manufacturers and best practices in the pharmaceutical industry, if we are found not to be in full compliance with these laws, we could face enforcement action and fines and other penalties, and could receive adverse publicity which could adversely affect our business.

If we fail to comply with our reporting and payment obligations under U.S. governmental price reporting laws, we could be required to reimburse government programs for underpayments and could pay penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition and results of operations.

We are required to calculate and report certain pricing data to the U.S. federal government in connection with federal drug pricing programs. Compliance with these federal drug pricing programs is a pre-condition to (i) the availability of federal funds to pay for our products under Medicaid and Medicare Part B; and (ii) the procurement of our products by the Department of Veterans Affairs, and by covered entities under the federal government’s drug pricing program administered under Section 340B of the Public Health Services Act, referred to as the 340B program. The pricing data reported are used as the basis for establishing contracts for sales to the Department of Veterans Affairs, the Section 340B program contract pricing and payment and rebate rates under the Medicare Part B and Medicaid programs, respectively. Pharmaceutical manufacturers have been prosecuted under federal and state false claims laws for submitting inaccurate and/or incomplete pricing information to the government that resulted in overcharges under these programs. The rules governing the calculation of certain reported prices are highly complex. Although we maintain and follow strict procedures to ensure the maximum possible integrity for our federal price calculations, the process for making the required calculations involves some subjective judgments and the risk of errors always exists, which creates the potential for exposure under the false claims laws. If we become subject to investigations or other inquiries concerning our compliance with price reporting laws and regulations, and our methodologies for calculating federal prices are found to include flaws or to have been incorrectly applied, we could be required to pay or be subject to additional reimbursements, penalties, sanctions or fines, which could have a material adverse effect on our business, financial condition and results of operations.

We rely on third-party manufacturers to produce our preclinical and clinical drug supplies and commercial supplies of KALBITOR and we intend to rely on third parties to produce any future approved product candidates.  Any failure by a third-party manufacturer to produce supplies for us may delay or impair our ability to develop, obtain regulatory approval for or commercialize our product candidates.

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We have relied upon a small number of third-party manufacturers for the manufacture of our product candidates for preclinical, clinical testing and commercial purposes and intend to continue to do so in the future.  As a result, we depend on collaborators, partners, licensees and other third parties to manufacture clinical and commercial scale quantities of our biopharmaceutical candidates in a timely and effective manner and in accordance with government regulations.  If these third party arrangements are not successful, it will adversely affect our ability to develop, obtain regulatory approval for or commercialize our product candidates.

We have identified only a few vendors with facilities that are capable of producing material for preclinical, clinical studies and for commercial purposes.  We cannot be assured that they will be able to supply sufficient clinical materials on a timely basis during the clinical development or commercialization of our biopharmaceutical candidates, including DX-2930.  Reliance on third-party manufacturers entails risks which we would not be subject to if we manufactured product candidates ourselves.  These risks include reliance on the third party for regulatory compliance and quality assurance, the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control (including a failure to synthesize and manufacture our product candidates in accordance with our product specifications) and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or damaging to us.  In addition, the FDA and other regulatory authorities require that our product candidates be manufactured according to cGMP and similar foreign standards.  Any failure by our third-party manufacturers to comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of DX-2930 or any of our product candidates.

In addition, as our drug development pipeline increases and matures, we will have a greater need for clinical trial and commercial manufacturing capacity.  We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates and we currently have no plans to build our own clinical or commercial scale manufacturing capabilities.  To meet our projected needs for commercial manufacturing, third parties with whom we currently work will need to increase their scale of production or we will need to secure alternate suppliers.

Although we obtained regulatory approval of KALBITOR for the treatment of acute attacks of HAE in patients 16 years and older in the United States, we may be unable to obtain regulatory approval for ecallantide in any other territory.

Governments in countries outside the United States also regulate drugs distributed in such countries and facilities in such countries where such drugs are manufactured, and obtaining their approvals can also be lengthy, expensive and highly uncertain.  The approval process varies from country to country and the requirements governing the conduct of clinical trials, product manufacturing, product licensing, pricing and reimbursement vary greatly from country to country.  In certain jurisdictions, we are required to finalize operational, reimbursement, price approval and funding processes prior to marketing our products.  We may not receive regulatory approval for ecallantide in countries other than the United States on a timely basis, if ever.  Even if approval is granted in any such country, the approval may require limitations on the indicated uses for which the drug may be marketed.  Failure to obtain regulatory approval for ecallantide in territories outside the United States could have a material adverse effect on our business prospects.

We rely on third parties to conduct clinical trials and to perform certain regulatory processes, which may adversely affect our ability to commercialize any biopharmaceuticals that we may develop.

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We have hired experienced clinical development and regulatory staff to develop and supervise our clinical trials and regulatory processes.  However, we will remain dependent upon third party contract research organizations to carry out some of our clinical and preclinical research studies for the foreseeable future.  As a result, we will continue to have less control over the conduct of the clinical trials, the timing and completion of the trials, the required reporting of adverse events and the management of data developed through the trials than would be the case if we were relying entirely upon our own staff.  Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities.  Outside parties may have staffing difficulties, may undergo changes in priorities or may become financially distressed, adversely affecting their willingness or ability to conduct our trials.  We may also experience unexpected cost increases that are beyond our control.

Problems with the timeliness or quality of the work of a contract research organization may lead us to seek to terminate the relationship and use an alternative service provider.  However, changing our service provider may be costly and may delay our trials.  Contractual restrictions may make such a change difficult or impossible.  Additionally, it may be impossible to find a replacement organization that can conduct our trials in an acceptable manner and at an acceptable cost.

Government regulation of drug development is costly, time consuming and fraught with uncertainty, and our products in development cannot be sold if we do not gain regulatory approval.

We and our licensees and partners conduct research, preclinical testing and clinical trials for our product candidates.  These activities are subject to extensive regulation by numerous state and federal governmental authorities in the United States, such as the FDA, as well as foreign countries, such as the EMEA in European countries, Canada and Australia.  We are required in the United States and in foreign countries to obtain approval from those countries' regulatory authorities before we can manufacture (or have our third-party manufacturers produce), market and sell our products in those countries.  The FDA and other United States and foreign regulatory agencies have substantial authority to fail to approve commencement of, suspend or terminate clinical trials, require additional testing and delay or withhold registration and marketing approval of our product candidates.

Obtaining regulatory approval has been and continues to be increasingly difficult and costly and takes many years.  If obtained, approval is costly to maintain.  With the occurrence of a number of high profile safety events with certain pharmaceutical products, regulatory authorities, and in particular the FDA, members of Congress, the United States Government Accountability Office (GAO), Congressional committees, private health/science foundations and organizations, medical professionals, including physicians and investigators, and the general public are increasingly concerned about potential or perceived safety issues associated with pharmaceutical and biological products, whether under study for initial approval or already marketed.

This increasing concern has engendered greater scrutiny, which may lead to longer time to approval, fewer treatments being approved by the FDA or other regulatory bodies, as well as restrictive labeling of a product or a class of products for safety reasons, potentially including “boxed” warnings or additional limitations on the use of products, post-approval pharmacovigilance programs for approved products or requirement of risk management activities related to the promotion and sale of a product.

If regulatory authorities determine that we or our licensees or partners or vendors conducting research and development activities on our behalf have not complied with regulations in the research and development of a product candidate, a new indication for an existing product or information to support a current indication, then they may not approve the product candidate or new indication or maintain approval of the current indication in its current form or at all, and we will not be able to market and sell it.  If we were unable to market and sell our product candidates, our business and results of operations would be materially and adversely affected.

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Product liability and other claims arising in connection with the testing of our product candidates in human clinical trials may reduce demand for our products or result in substantial damages.

We face an inherent risk of product liability exposure related to KALBITOR and the testing of DX-2930 in human clinical trials.

An individual may bring a product liability claim against us if KALBITOR, DX-2930, or one of our other product candidates causes, or merely appears to have caused, an injury.  Moreover, in some clinical trials, we test our product candidates in indications where the onset of certain symptoms or "attacks" could be fatal.  Although the protocols for these trials include emergency treatments in the event a patient appears to be suffering a potentially fatal incident, patient deaths may nonetheless occur.  As a result, we may face additional liability if we are found or alleged to be responsible for any such deaths.

These types of product liability claims may result in, but are not limited to:
 

·   decreased demand for KALBITOR or any other product candidates;

·   injury to our reputation;

·   withdrawal of clinical trial volunteers;

·   related litigation costs; and

·   substantial monetary awards to plaintiffs.

Although we currently maintain product liability insurance, we may not have sufficient insurance coverage, and we may not be able to obtain sufficient coverage at a reasonable cost.  Our inability to obtain product liability insurance at an acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of any products that we or our collaborators develop, including KALBITOR.  If we are successfully sued for any injury caused by our products or processes, then our liability could exceed our product liability insurance coverage and our total assets.

If we fail to establish and maintain strategic license, research and collaborative relationships, or if our collaborators are not able to successfully develop and commercialize product candidates, our ability to generate revenues could be adversely affected.

Our business strategy includes leveraging certain product candidates and our proprietary phage display technology through collaborations and licenses that are structured to generate revenues through license fees, technical and clinical milestone payments, and royalties.  We have entered into, and anticipate continuing to enter into, collaborative and other similar types of arrangements with third parties to develop, manufacture and market drug candidates and drug products.

In addition, for us to continue to receive any significant payments from our LFRP related licenses and collaborations and generate sufficient revenues to meet the required payments under our agreement with HC Royalty, the relevant product candidates must advance through clinical trials, establish safety and efficacy, and achieve regulatory approvals, obtain market acceptance and generate revenues.

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Reliance on license and collaboration agreements involves a number of risks as our licensees and collaborators:

·   are not obligated to develop or market product candidates discovered using our phage display technology;

·   may not perform their obligations as expected, or may pursue alternative technologies or develop competing products;

·   control many of the decisions with respect to research, clinical trials and commercialization of product candidates we discover or develop with them or have licensed to them;

·   may terminate their collaborative arrangements with us under specified circumstances, including, for example, a change of control, with short notice; and

·   may disagree with us as to whether a milestone or royalty payment is due or as to the amount that is due under the terms of our collaborative arrangements.

We cannot be assured we will be able to maintain our current licensing and collaborative efforts, nor can we assure the success of any current or future licensing and collaborative relationships.  An inability to establish new relationships on terms favorable to us, work successfully with current licensees and collaborators, or failure of any significant portion of our LFRP related licensing and collaborative efforts would result in a material adverse impact on our business, operating results and financial condition.

Our success depends significantly upon our ability to obtain and maintain intellectual property protection for our products and technologies and upon third parties not having or obtaining patents that would limit or prevent us from commercializing any of our products.

We face risks and uncertainties related to our intellectual property rights.  For example:

·   we may be unable to obtain or maintain patent or other intellectual property protection for any products or processes that we may develop or have developed;

·   third parties may obtain patents covering the manufacture, use or sale of these products or processes, which may prevent us from commercializing any of our products under development globally or in certain regions; or

·   our patents or any future patents that we may obtain may not prevent other companies from competing with us by designing their products or conducting their activities so as to avoid the coverage of our patents.

Patent rights relating to our phage display technology are central to our LFRP.  In countries where we do not have and/or have not applied for phage display patent rights, we will be unable to prevent others from using phage display or developing or selling products or technologies derived using phage display.  In jurisdictions where we have phage display patent rights, we may be unable to prevent others from selling or importing products or technologies derived elsewhere using phage display.  Any inability to protect and enforce such phage display patent rights, whether by any invalidity of our patents or otherwise, could negatively affect future licensing opportunities and revenues from existing agreements under the LFRP.

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In all of our activities, we also rely substantially upon proprietary materials, information, trade secrets and know-how to conduct our research and development activities and to attract and retain collaborators, licensees and customers.  Although we take steps to protect our proprietary rights and information, including the use of confidentiality and other agreements with our employees and consultants and in our academic and commercial relationships, these steps may be inadequate, these agreements may be violated, or there may be no adequate remedy available for a violation.  Our trade secrets or similar technology may otherwise become known to, or be independently developed or duplicated by, our competitors.

Before we and our collaborators can market some of our processes or products, we and our collaborators may need to obtain licenses from other parties who have patent or other intellectual property rights covering those processes or products.  Third parties have patent rights related to phage display, particularly in the area of antibodies.  While we have gained access to key patents in the antibody area through the cross licenses with Affimed Therapeutics AG, Affitech AS, Biosite Incorporated (now owned by Alere Inc.), Cambridge Antibody Technology Limited or CAT (now known as MedImmune Limited and owned by AstraZeneca), Domantis Limited (a wholly-owned subsidiary of GlaxoSmithKline), Genentech, Inc. and XOMA Ireland Limited, other third party patent owners may contend that we need a license or other rights under their patents in order for us to commercialize a process or product.  In addition, we may choose to license patent rights from other third parties.  In order for us to commercialize a process or product, we may need to license the patent or other rights of other parties.  If a third party does not offer us a needed license or offers us a license only on terms that are unacceptable, we may be unable to commercialize one or more of our products.  If a third party does not offer a needed license to our collaborators and as a result our collaborators stop work under their agreement with us, we might lose future milestone payments and royalties, which would adversely affect us.  If we decide not to seek a license, or if licenses are not available on reasonable terms, we may become subject to infringement claims or other legal proceedings, which could result in substantial legal expenses.  If we are unsuccessful in these actions, adverse decisions may prevent us from commercializing the affected process or products and could require us to pay substantial monetary damages.

We seek affirmative rights of license or ownership under existing patent rights relating to phage display technology of others.  For example, through our patent licensing program, we have secured a limited freedom to practice some of these patent rights pursuant to our standard license agreement, which contains a covenant by the licensee that it will not sue us under certain of the licensee's phage display improvement patents.  We cannot guarantee that we will be successful in enforcing any agreements from our licensees, including agreements not to sue under their phage display improvement patents, or in acquiring similar agreements in the future, or that we will be able to obtain commercially satisfactory licenses to the technology and patents of others.  If we cannot obtain and maintain these licenses and enforce these agreements, this could have a material adverse impact on our business.

Proceedings to obtain, enforce or defend patents and to defend against charges of infringement are time consuming and expensive activities.  Unfavorable outcomes in these proceedings could limit our patent rights and our activities, which could materially affect our business.
 

Obtaining, protecting and defending against patent and proprietary rights can be expensive.  For example, if a competitor files a patent application claiming technology also invented by us, we may have to participate in an expensive and time-consuming interference proceeding before the United States Patent and Trademark Office to address who was first to invent the subject matter of the claim and whether that subject matter was patentable.  Moreover, an unfavorable outcome in an interference proceeding could require us to cease using the technology or attempt to license rights to it from the prevailing party.  Our business would be harmed if a prevailing third party does not offer us a license on terms that are acceptable to us.  In patent offices outside the United States, we may be forced to respond to third party challenges to our patents.

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The issues relating to the validity, enforceability and possible infringement of our patents present complex factual and legal issues that we periodically reevaluate.  Third parties have patent rights related to phage display, particularly in the area of antibodies.  While we have gained access to key patents in the antibody area through our cross-licensing agreements with Affimed, Affitech, Biosite, Domantis, Genentech, XOMA and CAT, other third party patent owners may contend that we need a license or other rights under their patents in order for us to commercialize a process or product.  In addition, we may choose to license patent rights from third parties.  While we believe that we will be able to obtain any needed licenses, we cannot assure you that these licenses, or licenses to other patent rights that we identify as necessary in the future, will be available on reasonable terms, if at all.  If we decide not to seek a license, or if licenses are not available on reasonable terms, we may become subject to infringement claims or other legal proceedings, which could result in substantial legal expenses.  If we are unsuccessful in these actions, adverse decisions may prevent us from commercializing the affected process or products.  Moreover, if we are unable to maintain the covenants with regard to phage display improvements that we obtain from our licensees through our patent licensing program and the licenses that we have obtained to third party phage display patent rights, it could have a material adverse effect on our business.

We would expect to incur substantial costs in connection with any litigation or patent proceeding.  In addition, our management's efforts would be diverted, regardless of the results of the litigation or proceeding.  An unfavorable result could subject us to significant liabilities to third parties, require us to cease manufacturing or selling the affected products or using the affected processes, require us to license the disputed rights from third parties or result in awards of substantial damages against us.  Our business will be harmed if we cannot obtain a license, can obtain a license only on terms we consider to be unacceptable or if we are unable to redesign our products or processes to avoid infringement.

In all of our activities, we substantially rely on proprietary materials and information, trade secrets and know-how to conduct research and development activities and to attract and retain collaborative partners, licensees and customers.  Although we take steps to protect these materials and information, including the use of confidentiality and other agreements with our employees and consultants in both academic commercial relationships, we cannot assure you that these steps will be adequate, that these agreements will not be violated, or that there will be an available or sufficient remedy for any such violation, or that others will not also develop the same or similar proprietary information.

Failure to meet our HC Royalty debt service obligations could adversely affect our financial condition and our loan agreement obligations could impair our operating flexibility.

Our loans froman affiliate of HC Royalty have an aggregate principal balance of $84.5 million at December 31, 2013.  The loansbear interest at a rate of 12% per annum, payable quarterly, will mature in August 2018, and can be repaid without penalty beginning in August 2015.

In connection with this loan, we have entered into a security agreement granting HC Royalty a security interest in the intellectual property related to the LFRP and the revenues generated by us through licenses of our intellectual property related to the LFRP.  We are required to repay the loans based on a percentage of LFRP related revenues, including royalties, milestones, and license fees received by us under the LFRP.  If the LFRP revenues for any quarterly period are insufficient to cover the cash interest due for that period, the deficiency may be added to the outstanding loan principal or paid in cash by us.  In the event of certain changes of control or mergers or sales of all or substantially all of our assets, any or all of the loans may become due and payable at HC Royalty’s option, including a prepayment premium obligation, which will expire in August 2015.  We must comply with certain loan covenants which if not observed could make all loan principal, interest and all other amounts payable under the loans immediately due and payable.

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Our obligations under the HC Royalty agreement require that we dedicate a substantial portion of cash flow from our LFRP receipts to service the loans, which will reduce the amount of cash flow available for other purposes while the loan is outstanding.  If the LFRP fails to generate sufficient receipts to fund quarterly principal and interest payments to HC Royalty, we will be required to fund such obligations from cash on hand or from other sources, further decreasing the funds available to operate our business.  In the event that amounts due under the loans is accelerated, payment would significantly reduce our cash, cash equivalents and short-term investments and we may not have sufficient funds to pay the debt if any of it is accelerated.

As a result of the security interest granted to HC Royalty, we are restricted in our ability to sell our rights to part or all of those assets, or take certain other actions, without first obtaining permission from HC Royalty.  This requirement could delay, hinder or condition our ability to enter into corporate partnerships or strategic alliances with respect to these assets.

The obligations and restrictions under the HC Royalty agreement may limit our operating flexibility, make it difficult to pursue our business strategy and make us more vulnerable to economic downturns and adverse developments in our business.

If we lose or are unable to hire and retain qualified personnel, we may not be able to develop our products or processes.

We are highly dependent on qualified scientific and management personnel, and we face intense competition from other companies and research and academic institutions for qualified personnel.  If we lose an executive officer, a manager of one of our principal business units or research programs, or a significant number of any of our staff or are unable to hire and retain qualified personnel, then our ability to develop and commercialize our products and processes may be delayed which would have an adverse effect on our business, financial condition, and results of operations.

We use and generate hazardous materials in our business, and any claims relating to the improper handling, storage, release or disposal of these materials could be time-consuming and expensive.

Our phage display research and development involves the controlled storage, use and disposal of chemicals and solvents, as well as biological and radioactive materials.  We are subject to foreign, federal, state and local laws and regulations governing the use, manufacture and storage and the handling and disposal of materials and waste products.  Although we believe that our safety procedures for handling and disposing of these hazardous materials comply with the standards prescribed by laws and regulations, we cannot completely eliminate the risk of contamination or injury from hazardous materials.  If an accident occurs, an injured party could seek to hold us liable for any damages that result and any liability could exceed the limits or fall outside the coverage of our insurance.  We may not be able to maintain insurance on acceptable terms, or at all.  We may incur significant costs to comply with current or future environmental laws and regulations.

The FDA or similar agencies in other jurisdictions may require us to restrict the distribution or use of KALBITOR or other future products or take other potentially limiting or costly actions if we or others identify side effects after the product is on the market.
 

The FDA had required that we implement a Risk Evaluation and Mitigation Strategy (REMS) for KALBITOR and conduct post-marketing studies to assess a risk of hypersensitivity reactions, including anaphylaxis.  The REMS consisted of a plan to communicate the safety risks of the product to healthcare providers.  While the FDA approved the removal of the REMS requirement for KALBITOR during 2013 because the FDA agreed that we met our obligations under the communication plan, it or other regulatory agencies could impose new requirements or change existing regulations or promulgate new ones at any time that may affect our ability to obtain or maintain approval of KALBITOR or future products or require significant additional costs to obtain or maintain such approvals.  For example, the FDA or similar agencies in other jurisdictions may require us to restrict the distribution or use of KALBITOR if we or others identify side effects after KALBITOR and/or future products are on the market.  Changes in KALBITOR's approval or restrictions on its use could make it difficult to achieve market acceptance, and we may not be able to market and sell KALBITOR, or continue to sell it successfully, or at all.  This would limit our ability to generate product sales and adversely affect our results of operations and business prospects.

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Compliance with changing regulations relating to corporate governance and public disclosure may result in additional expenses.

Remaining compliant with changing laws, regulations and standards relating to corporate governance and public disclosure including the Sarbanes-Oxley Act of 2002, new SEC regulations and NASDAQ Global Market rules requires a significant amount of management attention and external resources.  We intend to invest all reasonably necessary resources to comply with evolving corporate governance and public disclosure standards.  This investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

We may not succeed in acquiring technology and integrating complementary businesses.

We may acquire additional technology and complementary businesses in the future.  Acquisitions involve many risks, any one of which could materially harm our business, including:

·   the diversion of management's attention from core business concerns;

·   the failure to exploit acquired technologies effectively or integrate successfully the acquired businesses;

·   the loss of key employees from either our current business or any acquired businesses; and

·   the assumption of significant liabilities of acquired businesses.

We may be unable to make any future acquisitions in an effective manner.  In addition, the ownership represented by the shares of our common stock held by our existing stockholders will be diluted if we issue equity securities in connection with any acquisition.  If we make any significant acquisitions using cash we may be required to use a substantial portion of our available cash.  If we issue debt securities to finance acquisitions, then the debt holders could have rights senior to the holders of shares of our common stock to make claims on our assets.  The terms of any debt could restrict our operations, including our ability to pay dividends on our shares of common stock.  Acquisition financing may not be available on acceptable terms, or at all.  We may be required to amortize significant amounts of intangible assets in connection with future acquisitions.  We might also have to recognize significant amounts of goodwill that will have to be tested periodically for impairment.  These amounts could be significant, which could harm our operating results.

Risks Related To Our Common Stock

Our common stock may continue to have a volatile public trading price and low trading volume.

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The market price of our common stock has been highly volatile.  Since our initial public offering in August 2000 through January 31, 2014, the price of our common stock on the NASDAQ Global Market has ranged between $54.12 and $1.05.  The market has experienced significant price and volume fluctuations for many reasons, some of which may be unrelated to our operating performance.

Many factors may have an effect on the market price of our common stock, including:

·   public announcements by us, our competitors or others;

·   developments concerning proprietary rights, including patents and litigation matters;

·   publicity regarding actual or potential clinical results or developments with respect to products or compounds we or our collaborators are developing;

·   regulatory decisions in both the United States and abroad;

·   public concern about the safety or efficacy of new technologies;

·   issuance of new debt or equity securities;

·   general market conditions and comments by securities analysts; and

·   quarterly fluctuations in our revenues and financial results.

While we cannot predict the effect that these or other factors may have on the price of our common stock, these factors, either individually or in the aggregate, could result in significant variations in price during any given period of time.

Anti-takeover provisions in our governing documents and under Delaware law may make an acquisition of us more difficult.

We are incorporated in Delaware.  We are subject to various legal and contractual provisions that may make a change in control of us more difficult.  Our board of directors has the flexibility to adopt additional anti-takeover measures.

Our charter authorizes our board of directors to issue up to 1,000,000 shares of preferred stock, of which 958,582 shares remain available for issuance and to determine the terms of those shares of stock without any further action by our stockholders.  If the board of directors exercises this power to issue preferred stock, it could be more difficult for a third party to acquire a majority of our outstanding voting stock.  Our charter also provides staggered terms for the members of our board of directors.  This may prevent stockholders from replacing the entire board in a single proxy contest, making it more difficult for a third party to acquire control of us without the consent of our board of directors.  Our equity incentive plans generally permit our board of directors to provide for acceleration of vesting of options granted under these plans in the event of certain transactions that result in a change of control.  If our board of directors used its authority to accelerate vesting of options this action could make an acquisition more costly, and it could prevent an acquisition from going forward.

Section 203 of the Delaware General Corporation Law prohibits a person from engaging in a business combination with any holder of 15% or more of its capital stock until the holder has held the stock for three years unless, among other possibilities, the board of directors approves the transaction.  This provision could have the effect of delaying or preventing a change of control of Dyax, whether or not it is desired by or beneficial to our stockholders.

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The provisions described above, as well as other provisions in our charter and bylaws and under the Delaware General Corporation Law, may make it more difficult for a third party to acquire our company, even if the acquisition attempt was at a premium over the market value of our common stock at that time.

ITEM 1B.       UNRESOLVED STAFF COMMENTS

None.

ITEM 2.          PROPERTIES

We lease approximately 45,000 square feet of space in Burlington, Massachusetts in a facility whichserves as our corporate headquarters and laboratory facility.  Our lease will expire in 2022, and we have an option to extend our lease for an additional five year term.  We have provided the lessor with a Letter of Credit of approximately $1.1 million.

ITEM 3.          LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

ITEM 4.          MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.          MARKET FOR THE COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER

                        MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on The NASDAQ Global Market under the symbol DYAX.  As of February 20, 2014, there were approximately 131 common stockholders of record.

The following table sets forth, the high and low selling prices for our common stock as reported on NASDAQ Global Market for the periods indicated:

	High		Low
Fiscal year ended December 31, 2013
First Quarter	$	4.39	$	2.82
Second Quarter	$	4.50	$	2.26
Third Quarter	$	7.07	$	3.46
Fourth Quarter	$	9.29	$	6.13

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	High		Low
Fiscal year ended December 31, 2012
First Quarter	$	1.67	$	1.27
Second Quarter	$	2.20	$	1.45
Third Quarter	$	2.88	$	2.08
Fourth Quarter	$	3.74	$	2.24

We have never declared or paid cash dividends on our capital stock.  We currently intend to retain our future earnings, if any, for use in our business.  We do not anticipate paying cash dividends in the foreseeable future.  Any payment of future dividends will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion.

We provide equity compensation plan information in Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters".  We are incorporating that information into this section by this reference.

ITEM 6.          SELECTED CONSOLIDATED FINANCIAL DATA

The following table summarizes certain selected consolidated financial data, which should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this Form 10-K.  The selected consolidated financial data at December 31, 2013 and 2012, and for the years ended December 31, 2013, 2012 and 2011 have been prepared from our audited financial statements included in this Form 10-K.  The selected consolidated financial data at December 31, 2011, 2010 and 2009, and for the years ended December 31, 2010 and 2009, have been prepared from our audited financial statements not included in this Form 10-K.

	December 31,
	2013			2012			2011			2010			2009
	(In thousands, except share and per share data)
Consolidated Statement of Operations Data:
Revenues:
Product sales, net	$	40,526		$	39,783		$	22,884		$	8,835		$	—
Development and license fees		13,400			14,867			25,853			42,564			21,643
Total revenues		53,926			54,650			48,737			51,399			21,643
Cost of product sales		2,688			2,152			1,223			505			—
Research and development expenses		29,695			30,028			34,676			31,522			46,587
Selling, general and administrative expenses		38,742			39,915			37,740			33,583			25,843
Restructuring costs		—			1,440			—			—			2,331
Impairment of fixed assets		—			—			—			—			955
Total operating expenses		71,125			73,535			73,639			65,610			75,716
Loss from operations		(17,199	)		(18,885	)		(24,902	)		(14,211	)		(54,073	)
Other expense, net		(10,578	)		(10,380	)		(9,697	)		(10,292	)		(8,346	)
Net loss	$	(27,777	)	$	(29,265	)	$	(34,599	)	$	(24,503	)	$	(62,419	)
Basic and diluted net loss per share	$	(0.26	)	$	(0.30	)	$	(0.35	)	$	(0.26	)	$	(0.90	)
Shares used in computing basic and diluted net loss per share		108,539,613			98,991,056			98,731,289			93,267,850			69,151,841

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	December 31,
	2013			2012			2011			2010			2009
	(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	68,085		$	20,018		$	31,468		$	18,601		$	29,386
Short-term investments		43,296			9,028			26,036			58,783			23,009
Working capital		104,824			24,431			48,186			67,869			34,126
Total assets		134,207			55,486			83,375			92,431			64,801
Long-term obligations, less current portion		81,979			78,992			75,372			56,474			58,749
Accumulated deficit		(533,963	)		(506,186	)		(476,921	)		(442,322	)		(417,819	)
Total stockholders' equity (deficit)		26,322			(51,560	)		(27,399	)		2,633			(38,602	)

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ITEM 7.          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We are a biopharmaceutical company focused on:

●   Hereditary Angioedema and Other Plasma-Kallikrein-Mediated Disorders

The principal focus of our efforts is to develop and commercialize treatments for hereditary angioedema and to identify other disorders that are mediated by plasma kallikrein.

We developed KALBITOR on our own, and since 2010, we have been selling it in the United States for the treatment of acute attacks of HAE.  We are also developing DX-2930, a fully human monoclonal antibody inhibitor of plasma kallikrein, which we believe is a candidate to treat HAE prophylactically.  The safety, tolerability, and kallikrein inhibition results of a Phase 1a clinical study in healthy volunteers support advancing the DX-2930 development program into a Phase 1b study in HAE patients in mid-2014.

We have also completed development of a biomarker assay that should assist us in detecting the activation of plasma kallikrein in patient blood.  We intend to use this assay to potentially expedite the development of DX-2930 and to potentially determine if plasma kallikrein activation occurs with other PKM disorders.

●   Licensing and Funded Research Portfolio

We have a portfolio of product candidates being developed by licensees using our phage display technology.  This portfolio currently includes multiple product candidates in various stages of clinical development, including three in Phase 3 trials, for which we are eligible to receive future royalties and/or milestone payments.  We expect our revenues from the LFRP to experience growth beginning in 2014 to the extent that our licensees commercialize product candidates that gain marketing approval.

RESULTS OF OPERATIONS

Revenues.  Total revenues for 2013 were $53.9 million, compared with $54.7 million in 2012 and $48.7 million in 2011.

Product Sales.  We began commercializing KALBITOR in the United States in 2010 for treatment of acute attacks of HAE in patients 16 years of age and older.  We sell KALBITOR to our distributors, and we recognize revenue when title and risk of loss have passed to the distributor, typically upon delivery.  Due to the specialty nature of KALBITOR, the limited number of patients, and limited return rights, we anticipate that distributors will carry inventory that is in line with their forecasted business needs.  Although fluctuations can occur due to the variable nature of acute HAE attacks, generally distributors do not hold inventory of more than 60 days of anticipated demand.

We record product sales net of allowances and accruals related to trade prompt pay discounts, government rebates, a patient financial assistance program, product returns and other applicable allowances.  Product sales, net of discounts and allowances, were as follows:

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	Years Ended December 31,
	2013			2012			2011
					(in thousands)
Gross product sales	$	46,309		$	43,251		$	23,999
Prompt pay and other discounts		(2,549	)		(1,722	)		(831	)
Government rebates, chargebacks and patient assistance		(3,230	)		(1,243	)		(249	)
Returns		(4	)		(503	)		(35	)
Total Product sales allowances		(5,783	)		(3,468	)		(1,115	)
Product sales, net	$	40,526		$	39,783		$	22,884
Product sales allowances, as a percent of gross product sales		12.5	%		8.0	%		4.6	%

The change in net sales between 2013 and 2012 was due to several offsetting factors:

● Sales represented by patient demand units increased in 2013 by approximately $5.8 million, a 16% increase over 2012,

● Distributor channel adjustments reduced comparable 2013 net sales by approximately $7.7 million,

● A KALBITOR price increase, offset by higher gross to net sales adjustments, increased 2013 net sales by approximately $2.6 million.

The change in net sales between 2012 and 2011 was due to several factors:

● Sales represented by patient demand units increased in 2012 by approximately $13.5 million,

● A KALBITOR price increase, offset by higher gross to net sales adjustments, increased 2012 net sales by approximately $2.5 million,

● Distributor channel adjustments increased comparable 2012 net sales by approximately $900,000.

Development and License Fees.  We also derive revenues from licensing, funded research and development fees, including milestone payments from our licensees and collaborators, in amounts that fluctuate from year-to-year due to the timing of the licensing and clinical activities of our collaborators and licensees.  This revenue was $13.4 million in 2013, $14.9 million in 2012 and $25.9 million in 2011.

Development and license fee revenue recognized under our agreement, as amended, with Sigma-Tau, included contra-revenue of $1.1 million in 2013, and revenue of $204,000 and $10.5 million in 2012 and 2011, respectively, associated with the termination of the Sigma-Tau agreement (see Item 8, Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 3, Significant Transactions – Sigma-Tau).

Development and license fee revenue recognized under our agreement with CMIC, included $2.6 million in 2013, $755,000 in 2012 and $595,000 in 2011.  The amount in 2013 was primarily associated with the termination of the CMIC agreement (see Item 8, Financial Statements and Supplementary Data, Notes to Consolidated Financial Statements, Note 3, Significant Transactions – CMIC).

Cost of Product Sales. We incurred $2.7 million of costs associated with product sales during 2013, $2.2 million during 2012 and $1.2 million during 2011.  Cost of product sales primarily includes the cost of testing, filling, packaging and distributing the KALBITOR product, as well as a royalty due on net sales of KALBITOR.

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Costs associated with the manufacture of KALBITOR prior to FDA approval were previously expensed when incurred, and accordingly are not included in the cost of product sales during 2012 and 2011.  In 2013, KALBITOR sales were comprised of a combination of product manufactured both prior to and following FDA approval.  Therefore, the cost of product sales reflects a portion but not all of the KALBITOR manufacturing cost.  Utilizing the average cost per unit of KALBITOR manufactured after regulatory approval, cost of product sales with these manufacturing costs included for the 2013, 2012 and 2011 would have approximated $2.9 million, $3.1 million, and $2.1 million, respectively.

Research and Development.  Our research and development expenses are summarized as follows:

	Years Ended December 31,
	2013		2012		2011
			(In thousands)
DX-2930 and other research and development	$	14,039	$	12,070	$	10,753
KALBITOR development		10,985		16,371		21,474
LFRP pass-through fees		4,671		1,587		2,449
Total	$	29,695	$	30,028	$	34,676

Our research and development expenses arise primarily from compensation and other related costs for our personnel dedicated to research, development, medical and pharmacovigilence activities, costs of post-approval studies and commitments and KALBITOR life cycle management, as well as fees paid and costs reimbursed to outside parties to conduct research and clinical trials.

The 2013 increase in DX-2930 and other research and development costs compared to 2012 and 2011 was due primarily to the pre-clinical and clinical activities for DX-2930, a fully human monoclonal antibody inhibitor of plasma kallikrein, which is an investigational candidate to prophylactically treat HAE.

KALBITOR development costs decreased in 2013 compared to both 2012 and 2011 primarily due to the discontinuation during 2012 of the clinical study of the use of ecallantide for the treatment of ACE-inhibitor-induced angioedema.  This Phase 2 clinical study was initiated during 2011.  In addition, there were $2.0 million of costs in 2011 associated with obtaining regulatory approval for the treatment of HAE in territories outside the United States.  These amounts were reimbursed by Sigma Tau and such payments were included as development and license fee revenue in our results of operations.

Research and development expenses may increase in future yearsdue to costs associated with our clinical study developing DX-2930 as a therapeutic candidate, and costs associated with other early stage product candidates.  Until the clinical studies are further advanced, we are not able to predict the future costs that may be incurred for the development candidates.

Selling, General and Administrative. Our selling, general and administrative expenses consist primarily of the sales and marketing costs of commercializing KALBITOR and costs of our management and administrative staff, as well as expenses related to business development, protecting our intellectual property, administrative occupancy, professional fees and the reporting requirements of a public company.  Selling, general and administrative expenses were $38.7 million in 2013 compared to $39.9 million in 2012 and $37.7 million in 2011, including costs for KALBITOR patient services of $2.1 million, $1.9 million and $1.2 million for each respective year.

The 2013 decrease in selling, general and administrative expenses from 2012 was due to reduced infrastructure supporting KALBITOR commercial efforts, primarily sales and marketing programs, as well as lower legal expenses to protect our intellectual property.

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The 2012 increases in costs over 2011 are primarily due to the expansion of infrastructure to support KALBITOR commercial efforts, primarily sales and marketing programs, and additional legal expenses.

We do not anticipate a significant change in the trend for selling, general and administrative expenses in 2014.

Restructuring.  In 2012, we implemented a realignment of our business which included a workforce reduction.  As a result, we recorded restructuring charges of approximately $1.4 million.

Interest Expense.  Interest expense, which primarily arises from our loan arrangement with HC Royalty, was $10.8 million, $10.5 million and $10.3 million in 2013, 2012 and 2011, respectively.  Based on the modification of the HC Royalty loan in December 2011, under which we received additional proceeds of $20 million, we recorded interest expense in 2012 using the effective interest rate method for the different tranches of the loans.  The effective interest rate in 2013 is approximately 12.6% compared to 13.0% in 2012.  In 2011, we recorded interest expense at the stated interest rate for each tranche, which in total was approximately 17.4%.

Interest and Other Income.  Interest income was $14,000, $28,000 and $184,000 in 2013, 2012 and 2011, respectively.  The lower amounts of interest income in 2013 and 2012 were primarily due to lower cash and investment balances during those years.
 

Net Loss Attributable to Common Stockholders.  For the year ended December 31, 2013, the net loss was $27.8 million, or $0.26 per share, as compared to $29.3 million, or $0.30 per share, in 2012, and $34.6 million, or $0.35 per share, in 2011.

LIQUIDITY AND CAPITAL RESOURCES

	December 31,
	2013		2012
	(In thousands)
Cash and cash equivalents	$	68,085	$	20,018
Short-term investments		43,296		9,028
Total cash, cash equivalents and investments	$	111,381	$	29,046

The following table summarizes our cash flow activity:

	Years Ended December 31,
	2013			2012			2011
	(In thousands)
Net cash used in operating activities	$	(15,816	)	$	(28,482	)	$	(36,452	)
Net cash provided by (used in) investing activities		(34,808	)		14,343			30,609
Net cash provided by financing activities		98,691			2,689			18,710
Net increase (decrease) in cash and cash equivalents	$	48,067		$	(11,450	)	$	12,867

We require cash to fund our operating activities, make capital expenditures, acquisitions and investments, and service debt.  Through December 31, 2013, we have funded our operations through the sale of equity securities and from borrowed funds under our loan agreement with HC Royalty, which is secured by certain assets associated with our LFRP.  In addition, we generate funds from product sales and development and license fees.  Our excess cash is currently invested in short-term investments primarily consisting of United States Treasury notes and bills and money market funds backed by the United States Treasury.

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Operating Activities.

In 2013 the principal use of cash in our operations was to fund our $27.8 million net loss.  Of this net loss, certain costs were non-cash charges, such as stock-based compensation expense of $5.4 million and depreciation and amortization costs of $891,000.  In addition to non-cash charges, we also had cash inflows due to changes in other operating assets and liabilities totaling $1.1 million that included a decrease in accounts receivable of $1.0 million, an increase in accounts payable and other accrued expenses of $1.9 million, a decrease in inventory of $1.6 million and a decrease in deferred revenue of $3.8 million, primarily due to revenue recognized from the termination of the CMIC agreement that was previously deferred.

In 2012, the principal use of cash in our operations was to fund our $29.3 million net loss.  Of this net loss, certain costs were non-cash charges, such as stock-based compensation expense of $3.6 million and depreciation and amortization costs of $1.1 million.  In addition to non-cash charges, we also had cash outflows due to changes in other operating assets and liabilities totaling $6.5 million, which included an increase in inventory of $2.9 million, an increase in prepaid and other assets of $2.8 million and a decrease in deferred revenue of $4.1 million, primarily associated with revenue recognized for LFRP licenses that was previously deferred.

In 2011, the principal use of cash in our operations was to fund our $34.6 million net loss.  Of this net loss, certain costs were non-cash charges, such as stock-based compensation expense of $4.0 million and depreciation and amortization costs of $1.6 million.  In addition to non-cash charges, we also had cash outflows due to changes in other operating assets and liabilities totaling $9.5 million, which included an increase in inventory of $5.2 million, an increase in accounts payable and accrued expenses of $1.6 million and a decrease in deferred revenue of $5.4 million, due primarily to the recognition of previously deferred revenue related to our collaborations to commercialize ecallantide outside of the United States.

Investing Activities.

Our investing activities for 2013 primarily consisted of the purchase of investments totaling $43.3 million, partially offset by the maturity of $9.0 million of investments.  We purchased fixed assets in 2013 totaling $507,000.

Our investing activities for 2012 primarily consisted of $23.0 million of investments which matured, partially offset by the purchase of $6.1 million of investments, and a decrease of $1.3 million in restricted cash due to the release of the letter of credit that had been issued as a security deposit under the lease of our previous facility in Cambridge, Massachusetts.  These are offset by the purchase of $4.1 million of fixed assets primarily made up of leasehold improvements for the new Burlington facility, of which $2.6 million was covered by a tenant improvement allowance and $1.4 million was financed through an equipment loan arrangement.

Our investing activities for 2011 consisted of approximately $35.5 million of investment maturities partially offset by the purchase of $3.0 million of investments.  We expended approximately $1.7 million on leasehold improvements related to the build-out of the new Burlington facility, of which $925,000 was reimbursed by the landlord in 2011.  The residual balance was reimbursed by the landlord during 2012, as referenced above.  In conjunction with the Burlington lease agreement, we have provided the landlord a letter of credit of $1.1 million to secure our obligations under the lease.

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Financing Activities.

Our financing activities for 2013 primarily consisted of net proceeds of $93.8 million from the sale of common and preferred stock in May 2013 and the sale of common stock in October 2013, proceeds from the exercise of stock options totaling $5.1 million, and proceeds of $249,000 from the issuance of common stock under the Employee Stock Purchase Plan.  Repayment of long-term debt in 2013 totaled $445,000.

Our financing activities for 2012 consisted of proceeds from the exercise of stock options totaling $1.3 million, proceeds of $123,000 from the issuance of common stock under the Employee Stock Purchase Plan, and a drawdown of $1.4 million under an equipment loan arrangement.  We repaid long-term debt totaling $135,000, primarily to HC Royalty.

Our financing activities for 2011 consisted of net proceeds of $19.9 million of new debt from an affiliate of HC Royalty.  We repaid long-term debt totaling $1.7 million, consisting of capital lease payments and $1.1 million paid to HC Royalty.

We expect to continue to manage our cash requirements by completing additional partnerships, collaborations, and financial and strategic transactions.  We expect that existing cash, cash equivalents, and short-term investments together with anticipated cash flow from existing development, collaborations and license agreements and product sales of KALBITOR will be sufficient to support our current operations for at least the next twelve months.  We will need additional funds if our cash requirements exceed our current expectations or if we generate less revenue than we expect during this period.  We may seek additional funding through collaborative arrangements and public or private financings.  We may not be able to obtain financing on acceptable terms or at all, and we may not be able to enter into additional collaborative arrangements. Arrangements with collaborators or others may require us to relinquish rights to certain of our technologies, product candidates or products. The terms of any financing may adversely affect the holdings or the rights of our stockholders. If we need additional funds and are unable to obtain funding on a timely basis, we would curtail significantly our research, development or commercialization programs in an effort to provide sufficient funds to continue our operations, which could adversely affect our business prospects.

HealthCare Royalty Partners

In August 2012, we completed an agreement that we entered into with an affiliate of HC Royalty in December 2011 to refinance our existing loans with HC Royalty.  At December 31, 2013, the aggregate principal amount of our current loans was $84.5 million, consisting of a $22.8 million Tranche A Loan and a $61.7 million Tranche B Loan. The loans bear interest at a rate of 12% per annum, payable quarterly.  The loans will mature in August 2018, and can be repaid without penalty beginning in August 2015.

In connection with the loans, we entered into a security agreement granting HC Royalty a security interest in the intellectual property related to the LFRP, and the revenues generated through our licenses of the intellectual property related to the LFRP. The security agreement does not apply to our internal drug development or to any of our co-development programs for HAE.

Under the terms of the loan agreement, we are required to repay the loans based on the annual net LFRP receipts.  Until September 30, 2016, required payments are equal to the sum of 75% of the first $15.0 million in specified annual LFRP receipts and 25% of specified annual LFRP receipts over $15.0 million.  After September 30, 2016, and until the maturity date or the complete repayment of the loans, HC Royalty will receive 90% of all specified LFRP receipts.  If the HC Royalty portion of LFRP receipts for any quarter exceeds the interest for that quarter, then the principal balance will be reduced.  Any unpaid principal will be due upon the maturity of the loans.  If the HC Royalty portion of LFRP revenues for any quarterly period is insufficient to cover the cash interest due for that period, the deficiency may be added to the outstanding principal or paid in cash, at our election. In December 2016 and August 2017, which are five years from the issuance dates of the Tranche A and Tranche B Loans, we must repay $1.1 million and $2.9 million, respectively, representing additional accumulated principal above the original loan amounts.

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Tranche A Loan

Under the terms of the loan agreement, we received a loan of $20 million (Tranche A Loan) in December 2011 and a commitment to refinance the amounts outstanding under our March 2009 amended and restated loan agreement (the March 2009 loan agreement) at a reduced interest rate of 12% in August 2012.  The Tranche A Loan was unsecured and accrued interest at an annual rate of 13% through August 2012, at which time the Tranche A Loan and its accrued interest was combined with 102% of the unpaid principal and accrued interest outstanding under the March 2009 loan agreement upon the closing of the Tranche B Loan.

Upon execution of the Tranche A Loan, the terms of the Original Loans (defined below) were determined to be modified under ASC 470.  Accordingly, during the years ended December 31, 2013 and 2012, interest expense on the Loan is being recorded in our financial statements at an effective interest rate of 12.6% and 13.0%, respectively.

Upon modification of the debt arrangement, the note payable balance related to the Tranche A Loan was reduced by $193,000 to reflect payment of legal fees in conjunction with the loan; these fees are being accreted over the life of the Loan, through August 2018.

Tranche B Loan

When we completed the loan agreement in August 2012, we borrowed approximately $57.6 million (Tranche B Loan) to refinance our loan under the March 2009 loan agreement on the same terms as the Tranche A Loan.

Original Loans

In 2008 and 2009, we entered into loan agreements with an affiliate of HC Royalty that provided aggregate loan proceeds of $65.0 million (the Original Loans).  These loans had an outstanding principal and accrued interest balance of $57.6 million at the time of their refinancing in August 2012.  The Original Loans bore interest at an annual rate of 17.4%, payable quarterly, and were secured by the LFRP.

In connection with the Original Loans, the Company issued affiliates of HC Royalty warrants to purchase shares of our common stock.  In August 2008, the Company issued warrants to purchase 250,000 shares of our common stock at an exercise price of $5.50 per share. This warrant became exercisable in August 2009 and could be exercised through August 2016. We estimated the relative fair value of the warrant to be $853,000 on the date of issuance, using the Black-Scholes valuation model, assuming a volatility factor of 83.64%, risk-free interest rate of 4.07%, an eight-year expected term and an expected dividend yield of zero.  In March 2009, we issued HC Royalty a second warrant to purchase 250,000 shares of the Company’s common stock at an exercise price of $2.87 per share. This warrant became exercisable in March 2010 and could be exercised through August 2016.   We estimated the relative fair value of the warrant to be $477,000 on the date of issuance, using the Black-Scholes valuation model, assuming a volatility factor of 85.98%, risk-free interest rate of 2.77%, a seven-year, four-month expected term and an expected dividend yield of zero.  The relative fair values of the warrants as of the date of issuance are recorded in additional paid-in capital on our consolidated balance sheets. In November 2013, HC Royalty executed their right to complete a cashless exercise of their warrants to purchase shares of the Company's common stock issued in conjunction with the loan. As a result, 233,438 shares were issued to HC Royalty and no further warrants remain outstanding under this agreement.

The cash proceeds from the Original Loans were recorded as a note payable on our consolidated balance sheet.  The note payable balance was reduced by $1.3 million for the fair value of the warrants issued, and by $580,000 for payment of HC Royalty’s legal fees in conjunction with the Tranche B Loan.  Prior to the December 2011 issuance of the Tranche A Loan, each of these amounts was being accreted over the life of the note through August 2016.  Subsequent to the modification of the debt arrangement in December 2011, the unamortized portion of these amounts is being accreted over the life of the Loan through August 2018.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements with the exception of operating leases.

Contractual Obligations

Contractual obligations represent future cash commitments and liabilities under agreements with third parties, and exclude contingent liabilities for which we cannot reasonably predict future payment.  The following chart represents our total contractual obligations, including principal and interest, at December 31, 2013, aggregated by type:

	Payments due by period
Contractual obligations	Total		Less than 1 year		1-2 years		2-3 years		3-4 years		4-5 years		More than 5 years
	(In thousands)
Note Payable (1)	$	130,357	$	10,137	$	11,165	$	10,435	$	27,192	$	71,428	$	—
Leasehold improvement arrangements		790		98		98		98		98		98		300
Equipment lease line		988		515		473		—		—		—		—
Operating lease obligations		13,411		1,605		1,614		1,581		1,588		1,670		5,353
Total contractual obligations	$	145,546	$	12,355	$	13,350	$	12,114	$	28,878	$	73,196	$	5,653

(1) These amounts represent projected future principal and interest payments to HC Royalty based on our current LFRP projections, which are subject to uncertainties based on the timing and amounts of cash receipts under the LFRP.  See Notes to the Financial Statements, Note 8 of Item 8 "Financial Statements and Supplementary Data"

Critical Accounting Estimates

Our discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.  On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition for licensing and collaboration arrangements, gross to net reserves, receivable collectibles, royalty interest obligations, clinical trial accruals, useful lives with respect to long-lived and intangible assets and valuation of common stock, related stock options, and deferred tax assets.  We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events.  These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  By their nature, estimates are subject to an inherent degree of uncertainty.  Actual results may differ from our estimates.  We believe that our judgment and assumptions with respect to the following significant accounting policies are most critical to the accounting estimates used in the preparation of our consolidated financial statements. Our assumptions and estimates may prove to be inaccurate. Although we make every effort to ensure the accuracy of our estimates, any significant unanticipated changes in our estimates could have a material impact on revenues and our results of operations.

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Revenue Recognition.  Our principal sources of revenue are product sales of KALBITOR, license fees, funding for research and development, and milestones and royalties derived from collaboration and license agreements.  In all instances, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, collectability of the resulting receivable is reasonably assured and we have fulfilled the respective performance obligation.

Product Sales and Allowances

Revenues from product sales are recognized when title and risk of loss have passed to the customer.  As such, product sales are recorded upon delivery of KALBITOR to the customer, our specialty and wholesale distributors.  We establish reserves for trade distributor and prompt pay discounts, government rebates, a patient financial assistance program, product returns and other applicable allowances.  Reserves are based on estimates of the amount earned or to be claimed on the related sales.  Our estimates are based on KALBITOR patient data, actual sales data, rebate claims and product returns.  If actual results vary, we may need to adjust these estimates, which could have an effect on earnings in the period of the adjustment.

In addition to the discounts and rebates described above and classified as a reduction of revenue, we also maintain service contracts for patient service initiatives. We have established that the services are at fair value and represent a separate and identifiable benefit related to these services and, accordingly, have classified them as selling, general and administrative expense.  If we had concluded that we did not receive a separate identifiable benefit or had sufficient evidence that the fair value did not exist for these services, we would have been required to classify these costs as a reduction of revenue.

Development and License Fee Revenues

We make significant assumptions and estimates relating to revenue recognition, which include the expected term of the agreement and around the best estimate of selling price of individual deliverables for multiple element arrangements.

Collaboration Agreements.  The Company enters into collaboration agreements with other companies for the research and development of therapeutic, diagnostic and separations products. The terms of the agreements may include non-refundable signing and licensing fees, funding for research and development, payments related to manufacturing services, milestone payments and royalties on any product sales derived from collaborations.  These multiple element arrangements are analyzed to determine how the deliverables, which often include license and performance obligations such as research, steering committee and manufacturing services, are separated into units of accounting.

Before January 1, 2011, we evaluated license arrangements with multiple elements in accordance with ASC, 605-25 Revenue Recognition – Multiple-Element Arrangements.  In October 2009, the FASB, issued ASU 2009-13 Revenue Arrangements with Multiple Deliverables, or ASU 2009-13, which amended the accounting standards for certain multiple element arrangements to:

·   Provide updated guidance on whether multiple elements exist, how the elements in an arrangement should be separated and how the arrangement considerations should be allocated to the separate elements;

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·   Require an entity to allocate arrangement consideration to each element based on a selling price hierarchy, also called the relative selling price method, where the selling price for an element is based on vendor-specific objective evidence (VSOE), if available; vendor objective evidence (VOE), if available and VSOE is not available; or the best estimate of selling price (BESP), if neither VSOE or VOE is available;

·   Eliminate the use of the residual method and require an entity to allocate arrangement consideration using the selling price hierarchy.

The Company evaluates all deliverables within an arrangement to determine whether or not they provide value to the licensee on a stand-alone basis.  Based on this evaluation, the deliverables are separated into units of accounting.  If VSOE or VOE is not available to determine the fair value of a deliverable, the Company determines the best estimate of selling price associated with the deliverable.  The arrangement consideration, including upfront license fees and funding for research and development, is allocated to the separate units based on relative fair value.

VSOE is based on the price charged when an element is sold separately and represents the actual price charged for that deliverable.  When VSOE cannot be established, we attempt to establish the selling price of the elements of a license arrangement based on VOE.  VOE is determined based on third party evidence for similar deliverables when sold separately.  In circumstances when the Company charges a licensee for pass-through costs paid to external vendors for development services, these costs represent VOE.

When we are unable to establish the selling price of an element using VSOE or VOE, management determines BESP for that element.  The objective of BESP is to determine the price at which we would transact a sale if the element within the license agreement was sold on a stand-alone basis.  Our process for establishing BESP involves management’s judgment and considers multiple factors including discounted cash flows, estimated direct expenses and other costs and available data.

Based on the value allocated to each unit of accounting within an arrangement, upfront fees and other guaranteed payments are allocated to each unit based on relative value.  The appropriate revenue recognition method is applied to each unit and revenue is accordingly recognized as each unit is delivered.

For agreements entered into prior to 2011, revenue related to upfront license fees was spread over the full period of performance under the agreement, unless the license was determined to provide value to the licensee on a stand-alone basis and the fair value of the undelivered performance obligations, typically including research or steering committee services was determinable.

Steering committee services that were not inconsequential or perfunctory and were determined to be performance obligations were combined with other research services or performance obligations required under an arrangement, if any, to determine the level of effort required in an arrangement and the period over which the Company expected to complete its aggregate performance obligations.

Whenever the Company determined that an arrangement should be accounted for as a single unit of accounting, it determined the period over which the performance obligations would be completed. Revenue is recognized using either an efforts-based or time-based (i.e. straight line) proportional performance method. The Company recognizes revenue using an efforts-based proportional performance method when the level of effort required to complete its performance obligations under an arrangement can be reasonably estimated and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time equivalents are typically used as the measurement of performance.

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If the Company cannot reasonably estimate the level of effort to complete its performance obligations under an arrangement, then revenue under the arrangement is recognized on a straight-line basis over the period the Company is expected to complete its performance obligations.

Many of the Company's collaboration agreements entitle it to additional payments upon the achievement of performance-based milestones. For all milestones achieved prior to 2011, substantive milestones were included in the Company's revenue model when achievement of the milestone was met.  Milestones that were tied to regulatory approval were not considered probable of being achieved until such approval was received. All milestones achieved after January 1, 2011 which are determined to be substantive milestones are recognized as revenue in the period in which they are met in accordance with Accounting Standards Update (ASU) No. 2010-17, Revenue Recognition – Milestone Method.  Milestones tied to counter-party performance are not included in the Company’s revenue model until the performance conditions are met.  Milestones determined to be non-substantive are allocated to each unit of accounting within an arrangement when met.  The allocation of the milestone to each unit is based on relative value and revenue related to each unit is recognized accordingly.

Royalty revenue is recognized upon the sale of the related products provided the Company has no remaining performance obligations under the arrangement.

Costs of revenues related to product development and license fees are classified as research and development in the consolidated statements of operations and comprehensive loss.

Library Licenses.  Standard terms of the proprietary phage display library agreements generally include non-refundable signing fees, license maintenance fees, development milestone payments, product license payments and royalties on product sales. Signing fees and maintenance fees are generally recognized on a straight-line basis over the term of the agreement. As milestones are achieved under a phage display library license, a portion of the milestone payment, equal to the percentage of the performance period completed when the milestone is achieved, multiplied by the amount of the milestone payment, will be recognized. The remaining portion of the milestone will be recognized over the remaining performance period on a straight-line basis.  If the Company has no future obligations under the license, milestone payments under these license arrangements are recognized when the milestone is achieved. Product license payments are recognized as revenue when the license is issued if the Company has no future obligations under the agreement. If there are future obligations under the agreement, product license payments are recognized as revenue only to the extent of the fair value of the license. Amounts paid in excess of fair value are recognized in a manner similar to milestone payments. Royalty revenue is recognized upon the sale of the related products provided the Company has no remaining performance obligations under the arrangement.

Patent Licenses.  Under the LFRPthe Company previously licensed its phage display patents on a non-exclusive basis to third parties for use in connection with the research and development of therapeutic, diagnostic, and other products.  The last of these patents expired in November 2012.  Even after patent expiration, the Company generally remains eligible under these patent licenses to receive milestones and/or royalties for products discovered prior to patent expiration, although certain existing patent licenses will no longer have a royalty obligation.  The Company does not expect the expiration of these patents to have a material impact on its LFRP business.

Standard terms of the patent rights agreements include non-refundable signing fees, non-refundable license maintenance fees, development milestone payments and/or royalties on product sales. Signing fees and maintenance fees are generally recognized on a straight line basis over the term of the agreement or through the date of patent expiry, if shorter, except that in the case of perpetual patent licenses for which fees were recognized immediately if it was determined that the Company had no future obligations under the agreement and the payments were made upfront.  As the Company has no remaining performance obligations under their patent license agreements, milestones are recognized as revenue in the period in which the milestone is achieved, and royalty revenue is recognized upon the sale of the related products.

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Share-Based Compensation.  We apply the provisions of Accounting Standards Codification (ASC) 718, "Accounting for Stock-Based Compensation" which required us to recognize the expense related to the fair value of stock-based compensation awards in our consolidated statement of operations.  ASC 718 requires companies to estimate the fair value of stock-based awards on the date of grant using an option-pricing model.  We use the Black-Scholes option pricing model.  A number of assumptions are used by the Black-Scholes option-pricing model to compute the grant date fair value, including expected price volatility, option term, risk-free interest rate, and dividend yield.  Expected volatilities are based on historical volatilities of our stock.  The expected option term is derived from historical data on exercise behavior.  The dividend yield is based on historical dividend payments.  The risk-free rate for periods within the contractual life of the option is based on the United States treasury yield curve in effect at the time of grant.  The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our consolidated statement of operations.  We recognize expense on a straight-line basis over the requisite service period.  The equity-based compensation expense recorded in future income statements could fluctuate based on the terms of the awards, the assumptions used in the valuation model, or the status of those employees receiving awards.

Note Payable Interest Expense.  We record interest expense associated with our note payable with HC Royalty based on the effective interest rate.  This calculation is based on management’s best estimate of future cash receipts expected from our LFRP.  See HealthCare Royalty Partners in the Liquidity and Capital Resources section of Management’s Discussion and Analysis for more information on this debt arrangement.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies, which we adopt as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

None.

54

ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	56
Consolidated Balance Sheets as of December 31, 2013 and 2012	57
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2013, 2012 and 2011	58
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2013, 2012 and 2011	59
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011	60
Notes to Consolidated Financial Statements	61

55

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Dyax Corp.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity (deficit) and cash flows present fairly, in all material respects, the financial position of Dyax Corp. and its subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013 based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing in Item 9A. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

March 3, 2014

56

Dyax Corp. and Subsidiaries

Consolidated Balance Sheets

	December 31, 2013			December 31, 2012
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	68,085		$	20,018
Short-term investments		43,296			9,028
Accounts receivable, net		6,506			7,507
Inventory		2,827			4,085
Other current assets		1,618			2,159
Total current assets		122,332			42,797
Fixed assets, net		4,960			5,329
Restricted cash		1,100			1,100
Other assets		5,815			6,260
Total assets	$	134,207		$	55,486
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	12,542		$	12,472
Current portion of deferred revenue		2,686			5,449
Current portion of long-term obligations		468			445
Other current liabilities		1,812			—
Total current liabilities		17,508			18,366
Deferred revenue		5,335			6,402
Note payable		81,516			78,061
Long-term obligations		463			931
Deferred rent and other long-term liabilities		3,063			3,286
Total liabilities		107,885			107,046
Commitments and Contingencies
Stockholders' equity (deficit):
Preferred stock, $0.01 par value; 1,000,000 shares authorized; 41,418 and 0     shares issued and outstanding at December 31, 2013 and 2012, respectively		—			—
Common stock, $0.01 par value; 200,000,000 shares authorized;     121,704,480 and 99,482,629 shares issued and outstanding at December 31, 2013 and 2012, respectively		1,217			995
Additional paid-in capital		559,065			453,625
Accumulated deficit		(533,963	)		(506,186	)
Accumulated other comprehensive income		3			6
Total stockholders' equity (deficit)		26,322			(51,560	)
Total liabilities and stockholders' equity (deficit)	$	134,207		$	55,486

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

57

Dyax Corp.  and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

	Years Ended December 31,
	2013			2012			2011
	(In thousands, except share and per share data)
Revenues:
Product sales, net	$	40,526		$	39,783		$	22,884
Development and license fees		13,400			14,867			25,853
Total revenues		53,926			54,650			48,737
Costs and expenses:
Cost of product sales		2,688			2,152			1,223
Research and development		29,695			30,028			34,676
Selling, general and administrative		38,742			39,915			37,740
Restructuring		—			1,440			—
Total costs and expenses		71,125			73,535			73,639
Loss from operations		(17,199	)		(18,885	)		(24,902	)
Other income (expense):
Interest and other income		214			111			554
Interest expense		(10,792	)		(10,491	)		(10,251	)
Total other expense, net		(10,578	)		(10,380	)		(9,697	)
Net loss		(27,777	)		(29,265	)		(34,599	)
Other comprehensive loss:
Unrealized loss on investments		(3	)		(1	)		(37	)
Comprehensive loss		(27,780	)		(29,266	)		(34,636	)
Basic and diluted net loss per share:
Net loss per share attributable to common stockholders	$	(0.26	)	$	(0.30	)	$	(0.35	)
Shares used in computing basic and diluted net loss per share		108,539,613			98,991,056			98,731,289

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

58

Dyax Corp. and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity (Deficit)

For the years ended December 31, 2013, 2012 and 2011

(In thousands, except share data)

															Accumulated
	Common Stock				Preferred Stock				Additional						Other
			Par				Par		Paid-in			Accumulated			Comprehensive
	Shares		Value		Shares		Value		Capital			Deficit			Income			Total
Balance at December 31, 2010		98,508,487	$	985		—	$	—	$	443,926		$	(442,322	)	$	44		$	2,633
Issuance of common stock under the Equity Incentive plan		138,063		1		—		—		218			—			—			219
Sale of common stock		151,515		2		—		—		321			—			—			323
Share-based compensation expense		—		—		—		—		4,062			—			—			4,062
Unrealized loss on investments		—		—		—		—		—			—			(37	)		(37	)
Net loss		—		—		—		—		—			(34,599	)		—			(34,599	)
Balance at December 31, 2011		98,798,065		988		—		—		448,527			(476,921	)		7			(27,399	)
Issuance of common stock under the Equity Incentive plan		684,564		7		—		—		1,435			—			—			1,442
Share-based compensation expense		—		—		—		—		3,663			—			—			3,663
Unrealized loss on investments		—		—		—		—		—			—			(1	)		(1	)
Net loss		—		—		—		—		—			(29,265	)		—			(29,265	)
Balance at December 31, 2012		99,482,629		995		—		—		453,625			(506,186	)		6			(51,560	)
Issuance of common stock under the Equity Incentive plan		2,199,688		22		—		—		5,338			—			—			5,360
Sale of common and preferred stock		19,517,060		195		41,418		—		93,580			—			—			93,775
Exercise of warrants		233,438		2		—		—		(2	)		—			—			—
Other issuance of common stock		271,665		3		—		—		1,073			—			—			1,076
Share-based compensation expense		—		—		—		—		5,451			—			—			5,451
Unrealized loss on investments		—		—		—		—		—			—			(3	)		(3	)
Net loss		—		—		—		—		—			(27,777	)		—			(27,777	)
Balance at December 31, 2013		121,704,480	$	1,217		41,418	$	—	$	559,065		$	(533,963	)	$	3		$	26,322

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

59

Dyax Corp. and Subsidiaries

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2013			2012			2011
				(In thousands)
Cash flows from operating activities:
Net loss	$	(27,777	)	$	(29,265	)	$	(34,599	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of investment premium/discount		30			64			229
Depreciation and amortization of fixed assets and intangible assets		861			1,060			1,417
Non-cash interest expense		3,455			2,784			1,955
Gain on disposal of fixed assets		—			(110	)		—
Share-based compensation expense		5,441			3,640			4,030
Provision for doubtful accounts		—			(80	)		35
Non-cash stock issuance		1,076			—			—
Non-cash other income		—			(68	)		—
Changes in operating assets and liabilities
Accounts receivable		1,001			(1,335	)		(810	)
Other current assets		541			2,809			(1,720	)
Inventory		1,637			(2,916	)		(5,201	)
Accounts payable and accrued expenses		1,900			(2,113	)		1,426
Deferred revenue		(3,830	)		(4,051	)		(5,434	)
Long-term deferred rent		(123	)		685			1,417
Other		(28	)		414			803
Net cash used in operating activities		(15,816	)		(28,482	)		(36,452	)
Cash flows from investing activities:
Purchase of investments		(43,301	)		(6,057	)		(3,021	)
Proceeds from maturity of investments		9,000			23,000			35,502
Purchase of fixed assets		(507	)		(4,066	)		(1,694	)
Proceeds from sale of fixed assets		—			200			—
Restricted cash		—			1,266			(178	)
Net cash (used in) provided by investing activities		(34,808	)		14,343			30,609
Cash flows from financing activities:
Gross proceeds from common stock offerings		99,000			—			323
Fees associated with common stock offerings		(5,225	)		—			—
Proceeds from issuance of note payable		—			1,382			19,850
Repayment of long-term obligations		(445	)		(135	)		(1,682	)
Proceeds from the issuance of common stock under employee stock purchase plan and exercise of stock options		5,361			1,442			219
Net cash provided by financing activities		98,691			2,689			18,710
Net increase (decrease) in cash and cash equivalents		48,067			(11,450	)		12,867
Cash and cash equivalents at beginning of the period		20,018			31,468			18,601
Cash and cash equivalents at end of the period	$	68,085		$	20,018		$	31,468
Supplemental disclosure of cash flow information:
Issuance of common shares on exercise of warrants – see Note 8	$	2,093		$	—		$	—
Interest paid	$	5,525		$	9,364		$	9,108

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

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Dyax Corp. and Subsidiaries

Notes to Consolidated Financial Statements

1.   Nature of Business

Dyax Corp. (Dyax or the Company) is a biopharmaceutical company focused on:

●   Hereditary Angioedema and Other Plasma-Kallikrein-Mediated Disorders

The principal focus of the Company’s efforts is to develop and commercialize treatments for hereditary angioedema and to identify other disorders that are mediated by plasma kallikrein.

The Company developed KALBITOR on its own, and since 2010, has been selling it in the United States for the treatment of acute attacks of HAE.  The Company is also developing DX-2930, a fully human monoclonal antibody inhibitor of plasma kallikrein, which is believed to be a candidate to treat HAE prophylactically.

The Company has also completed development of a biomarker assay that should assist in detecting the activation of plasma kallikrein in patient blood.  It intends to use this assay to potentially expedite the development of DX-2930 and to potentially determine if plasma kallikrein activation occurs with other PKM disorders.

●   Licensing and Funded Research Portfolio

The Company has a portfolio of product candidates being developed by licensees using its phage display technology.  This portfolio currently includes multiple product candidates in various stages of clinical development, including three in Phase 3 trials, for which the Company is eligible to receive future royalties and/or milestone payments.

2.   Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and the Company's European subsidiaries Dyax S.A. and Dyax BV.  All inter-company accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods.  The significant estimates and assumptions in these financial statements include revenue recognition, product sales allowances, effective interest rate calculation, useful lives with respect to long lived assets, valuation of stock options, accrued expenses and tax valuation reserves.  Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, short-term investments and trade accounts receivable.  At December 31, 2013 and 2012, approximately 89% and 86%, respectively, of the Company's cash, cash equivalents and short-term investments were invested in money market funds backed by U.S. Treasury obligations, U.S. Treasury notes and bills, and obligations of United States government agencies held by one financial institution.  The Company maintains balances in various operating accounts in excess of federally insured limits.

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Dyax Corp. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The Company provides most of its services and licenses its technology to pharmaceutical and biomedical companies worldwide, and makes all product sales to its distributors.  Concentrations of credit risk with respect to trade receivable balances associated the Company’s development and license fee revenue are usually limited on an ongoing basis, due to the diverse number of licensees and collaborators comprising the Company's customer base.  Trade receivable balances associated with the Company’s product sales are comprised of a few customers due to the Company’s limited distribution network.  The Company completes ongoing credit evaluations of their customers.  As of December 31, 2013, two customers accounted for 35% (US Bio) and 26% (Walgreens) of the accounts receivable balance.  Two customers accounted for approximately 50% (Walgreens) and 34% (US Bio), of the Company's accounts receivable balance as of December 31, 2012.

The Company’s two largest distributors of KABITOR are Walgreens and US Bio.  During the years ended December 31, 2013, 2012 and 2011, sales to Walgreens were 47%, 53% and 16% of revenue, respectively. During the years ended December 31, 2013, 2012 and 2011, sales to US Bio were 31%, 39% and 69% of revenue, respectively.

Revenues from customers outside the United States were approximately 13%, 13% and 28% of the Company's total revenus for the years ended December 31, 2013, 2012 and 2011, respectively, principally related to development and license agreements.

Cash and Cash Equivalents

All highly liquid investments purchased with an original maturity of ninety days or less are considered to be cash equivalents.  Cash and cash equivalents consist principally of cash, money market and U.S. Treasury funds.

Investments

Short-term investments primarily consist of investments with original maturities greater than ninety days and remaining maturities less than one year at period end.  The Company has also classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of investments available-for-sale.  Accordingly, these investments are recorded at fair value, which is based on quoted market prices.  As of December 31, 2013, the Company's investments consisted of U.S. Treasury notes and bills with an amortized cost and estimated fair value of $43.3 million, and had an unrealized gain of $3,000.  As of December 31, 2012, the Company's investments consisted of United States Treasury notes and bills with an estimated fair value and amortized cost of $9.0 million, and had an unrealized gain of $6,000, which is recorded in other comprehensive income on the accompanying consolidated balance sheet.

Inventories

Inventories are stated at the lower of cost or market with cost determined under the first-in, first-out, or FIFO, basis. The Company evaluates inventory levels and would write-down inventory that is expected to expire prior to being sold, inventory that has a cost basis in excess of its expected net realizable value, inventory in excess of expected sales requirements, or inventory that fails to meet commercial sale specifications, through a charge to cost of product sales. Included in the cost of inventory are employee stock-based compensation costs capitalized under Accounting Standards Codification (ASC) 718.  Inventory on-hand that will be sold beyond the Company's normal operating cycle is classified as non-current and grouped with other assets on the Company's consolidated balance sheet.

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Dyax Corp. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Fixed Assets

Property and equipment are recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Laboratory and production equipment, furniture and office equipment are depreciated over a three to seven year period. Leasehold improvements are stated at cost and are amortized over the lesser of the non-cancelable term of the related lease or their estimated useful lives. Leased equipment is amortized over the lesser of the life of the lease or their estimated useful lives. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation and amortization are eliminated from the balance sheet and any resulting gains or losses are included in operations in the period of disposal.

The Company records all proceeds received from the lessor for tenant improvements under the terms of its operating lease as deferred rent.  The amounts are amortized on a straight-line basis over the term of the lease as an offset to rent expense.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flow to the recorded value of the asset or asset group. If impairment is indicated, the asset is written down to its estimated fair value on a discounted cash flow basis.

Revenue Recognition

The Company’s principal sources of revenue are product sales of KALBITOR and license fees, funding for research and development, and milestones and royalties derived from collaboration and license agreements.  In all instances, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, collectability of the resulting receivable is reasonably assured and the Company has no further performance obligations.

Product Sales and Allowances

Product Sales.  Product sales are generated from the sale of KALBITOR to the Company’s customers, primarily wholesale and specialty distributors, and are recorded upon delivery when title and risk of loss have passed to the customer.  Product sales are recorded net of applicable reserves for trade prompt pay and other discounts, government rebates, patient financial assistance programs, product returns and other applicable allowances.

Product Sales Allowances.  The Company establishes reserves for trade distributor, prompt pay and volume discounts, government rebates, patient financial assistance programs, product returns and other applicable allowances.  Reserves established for these discounts and allowances are classified as a reduction of accounts receivable (if the amount is payable to the customer) or a liability (if the amount is payable to a party other than the customer).

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Dyax Corp. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Allowances against receivable balances primarily relate to prompt payment discounts and are recorded at the time of sale, resulting in a reduction in product sales revenue.  Accruals related to government rebates, patient financial assistance programs, product returns and other applicable allowances are recognized at the time of sale, resulting in a reduction in product sales revenue and the recording of an increase in accrued expenses.

The Company maintains service contracts with its distributors. These contracts include services such as inventory maintenance and patient support services, which include on-demand nursing services.  Accounting standards related to consideration given by a vendor to a customer, including a reseller of a vendor’s product, specify that each consideration given by a vendor to a customer is presumed to be a reduction of the selling price.  Consideration should be characterized as a cost if the company receives, or will receive, an identifiable benefit in exchange for the consideration, and fair value of the benefit can be reasonably estimated.  The Company has established that patient support services are at fair value and represent a separate and identifiable benefit because these services could be provided by separate third-party vendors.  Accordingly, these costs are classified as selling, general and administrative expense.

Inventory maintenance fees are calculated as a percentage of KALBITOR sales price and accordingly, are classified as a reduction in product sales revenue.

Prompt Payment and Other Discounts.  The Company offers a prompt payment discount to its United States distributors.  Since the Company expects that these distributors will take advantage of this discount, the Company accrues 100% of the prompt payment discount that is based on the gross amount of each invoice, at the time of sale.  This accrual is adjusted quarterly to reflect actual earned discounts.  The Company also offers volume discounts to certain distributors which are accrued quarterly based on sales during the period.

Government Rebates and Chargebacks.  The Company estimates reductions to product sales for Medicaid and Veterans' Administration (VA) programs and the Medicare Part D Coverage Gap Program, as well as for certain other qualifying federal and state government programs.  The Company estimates the amount of these reductions based on available KALBITOR patient data, actual sales data and rebate claims.  These allowances are adjusted each period based on actual experience.

Medicaid rebate reserves relate to the Company’s estimated obligations to state jurisdictions under the established reimbursement arrangements of each applicable state.  Rebate accruals are recorded during the same period in which the related product sales are recognized.  Actual rebate amounts are determined at the time of claim by the state, and the Company will generally make cash payments for such amounts after receiving billings from the state.

VA rebates or chargeback reserves represent the Company’s estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at a price lower than the list price charged to the Company’s distributor.  The distributor will charge the Company for the difference between what the distributor pays for the product and the ultimate selling price to the qualified healthcare provider.  Rebate accruals are established during the same period in which the related product sales are recognized. Actual chargeback amounts for Public Health Service are determined at the time of resale to the qualified healthcare provider from the distributor, and the Company will generally issue credits for such amounts after receiving notification from the distributor.

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Dyax Corp. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Although allowances and accruals are recorded at the time of product sale, certain rebates are typically paid out, on average, up to six months or longer after the sale.  Reserve estimates are evaluated quarterly and if necessary, adjusted to reflect actual results.  Any such adjustments will be reflected in the Company’s operating results in the period of the adjustment.

Product Returns.  Allowances for product returns are recorded during the period in which the related product sales are recognized, resulting in a reduction to product revenue.  The Company does not provide its distributors with a general right of product return. The Company permits returns if the product is damaged or defective when received by customers or if the product shelf life has expired.  The Company estimates product returns based upon actual returns history and data provided by a distributor.

Patient Financial Assistance.  The Company offers a financial assistance program for commercially insured KALBITOR patients in order to defray patients’ out-of-pocket expenses, including co-payments, to aid patients’ access to KALBITOR.  The Company estimates its liability for this program based on actual but unpaid, as well as, an estimated reserve for product sold to and held by distributors as of period end, based on the Company’s historical redemption rates.

An analysis of the amount of, and change in, reserves related to sales allowances is summarized as follows:

(In thousands)	Prompt pay and other discounts			Patient financial assistance			Government rebates and chargebacks			Returns			Total
Balance, as of December 31, 2011	$	170		$	193		$	283		$	49		$	695
Current provisions relating to sales in current year		1,726			408			856			502			3,492
Adjustments relating to prior years		—			(60	)		(22	)		—			(82	)
Payments relating to sales in current year		(1,338	)		(243	)		(398	)		—			(1,979	)
Payments/returns relating to sales in prior years		(170	)		(133	)		(154	)		—			(457	)
Balance, as of December 31, 2012		388			165			565			551			1,669
Current provisions relating to sales in current year		2,565			498			2,806			145			6,014
Adjustments relating to prior years		23			(38	)		(79	)		(141	)		(235	)
Payments relating to sales in current year		(2,165	)		(378	)		(1,380	)		—			(3,923	)
Payments/returns relating to sales in prior years		(327	)		(157	)		(278	)		(232	)		(994	)
Balance, as of December 31, 2013	$	484		$	90		$	1,634		$	323		$	2,531

65

Dyax Corp. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Development and License Fee Revenues

Collaboration Agreements.  The Company enters into collaboration agreements with other companies for the research and development of therapeutic, diagnostic and separations products. The terms of the agreements may include non-refundable signing and licensing fees, funding for research and development, payments related to manufacturing services, milestone payments and royalties on any product sales derived from collaborations.  These multiple element arrangements are analyzed to determine how the deliverables, which often include license and performance obligations such as research, steering committee and manufacturing services, are separated into units of accounting.

For agreements entered into prior to 2011, the Company evaluated license arrangements with multiple elements in accordance with ASC, 605-25 Revenue Recognition – Multiple-Element Arrangements.  Since 2011, the Company has applied the guidance of ASU 2009-13 to evaluate license arrangements with multiple elements.  This guidance amended the accounting standards for certain multiple element arrangements to:

·   Provide updated guidance on whether multiple elements exist, how the elements in an arrangement should be separated and how the arrangement considerations should be allocated to the separate elements;

·   Require an entity to allocate arrangement consideration to each element based on a selling price hierarchy, also called the relative selling price method, where the selling price for an element is based on vendor-specific objective evidence (VSOE), if available; third-party evidence (TPE), if available and VSOE is not available; or the best estimate of selling price (BESP), if neither VSOE or TPE is available; and

·   Eliminate the use of the residual method and require an entity to allocate arrangement consideration using the selling price hierarchy.

The Company evaluates all deliverables within an arrangement to determine whether or not they provide value to the licensee on a stand-alone basis.  Based on this evaluation, the deliverables are separated into units of accounting.  If VSOE or VOE is not available to determine the fair value of a deliverable, the Company determines the best estimate of selling price associated with the deliverable.  The arrangement consideration, including upfront license fees and funding for research and development, is allocated to the separate units based on relative fair value.

VSOE is based on the price charged when an element is sold separately and represents the actual price charged for that deliverable.  When VSOE cannot be established, we attempt to establish the selling price of the elements of a license arrangement based on VOE.  VOE is determined based on third party evidence for similar deliverables when sold separately.  In circumstances when the Company charges a licensee for pass-through costs paid to external vendors for development services, these costs represent VOE.

When we are unable to establish the selling price of an element using VSOE or VOE, management determines BESP for that element.  The objective of BESP is to determine the price at which we would transact a sale if the element within the license agreement was sold on a stand-alone basis.  Our process for establishing BESP involves management’s judgment and considers multiple factors including discounted cash flows, estimated direct expenses and other costs and available data.

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Notes to Consolidated Financial Statements (Continued)

Based on the value allocated to each unit of accounting within an arrangement, upfront fees and other guaranteed payments are allocated to each unit based on relative value.  The appropriate revenue recognition method is applied to each unit and revenue is accordingly recognized as each unit is delivered.

For agreements entered into prior to 2011, revenue related to upfront license fees was spread over the full period of performance under the agreement, unless the license was determined to provide value to the licensee on a stand-alone basis and the fair value of the undelivered performance obligations, typically including research or steering committee services was determinable.

Steering committee services that were not inconsequential or perfunctory and were determined to be performance obligations were combined with other research services or performance obligations required under an arrangement, if any, to determine the level of effort required in an arrangement and the period over which the Company expected to complete its aggregate performance obligations.

Whenever the Company determined that an arrangement should be accounted for as a single unit of accounting, it determined the period over which the performance obligations would be completed. Revenue is recognized using either an efforts-based or time-based proportional performance (i.e. straight-line) method. The Company recognizes revenue using an efforts-based proportional performance method when the level of effort required to complete its performance obligations under an arrangement can be reasonably estimated and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time equivalents are typically used as the measurement of performance.

If the Company cannot reasonably estimate the level of effort to complete its performance obligations under an arrangement, then revenue under the arrangement is recognized on a straight-line basis over the period the Company is expected to complete its performance obligations.

Many of the Company's collaboration agreements entitle it to additional payments upon the achievement of performance-based milestones. Milestones that are tied to regulatory approval are not considered probable of being achieved until such approval was received. All milestones which are determined to be substantive milestones are recognized as revenue in the period in which they are met in accordance with Accounting Standards Update (ASU) No. 2010-17, Revenue Recognition – Milestone Method.  Milestones tied to counter-party performance are not included in the Company’s revenue model until performance conditions are met.  Milestones determined to be non-substantive are allocated to each unit of accounting within an arrangement when met.  The allocation of the milestone to each unit is based on relative value and revenue related to each unit is recognized accordingly.

Royalty revenue is recognized upon the sale of the related products provided the Company has no remaining performance obligations under the arrangement.

Costs of revenues related to product development and license fees are classified as research and development in the consolidated statements of operations and comprehensive loss.

Phage Display Library Licenses.  Standard terms of the proprietary phage display library agreements generally include non-refundable signing fees, license maintenance fees, development milestone payments, product license payments and royalties on product sales.  Signing fees and maintenance fees are generally recognized on a straight line basis over the term of the agreement as deliverables within these arrangements are determined to not provide the licensee with value on a stand-alone basis and therefore are accounted for as a single unit of accounting. As milestones are achieved under a phage display library license, a portion of the milestone payment, equal to the percentage of the performance period completed when the milestone is achieved, multiplied by the amount of the milestone payment, will be recognized. The remaining portion of the milestone will be recognized over the remaining performance period on a straight-line basis. If the Company has no future obligations under the license, milestone payments under these license arrangements are recognized as revenue when the milestone is achieved. Product license payments, which are optional to the licensee, are substantive and therefore are excluded from the initial allocation of the arrangement consideration.  These payments are recognized as revenue when the license is issued upon exercise of the licensee’s option, if the Company has no future obligations under the agreement. If there are future obligations under the agreement, product license payments are recognized as revenue only to the extent of the fair value of the license. Amounts paid in excess of fair value are recognized in a manner similar to milestone payments. Royalty revenue is recognized upon the sale of the related products provided the Company has no remaining performance obligations under the arrangement.

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Notes to Consolidated Financial Statements (Continued)

Payments received that have not met the appropriate criteria for revenue recognition are recorded as deferred revenue.

Phage Display Patent Licenses.  The Company previously licensed its phage display patents on a non-exclusive basis to third parties for use in connection with the research and development of therapeutic, diagnostic, and other products.  The core patents in this portfolio expired in November 2012.  Even after patent expiration, the Company generally remains eligible under these patent licenses to receive milestones and/or royalties for products discovered prior to patent expiration, although certain existing patent licenses will no longer have a royalty obligation.  The Company does not expect the expiration of these patents to have a material impact on its LFRP business.

Standard terms of the patent rights agreements include non-refundable signing fees, non-refundable license maintenance fees, development milestone payments and/or royalties on product sales. Signing fees and maintenance fees are generally recognized on a straight line basis over the term of the agreement or through the date of patent expiry, if shorter, except that in the case of perpetual patent licenses for which fees were recognized immediately if it was determined that the Company had no future obligations under the agreement and the payments were made upfront.  If the Company has no remaining performance obligations under the patent license agreement, milestones are recognized as revenue in the period in which the milestone is achieved, and royalty revenue is recognized upon the sale of the related products.

LFRP Milestones

Non-substantive Milestones.  Under the LFRP, the Company is eligible to receive clinical development, regulatory filing and marketing approval milestones, which vary from licensee to licensee.  Achievement of these milestones is contingent upon the licensees’ efforts and involves risks and uncertainty related to drug development, regulatory approval and intellectual property which could lead to milestones never being met.

Based on information available to the Company regarding pre-clinical and clinical candidates in the LFRP developed using its technology and through intellectual property rights granted, it is estimated that the Company could receive up to $78 million in development milestones, $66 million in regulatory filing milestones and $95 million in marketing approval milestones.  As achievement of these milestones is outside the control of the Company and is contingent upon the licensees’ efforts, they have been determined to be non-substantive milestones.

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Notes to Consolidated Financial Statements (Continued)

The Company recognized revenue of approximately $3.1 million, $3.3 million and $3.3 million related to milestones under the LFRP for the years ended December 31, 2013, 2012 and 2011, respectively.

Substantive Milestones. Under certain collaboration agreements, the Company performs funded research for various collaborators using its phage display technology and libraries.  These arrangements typically include technical milestones which are based on agreed upon objectives to be met under the research campaign, which are considered to be commensurate with the Company’s performance and therefore have been determined to be substantive milestones.
 

During the years ended December 31, 2012 and 2011, the Company recognized revenue of approximately $327,000 and $588,000, respectively, for technical milestones.  There was no amount recognized during the year ended December 31, 2013.  The Company is not eligible to receive any future technical milestones at this time.

Non-LFRP Milestones

In certain countries outside of the U.S., the Company has entered into licensing agreements for the development and commercialization of KALBITOR for the treatment of HAE and other angioedema indications.  Under these agreements, the Company is eligible to receive certain development and sales milestones. See Note 3, Significant Transactions.

Cost of Product Sales

Cost of product sales includes costs to procure, manufacture and distribute KALBITOR and manufacturing royalties. Costs associated with the manufacture of KALBITOR prior to regulatory approval in the United States were expensed when incurred as a research and development cost and accordingly, KALBITOR units sold during the years ended December 31, 2012 and 2011 do not include the full cost of drug manufacturing.  For the year ended December 31, 2013, KALBITOR sales were comprised of a combination of product manufactured both prior to and following FDA approval.  Accordingly, cost of product sales for the year ended December 31, 2013 does not reflect the full KALBITOR manufacturing cost.

Research and Development

Research and development costs include all direct costs, including salaries and benefits for research and development personnel, outside consultants, costs of clinical trials, sponsored research, clinical trials insurance, other outside costs, depreciation and facility costs related to the development of drug candidates. Costs of revenues related to product development and license fees are classified as research and development in the consolidated statements of operations and comprehensive loss.

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes in accordance with ASC 740.  Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities using the enacted statutory tax rates.  At December 31, 2013 and 2012, there were no unrecognized tax benefits.

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Notes to Consolidated Financial Statements (Continued)

The Company accounts for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions.

Translation of Foreign Currencies

Assets and liabilities of the Company's foreign subsidiaries are translated at period end exchange rates. Amounts included in the statements of operations are translated at the average exchange rate for the period. All currency translation adjustments are recorded to other income (expense) in the consolidated statement of operations and comprehensive loss.  The Company recorded other income of $14,000 and $15,000, for the years ended December 31, 2013 and 2012, respectively, and other expense of $3,000 for the year ended December 31, 2011.

Share-Based Compensation

The Company’s share-based compensation program consists of share-based awards granted to employees in the form of stock options and restricted stock units, as well as its 1998 Employee Stock Purchase Plan, as amended (the Purchase Plan).  The Company’s share-based compensation expense is recorded in accordance with ASC 718.

Income or Loss Per Share

The Company follows the two-class method when computing net loss per share, as it has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends, as if all income for the period had been distributed. The Company’s convertible preferred stock issued during May 2013 contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in losses of the Company.

The Company presents two earnings or loss per share (EPS) amounts, basic and diluted in accordance with ASC 260.  Basic earnings or loss per share is computed using the weighted average number of shares of common stock outstanding. Diluted net loss per share does not differ from basic net loss per share since potential common shares from the exercise of stock options, warrants or rights under the Purchase Plan are anti-dilutive for the years ended December 31, 2013, 2012 and 2011, and therefore, are excluded from the calculation of diluted net loss per share.

The weighted average of stock options and warrants outstanding totaled 12,185,724, 12,278,657 and 11,456,758 at December 31, 2013, 2012, and 2011, respectively.

Comprehensive Income (Loss)

The Company accounts for comprehensive income (loss) under ASC 220, Comprehensive Income, which established standards for reporting and displaying comprehensive income (loss) and its components in a full set of general purpose financial statements. The statement requires that all components of comprehensive income (loss) be reported in a financial statement that is displayed with the same prominence as other financial statements.

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Notes to Consolidated Financial Statements (Continued)

Accumulated other comprehensive income (loss) consists entirely of changes in unrealized gains (losses) on investments.

Business Segments

The Company discloses business segments under ASC 280, Segment Reporting.   The statement established standards for reporting information about operating segments and disclosures about products and services, geographic areas and major customers.  The Company operates as one business segment within predominantly one geographic area.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies, which are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

3.   SIGNIFICANT TRANSACTIONS

CMIC

In 2010, the Company entered into an agreement with CMIC Co., Ltd. (CMIC) to develop and commercialize subcutaneous ecallantide for the treatment of HAE and other angioedema indications in Japan.  Under the terms of the agreement, the Company received a $4.0 million upfront payment and was eligible to receive development and sales milestones for ecallantide in HAE and other angioedema indications and royalties on net product sales. CMIC was solely responsible for all costs associated with development, regulatory activities, and commercialization of ecallantide for all angioedema indications in Japan.  In December, 2013, CMIC provided the Company written notice of CMIC’s intent to terminate the agreement.  The termination will take effect in June 2014, at which time all of the rights to develop ecallantide in Japan will return to the Company.  The Company has no obligations to CMIC in connection with, or following the termination.

Upon the commencement of the agreement in 2010, the Company analyzed this multiple element arrangement in accordance with ASC 605 and evaluated whether the performance obligations under this agreement, including the product license, development of ecallantide for the treatment of HAE and other angioedema indications in Japan, steering committee, and manufacturing services should be accounted for as a single unit or multiple units of accounting.  The Company determined that there were two units of accounting.  The first unit of accounting included the product license, the committed future development services and the steering committee involvement.  The second unit of accounting relates to the manufacturing services.  As the scope and timing of the future development of ecallantide for the treatment of HAE and other indications in the CMIC territory are the joint responsibility of the Company and CMIC, the Company could not reasonably estimate the level of effort required to fulfill its obligations under the first unit of accounting, and, as a result, the Company was recognizing revenue under the first unit of accounting on a straight-line basis over the estimated development period of ecallantide for the treatment of HAE in the CMIC territory.  Upon receiving notification of CMIC’s irrevocable intent to terminate, it was determined the Company had no further obligations under this arrangement, and therefore, the full amount of deferred revenue of $2.0 million was recognized in the quarter ending December 31, 2013.

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Notes to Consolidated Financial Statements (Continued)

The Company recognized revenue of approximately $2.6 million, $755,000 and $595,000 related to this agreement for the years ended December 31, 2013, 2012 and 2011, respectively.  As of December 31, 2012, the Company had deferred approximately $2.5 million, of revenue related to this arrangement, which was recorded in deferred revenue on the accompanying consolidated balance sheets.  There was no deferred balance related to this arrangement as of December 31, 2013.

CVie

In 2013, the Company entered into an agreement with CVie Therapeutics (CVie), a subsidiary of Lee’s Pharmaceutical Holdings Ltd., to develop and commercialize KALBITOR for the treatment of HAE and other angioedema indications in China, Hong Kong and Macau.  Under the terms of this exclusive license agreement, Dyax received a $1.0 million upfront payment and is eligible to receive up to $11 million in future regulatory and sales milestones.  Additionally, the Company is eligible to receive royalties on net product sales.  CVie is solely responsible for all costs associated with development, regulatory activities and the commercialization of KALBITOR in its licensed territories.  CVie will purchase drug product from the Company on a cost-plus basis for its commercial supply when and if KALBITOR is approved for commercial sale in the CVie territories.

The Company analyzed this multiple element arrangement in accordance with ASC 605 and evaluated whether the performance obligations under this agreement, including the product license, steering committee, and manufacturing services should be accounted for as a single unit or multiple units of accounting.  Because of the risk associated with obtaining approval for commercial sale in the CVie territories, manufacturing services associated with commercial supply are considered a contingent deliverable and will be accounted for if and when performed.  As CVie is required to obtain all drug product for both clinical development and commercial demand from the Company, all other deliverables under this arrangement were determined to provide no stand-alone value to the licensee.  Accordingly, it was determined that the license, manufacturing services associated with clinical supply, and steering committee performance obligations under this agreement represent a single unit of accounting.

At this time, the Company cannot reasonably estimate the level of effort required to fulfill its obligations and, therefore, is recognizing revenue on a straight-line basis over the estimated development period in the CVie territories through mid-2018.

The Company recognized revenue of $172,000 for the year ended December 31, 2013. As of December 31, 2013, the Company has deferred $828,000 of revenue related to this arrangement, which is recorded in deferred revenue on the accompanying consolidated balance sheets.

Novellus

In 2013, the Company entered into an agreement with Novellus Biopharma AG (Novellus) to develop and commercialize KALBITOR for the treatment of HAE and other angioedema indications in select countries in Latin America, including Argentina, Brazil, Chile, Colombia, Mexico and Venezuela.  Under the terms of the exclusive license agreement, the Company was entitled to receive payments totaling $800,000 in 2013, of which $500,000 was received through year-end.  Additionally, the Company is eligible to receive up to $5.2 million in future regulatory and sales milestones and royalties on net product sales.  Novellus is solely responsible for all costs associated with development, regulatory activities, and the commercialization of KALBITOR in their licensed territories.  Novellus will purchase drug product from the Company on a cost-plus basis for its commercial supply.

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Notes to Consolidated Financial Statements (Continued)

The Company analyzed this multiple element arrangement in accordance with ASC 605 and evaluated whether the performance obligations under this agreement, including the product license, steering committee, and manufacturing services should be accounted for as a single unit or multiple units of accounting.  As Novellus is required to obtain all drug product for both clinical and commercial demand from the Company, all other deliverables under this arrangement were determined to provide no stand-alone value to the licensee.  Accordingly, it was determined that performance obligations under this agreement represent a single unit of accounting.

The Company will recognize revenue related to this arrangement, including the upfront payments, on a unit output basis, as products under clinical and commercial supply are provided to Novellus.  As no supply has been provided to Novellus to date, no revenue has been recognized for the year ended December 31, 2013, and the Company has deferred $800,000 of revenue related to this arrangement, which is recorded in deferred revenue on the accompanying consolidated balance sheet at December 31, 2013.

Sigma Tau

In June 2010, the Company entered into a strategic collaboration agreement with Sigma-Tau Rare Diseases S.A. (as successor-in-interest to Defiante Farmaceutica S.A.) (SigmaTau) to develop and commercialize subcutaneous ecallantide for the treatment of HAE and other therapeutic indications throughout Europe, North Africa, the Middle East and Russia.  In December 2010, the original agreement was amended to expand the partnership to commercialize KALBITOR for the treatment of HAE in Australia and New Zealand (the first amendment).  In May 2011, the Company further amended its agreement with Sigma-Tau to include development and commercialization rights in Latin America (excluding Mexico), the Caribbean and certain Asian territories (the second amendment).  Three subsequent amendments to this agreement eliminated rights that Dyax had previously granted to Sigma Tau for the Asian territories, the Middle East, North Africa, Latin America and the Caribbean, and in March 2013 rights to the remaining territories (Europe, Russia, Australia and New Zealand) were eliminated under a termination agreement between the Company and Sigma Tau.

Through the date of termination, Sigma Tau made aggregate upfront payments of $7.0 million, and payments of $3.8 million for reimbursement associated with development services, and it purchased 787,647 shares of the Company’s common stock for an aggregate purchase price of $3.0 million.  

Through May 2011, revenue under this arrangement was recognized in accordance with Emerging Issues Task Force Issue 00-21, Revenue Arrangements with Multiple Deliverables.  In May 2011, in conjunction with the second amendment to this agreement, it was determined that the existing arrangement had been materially modified.  As a result, the Company re-evaluated the entire arrangement under ASU No. 2009-13, Revenue Recognition with Multiple Deliverables, as if all modifications since inception were part of the original agreement.  All undelivered items under the agreement were identified and allocated to separate units of accounting based on whether the deliverable provided stand-alone value to the licensee.  The undelivered items as of the date of the second amendment consisted of (i) committed future development services, (ii) steering committee services and (iii) manufacturing services.  Manufacturing services for commercial supply were determined to be a contingent deliverable as the performance of these services were contingent upon Sigma-Tau obtaining regulatory approval in its territories.

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Notes to Consolidated Financial Statements (Continued)

All deferred revenue as of the date of modification and additional proceeds received under the second amendment, determined to be attributable to the license granted based on the Company’s best estimate of selling price (BESP), were recognized during the second quarter of 2011.  Management allocated proceeds as of the date of modification to the steering committee and development services based on BESP which was recognized under the proportional performance model as work was performed. 

The principal terms of the March 2013 termination agreement included provision for (i) the revocation of all licenses granted by the Company to Sigma Tau, (ii) the termination of all other obligations under the license agreement, (iii) the issuance of 271,665 shares of the Company’s common stock to Sigma Tau, and (iv) the right of Sigma Tau to receive $500,000 for every $5.0 million of compensation received by the Company during the next ten years in relation to the potential license or supply of ecallantide exclusively in those territories that had been previously licensed to Sigma Tau.  In accordance with ASC 605-50, the $1.1 million determined to be the fair value of the common stock as of the date of issuance was recorded as a reduction to development and license fee revenue on the Company’s statement of operations and $85,000 of deferred revenue attributable to the JSC services was recognized as revenue for the year ended December 31, 2013.  No additional revenue is expected to be recognized in future periods.  For the years ended December 31, 2012 and 2011, revenue recognized under this arrangement totaled $204,000 and $10.5 million, respectively.

4.   Fair Value Measurements

The following tables present information about the Company's financial assets that have been measured at fair value as of December 31, 2013 and 2012, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value.  In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities.  Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices, for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.  Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.

Description	December 31, 2013		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Assets:
Money Market Funds	$	55,569	$	55,569	$	—	$	—
US Treasury Bills and Notes		43,296		—		43,296		—
Total	$	98,865	$	55,569	$	43,296	$	—

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Notes to Consolidated Financial Statements (Continued)

Description	December 31, 2012		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Assets:
Money Market Funds	$	15,910	$	15,910	$	—	$	—
US Treasury Bills and Notes		9,028		—		9,028		—
Total	$	24,938	$	15,910	$	9,028	$	—

The following tables summarize the Company’s marketable securities at December 31, 2013 and 2012:

	December 31, 2013
Description	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
US Treasury Bills and Notes (due within 1 year)	$	2,001	$	1	$	—	$	2,002
US Treasury Bills and Notes (due after 1 year through 2 years)		41,292		2		—		41,294
Total	$	43,293	$	3	$	—	$	43,296

	December 31, 2012
Description	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
US Treasury Bills and Notes (due within 1 year)	$	9,022	$	6	$	—	$	9,028
US Treasury Bills and Notes (due after 1 year through 2 years)		—		—		—		—
Total	$	9,022	$	6	$	—	$	9,028

As of December 31, 2013 and 2012, the Company's cash equivalents which are invested in money market funds are valued based on Level 1 inputs.  As of December 31, 2013 and 2012, the Company’s short-term investments consisted of United States Treasury notes and bills which are valued based on Level 2 inputs.  The Company has also classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

The carrying amounts reflected in the consolidated balance sheets for cash, cash equivalents, accounts receivable, other current assets, accounts payable and accrued expenses and other current liabilities approximate fair value due to their short-term maturities.

5.   Inventory

Costs associated with the manufacture of KALBITOR prior to regulatory approval by the FDA in 2009 were expensed when incurred, and therefore were not capitalized as inventory.  The supply of KALBITOR produced prior to FDA approval met commercial needs into 2013.  Subsequent to FDA approval, all costs associated with the manufacture of KALBITOR have been recorded as inventory.

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Notes to Consolidated Financial Statements (Continued)

Inventory on-hand that will be sold beyond the Company's normal operating cycle is classified as non-current and grouped with other assets on the Company's balance sheet. As of December 31, 2013 and 2012, approximately $5.5 million and $5.9 million of inventory, respectively, is classified as non-current.

Inventory consists of the following:

	December 31,
	2013		2012
	(in thousands)
Raw Materials	$	1,116	$	1,116
Work in Progress		5,965		8,274
Finished Goods		1,281		599
Total	$	8,362	$	9,989

6.   Fixed Assets

Fixed assets consist of the following:

	December 31,
	2013			2012
	(In thousands)
Laboratory equipment	$	3,932		$	7,628
Furniture and office equipment		815			1,619
Software and computers		2,958			4,763
Leasehold improvements		4,510			4,502
Construction in process		—			197
Total		12,215			18,709
Less: accumulated depreciation and amortization		(7,255	)		(13,380	)
	$	4,960		$	5,329

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Notes to Consolidated Financial Statements (Continued)

Depreciation expense for the years ended December 31, 2013, 2012, and 2011 was approximately $859,000, $1.1 million and $1.4 million, respectively.

During 2013, the Company retired fixed assets of $7.0 million with no remaining net book value.  During 2012, the Company retired fixed assets of $6.8 million with no remaining net book value.  Additionally in 2012 the Company sold fixed assets totaling $1.5 million with a remaining net book value of $90,000.  Proceeds from this sale totaled $200,000, resulting in a gain on sale of fixed assets of $110,000.

7.   Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

	December 31,
	2013		2012
	(In thousands)
Accounts payable	$	1,407	$	3,557
Accrued employee compensation and related taxes		4,609		4,018
Accrued external research and development and sales expense		1,778		1,652
Accrued legal		456		518
Accrued sales allowances		1,918		1,052
Other accrued liabilities		2,374		1,675
	$	12,542	$	12,472

8.   Long-term Obligations

Long-term obligations and note payable consists of the following (in thousands):

	December 31,
	2013			2012
	(In thousands)
Note payable	$	81,516		$	78,061
Obligations under equipment loan		931			1,376
Total	$	82,447		$	79,437
Less: current portion		(468	)		(445	)
Long-term obligations	$	81,979		$	78,992

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Notes to Consolidated Financial Statements (Continued)

Estimated future payments under the Company's long-term obligations and note payable as of December 31, 2013 are as follows:

	(In thousands)
2014	$	10,652
2015		11,638
2016		10,435
2017		27,192
2018		71,428
Thereafter		—
Total estimated future payments		131,345
Less: amount representing interest		(45,941	)
Present value of estimated future payments		85,404
Less: current portion		(468	)
Less: unamortized portion of discount and deferred interest expense		(2,957	)
Long-term obligations and note payable	$	81,979

Note Payable:

HealthCare Royalty Partners

In August 2012, the Company completed the second closing under an agreement with an affiliate of HealthCare Royalty Partners, formerly Cowen Healthcare Partners (HC Royalty), which the Company entered into in December 2011 to refinance its existing loans from HC Royalty.  At December 31, 2013, the aggregate principal amount of the new loan was $84.5 million, consisting of a $22.8 million Tranche A Loan and a $61.7 million Tranche B Loan (collectively, the “Loan”). The Loan bears interest at a rate of 12% per annum, payable quarterly.  The Loan will mature in August 2018, and can be repaid without penalty beginning in August 2015.

In connection with the Loan, the Company entered into a security agreement granting HC Royalty a security interest in the intellectual property related to the LFRP, and the revenues generated by the Company through the licenses of the intellectual property related to the LFRP. The security agreement does not apply to the Company's internal drug development or to any of the Company's co-development programs for ecallantide.

Under the terms of the agreement, the Company is required to repay the Loan based on the annual net LFRP receipts.  Until September 30, 2016, required payments are equal to the sum of 75% of the first $15.0 million in specified annual LFRP receipts and 25% of specified annual LFRP receipts over $15.0 million.  After September 30, 2016, and until the maturity date or the complete repayment of the Loan, HC Royalty will receive 90% of all included LFRP receipts.  If the HC Royalty portion of LFRP receipts for any quarter exceeds the interest for that quarter, then the principal balance will be reduced.  Any unpaid principal will be due upon the maturity of the Loan.  If the HC Royalty portion of LFRP revenues for any quarterly period is insufficient to cover the cash interest due for that period, the deficiency may be added to the outstanding principal or paid in cash by the Company. After five years from the dates of the Tranche A Loan and the Tranche B Loan, respectively, the Company must repay to HC Royalty all additional accumulated principal above the original loan amounts of $21.7 million and $58.8 million, respectively.

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Notes to Consolidated Financial Statements (Continued)

Tranche A Loan

Under the terms of the agreement, the Company received a loan of $20 million (Tranche A Loan) in December 2011 and a commitment to refinance the amounts outstanding under the Company’s March 2009 amended and restated loan agreement (the March 2009 Loan) at a reduced interest rate in August 2012.  The Tranche A Loan was unsecured and accrued interest at an annual rate of 13% through August 2012.

Upon execution of the Tranche A Loan, the terms of the Original Loans (defined below) were determined to be modified under ASC 470.  During the years ended December 31, 2013 and 2012, interest expense on the Loan is being recorded in the Company’s financial statements at an effective interest rate of 12.6 and 13.0%, respectively.

Upon modification of the Original Loans, the note payable balance related to the Tranche A Loan was reduced by $193,000 to reflect payment of the lender’s legal fees in conjunction with the Tranche A Loan; these fees are being accreted over the life of the Loan, through August 2018.

Tranche B Loan

In August 2012, the Company completed a second closing under the agreement that refinanced on the same terms as the Tranche A Loan approximately $57.6 million outstanding under the March 2009 Loan (Tranche B Loan).

Original Loans

In 2008 and 2009, the Company entered into loan agreements with an affiliate of HC Royalty that provided aggregate loan proceeds of $65.0 million (the Original Loans), which  had an outstanding  principal and accrued interest balance of $57.6 million at the time of their refinancing in August 2012.  The Original Loans bore interest at an annual rate of 17.4%, payable quarterly, and were secured by the Company’s LFRP.

In connection with the Original Loans, the Company issued affiliates of HC Royalty warrants to purchase shares of the Company’s common stock.  In August 2008, the Company issued warrants to purchase 250,000 shares of the Company’s common stock at an exercise price of $5.50 per share. This warrant became exercisable in August 2009 and could be exercised through August 2016.  The Company estimated the relative fair value of the warrant to be $853,000 on the date of issuance, using the Black-Scholes valuation model, assuming a volatility factor of 83.64%, risk-free interest rate of 4.07%, an eight-year expected term and an expected dividend yield of zero.  In March 2009, the Company issued HC Royalty a second warrant to purchase 250,000 shares of the Company’s common stock at an exercise price of $2.87 per share. This warrant became exercisable in March 2010 and could be exercised through August 2016.  The Company estimated the relative fair value of the warrant to be $477,000 on the date of issuance, using the Black-Scholes valuation model, assuming a volatility factor of 85.98%, risk-free interest rate of 2.77%, a seven-year, four-month expected term and an expected dividend yield of zero.  The relative fair values of the warrants as of the date of issuance are recorded in additional paid-in capital on the Company's consolidated balance sheets. In November 2013, HC Royalty executed their right to complete a cashless exercise of their warrants to purchase shares of the Company's common stock issued in conjunction with the loan. As a result, 233,438 shares were issued to HC Royalty and no further warrants remain outstanding under this agreement.

The cash proceeds from the Original Loans were recorded as a note payable on the Company's consolidated balance sheet.  The note payable balance was reduced by $1.3 million for the fair value of the warrants issued, and by $580,000 for payment of HC Royalty’s legal fees in conjunction with the Original Loan.  Prior to the December 2011 issuance of the Tranche A Loan, each of these amounts was being accreted over the life of the note through August 2016.  Subsequent to the modification of the debt arrangement in December 2011, the unamortized portion of these amounts is being accreted over the life of the Loan through August 2018.

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Notes to Consolidated Financial Statements (Continued)

The Loan principal balance at December 31, 2013 and 2012 was $84.5 million and $81.2 million, respectively.  For financial reporting purposes, the Loan is adjusted for discounts associated with the debt issuance, including warrants and fees.

Activity under the Loan is presented for financial reporting purposes, as follows:

	2013			2012
	(in thousands)
Balance, January 1	$	78,061		$	75,372
Accretion of discount		198			198
Loan activity:
Discount on Tranche A Loan		—			(43	)
Interest Expense		10,447			10,199
Payments applied to principal		—			(96	)
Payments applied to interest		(5,378	)		(7,569	)
Accrued interest payable		(1,812	)		—
Balance, December 31	$	81,516		$	78,061

The estimated fair value of the note payable was $83.2 million at December 31, 2013 which was calculated based on level 3 inputs due to the limited availability of comparable data points.  The note payable was valued using expected cash flows discounted at our estimate of the currently available market interest rate.

Obligations Under Equipment Loan Arrangements

In 2012, the Company entered into an equipment lease line of credit for up to $3 million with Silicon Valley Bank.  When drawn, the note bears interest at a 6% annual rate.  The Company drew down $1.4 million from this line, which will be financed over a 3-year term.  The outstanding balance of this loan was $931,000 and $1.4 million, as of December 31, 2013 and 2012, respectively.

Operating Leases

In 2011, the Company entered into a lease agreement for new premises located in Burlington, Massachusetts and in January 2012, the Company relocated its operations to the new facility.  The new premises, consisting of approximately 45,000 rentable square feet of office and laboratory facilities, serves as the Company’s principal offices and corporate headquarters.  The term of the lease is ten years, and the Company has rights to extend the term for an additional five years at fair market value subject to specified terms and conditions. The aggregate minimum lease commitment over the ten year term of the new lease is approximately $15.0 million.  The Company has provided the landlord a Letter of Credit of $1.1 million to secure its obligations under the lease, which is classified as restricted cash on the Company’s balance sheet at December 31, 2013 and 2012.

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Notes to Consolidated Financial Statements (Continued)

Under the terms of the lease agreement, the landlord has provided the Company with a tenant improvement allowance of $2.6 million which was used towards the cost of leasehold improvements.  Through December 31, 2012, the Company capitalized approximately $4.5 million in leasehold improvements associated with the Burlington facility.  Costs reimbursed under the tenant improvement allowance have been recorded as deferred rent and are being amortized as a reduction to rent expense over the lease term.  All rent payments due over the term of the lease are being expensed on a straight-line basis in the Company’s statement of operations.

In January 2012, the Company’s lease agreement associated with its former facility terminated and the $1.3 million Letter of Credit which secured the Company’s obligations under the lease was released.  This Letter of Credit was classified on the Company’s balance sheet as restricted cash at December 31, 2011.

Gross minimum future lease payments under the Company's non-cancelable operating leases as of December 31, 2013 are as follows:

	(In thousands)
2014	$	1,605
2015		1,615
2016		1,581
2017		1,588
2018		1,670
Thereafter		5,352
Total	$	13,411

Rent expense for the years ended December 31, 2013, 2012, and 2011 was approximately $1.5 million, $1.6 million and $3.4 million, respectively.  Rent expense for the year ended December 31, 2011 is reflected as net of sublease payments of $194,000.

9.   Restructuring Charges

In 2012, the Company realigned its business structure and implemented a number of strategic and operational initiatives.  As part of these initiatives, a workforce reduction was implemented.  As a result of the restructuring, during the year ended December 31, 2012, the Company recorded charges of approximately $1.4 million, which included severance and benefits related charges of approximately $1.2 million, outplacement costs of approximately $120,000, stock compensation expense of $55,000 for amendments to the exercise schedules to certain options and other exit costs of $90,000.  All restructuring costs were paid as of December 31, 2012.

10. Stockholders' Equity (Deficit)

Sale of Common and Preferred Stock

In October 2013, the Company issued 10,615,385 shares of common stock at $6.50 per share in an underwritten public offering, which included 1,384,615 shares issued to the underwriters upon exercise in full of their underwriters’ option. Net proceeds from the offering were approximately $64.7 million, after deducting offering expenses.

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Notes to Consolidated Financial Statements (Continued)

In May 2013, the Company issued 8,901,675 shares of common stock at $2.30 per share and 41,418 shares of Series 1 convertible preferred stock at $230 per share in a registered direct offering.  Each share of Series 1 convertible preferred stock is convertible into 100 shares of common stock, provided, however, that the holder is prohibited from converting Series 1 convertible preferred stock into shares of common stock if, as a result of such conversion, the holder, together with affiliates, would own more than 9.99% of the total shares of the Company’s common stock then issued and outstanding.  The Company may not pay any dividends on shares of its common stock (other than dividends in the form of common stock) unless the holders of Series 1 convertible preferred stock shall first receive dividends on shares of Series 1 convertible preferred stock held by them (on an as-if-converted-to-common-stock basis) in an amount equal to and in the same form as any such dividends (other than dividends in the form of common stock) to be paid on shares of the common stock.  Net proceeds from the offering were approximately $29.1 million, after deducting offering expenses.

In February 2014, 41,418 shares of preferred stock outstanding was converted into 4,141,800 shares of common stock. The Company has no remaining preferred stock outstanding.

Stock-Based Compensation Expense

The Company measures compensation cost for all stock awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest.  The fair value of stock options was determined using the Black-Scholes valuation model. Such value is recognized as expense over the service period, net of estimated forfeitures and adjusted for actual forfeitures. The estimation of stock options that will ultimately vest requires significant judgment. The Company considers many factors when estimating expected forfeitures, including historical experience. Actual results and future changes in estimates may differ substantially from the Company's current estimates.

The following table reflects stock compensation expense recorded, net of amounts capitalized into inventory:

	Year Ended December 31,
Compensation expense related to:	2013		2012		2011
	(in thousands)
Equity incentive plan	$	5,131	$	3,549	$	3,984
Employee stock purchase plan		310		91		46
	$	5,441	$	3,640	$	4,030
Stock-based compensation expense charged to:
Research and development	$	1,671	$	839	$	1,193
General and administrative	$	3,770	$	2,746	$	2,837
Restructuring charges	$	—	$	55	$	—

Stock-based compensation of $9,000, $23,000 and $31,000 was capitalized into inventory for the each of the years ended December 31, 2013, 2012 and 2011, respectively.  Capitalized stock-based compensation is recognized into cost of product sales when the related product is sold.

Stock-based compensation expense for the year ended December 31, 2013, 2012 and 2011 included $1.6 million, $467,000 and $273,000, respectively, related to the modification of certain stock options.  The 2013 expense included $1.1 million recognized in relation to the extension of exercisability and vesting of options held by a former executive officer.

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Notes to Consolidated Financial Statements (Continued)

Valuation Assumptions for Stock Options

For the years ended December 31, 2013, 2012 and 2011,3,617,150, 5,897,221 and 2,624,160 stock options were granted, respectively.  The fair value of each option was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	Year Ended December 31,
	2013	2012	2011
Expected Option Term (in years)	6 – 8	6 – 8	5.5 – 6
Risk-free interest rate	0.99% - 2.21%	0.86% - 1.37%	1.28% - 2.39%
Expected dividend yield	0	0	0
Volatility factor	70% - 73%	70% - 73%	74% - 75%

Valuation Assumptions for Employee Stock Purchase Plans

The fair value of shares issued under the employee stock purchase plan was estimated on the commencement date of each offering period using the Black-Scholes option-pricing model with the following assumptions:

	Year Ended December 31,
	2013	2012	2011
Expected Option Term (in years)	0.5	0.5	0.5
Risk-free interest rate	0.06% - 0.10%	0.09% - 0.12%	0.07% - 0.11%
Expected dividend yield	0	0	0
Volatility factor	46% - 81%	45% - 54%	37% - 72%

Expected volatilities are based on historical volatilities of our common stock; the expected life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and our historical exercise and cancellation patterns; and the risk-free rate is based on the United States Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option.

Equity Incentive Plan

The Company's 1995 Equity Incentive Plan (the Equity Plan), as amended, is an equity plan under which equity awards, including awards of restricted stock and incentive and nonqualified stock options to purchase shares of common stock may be granted to employees, consultants and directors of the Company by action of the Compensation Committee of the Board of Directors. Options are generally granted at the current fair market value on the date of grant, generally vest ratably over a 48-month period, and expire within ten years from date of grant.  Restricted stock units are generally granted at the current fair market value on the date of grant, generally vest over a four year period in equal installments on each anniversary of the grant date.  The Equity Plan is intended to attract and retain employees and to provide an incentive for employees, consultants and directors to assist the Company to achieve long-range performance goals and to enable them to participate in the long-term growth of the Company.

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Notes to Consolidated Financial Statements (Continued)

At the Annual Meeting of Stockholders held in May 2012 (the Annual Meeting), the Company’s shareholders approved a stock option exchange program for employees, executive officers and non-employee directors.  Under this option exchange program, outstanding options to purchase an aggregate of 4,192,310 shares of the Company’s common stock were exchanged for new options to purchase an aggregate of 2,473,596 shares of the Company’s common stock at an exercise price equal to $2.06 per share, which was the closing price of the Company’s common stock on the grant date of June 20, 2012.  All new options issued in the option exchange program are subject to a new, extended vesting schedule, the terms of which differ depending on the holder’s status as an executive, director or non-executive employee.  The new options have a term equal to the greater of (i) the term of the original options for which they were exchanged, or (ii) five years from date of grant.  The new options had a fair value approximately equal to the fair value of the surrendered options, based on a Black-Scholes option pricing model applied immediately prior to commencement of the exchange program.  Accordingly, approximately $46,000 of expense was recorded during the year ended December 31, 2012 related to the modification of the exchanged options.

Also at the Annual Meeting, the Company’s shareholders approved an amendment to the Equity Plan to increase the number of shares of common stock available for issuance under the plan by 5,000,000 shares less the net number of shares, if any, returned to the Equity Plan for issuance following the option exchange program.  Accordingly, 3,281,286 additional shares of common stock, constituting the approved 5,000,000 share increase net of the 1,718,714 shares that were returned to the Equity Plan as a result of the option exchange program, became available for issuance under the plan.

At December 31, 2013, a total of 4,114,886 shares were available for future grants under the Equity Plan.

Stock Option Activity

The following table summarizes stock option activity for the year ended December 31, 2013:

	Number of Options			Weighted-Avg. Exercise Price		Weighted-Avg. Remaining Contractual Life		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2012		10 528,474		$	2.28		6.84	$	13,864
Granted at fair market value		3,617,150		$	3.22
Exercised		(2,043,466	)	$	2.50
Forfeited		(1,152,738	)	$	2.33
Expired		(320,541	)	$	5.04
Outstanding as of December 31, 2013		10,628,879		$	2.47		6.99	$	53,978
Exercisable as of December 31, 2013		4,546,646		$	2.52		6.32	$	22,960
Vested and unvested expected to vest as of December 31, 2013		10,587,985		$	2.48		7.00	$	53,731

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Notes to Consolidated Financial Statements (Continued)

The aggregate intrinsic value in the table above represents the total intrinsic value of the options outstanding, options exercisable and options vested and unvested which are expected to vest, based on the Company’s common stock closing price of $7.54 as of December 31, 2013, which would have been received by the option holders had all option holders exercised their options and sold the underlying common stock as of that date.  The total number of in-the-money options exercisable as of December 31, 2013 was 4,516,135.

The weighted average grant date fair values of options, as determined under ASC 718, granted during the years ended December 31, 2013, 2012 and 2011 were $2.06, $1.00 and $1.17 per share, respectively.  The total intrinsic value of options exercised during years ended December 31, 2013, 2012 and 2011 was approximately $5.4 million, $375,000, and $0, respectively.  The total cash received from employees as a result of employee stock option exercises during the years ended December 31, 2013, 2012 and 2011 was approximately $5.1 million, $1.3 million, and $2,000, respectively.

As of December 31, 2013 future compensation cost related to non-vested stock options is approximately $8.8 million and will be recognized over an estimated weighted average period of approximately 1.98 years.

The following table summarizes unvested stock option activity for the year ended December 31, 2013:

	Non-vested Number of Options
Unvested balance at December 31, 2012		6,252,662
Granted at fair market value		3,617,150
Vested		(2,635,583	)
Forfeited		(1,151,996	)
Unvested balance at December 31, 2013		6,082,233

The total fair value of options vested during the years ended December 31, 2013, 2012 and 2011 were $3.4 million, $3.0 million and $3.7 million, respectively.

Restricted Stock Unit Activity

The fair market value of restricted stock units is expensed over the period of vesting. Restricted stock units generally vest over a four year period in equal installments on each anniversary of the grant date. The fair value of restricted stock units was determined based on the closing market price of the underlying stock on the grant date.

The following table summarizes our RSU activity:

	Shares			Weighted-Avg Fair Value
Unvested balance at December 31, 2012		373,749		$	1.48
Granted at fair market value		—		$	—
Vested		(61,250	)	$	1.48
Forfeited		(59,375	)	$	1.48
Unvested balance at December 31, 2013		253,124		$	1.48

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Notes to Consolidated Financial Statements (Continued)

As of December 31, 2013, there was $213,000 of total unrecognized compensation cost related to non-vested restricted stock units. This expense, net of forfeitures is expected to be recognized over a weighted average period of approximately 2.15 years. Of the 253,124 unvested shares, the Company estimates that 227,714 will vest.

Employee Stock Purchase Plan

The Company's Purchase Plan allows employees to purchase shares of the Company's common stock at a discount from fair market value.  Under this Plan, eligible employees may purchase shares during six-month offering periods commencing on June 1 and December 1 of each year at a price per share of 85% of the lower of the fair market value price per share on the first or last day of each six-month offering period.  Participating employees may elect to have up to 10% of their base pay withheld and applied toward the purchase of such shares, subject to the limitation of 875 shares per participant per quarter.  The rights of participating employees under the Purchase Plan terminate upon voluntary withdrawal from the Purchase Plan at any time or upon termination of employment.  The compensation expense in connection with the Plan for the years ended December 31, 2013, 2012 and 2011 was approximately $310,000, $91,000 and $46,000, respectively. There were 94,979, 93,974 and 137,167 shares purchased under the Plan during the years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013, a total of 267,960 shares were reserved and available for issuance under this Plan.

11. Employee Savings and Retirement Plans

The Company has an employee savings and retirement plan (the "Retirement Plan"), qualified under Section 401(k) of the Internal Revenue Code, covering substantially all of the Company's employees.  Employees may elect to contribute a portion of their pretax compensation to the Retirement Plan up to the annual maximum allowed under the Retirement Plan.  Employees are 100% vested in company matching contributions which have been 50% of employee contributions up to 6% of eligible pay.  For the years ended December 31, 2013, 2012 and 2011, the Company's matching contributions amounted to $451,000, $440,000 and $431,000, respectively.

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Notes to Consolidated Financial Statements (Continued)

12. Income Taxes

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using future enacted rates.  A valuation allowance is recorded against deferred tax assets for which the Company determines that it does not meet the criteria under ASC 740.

The provision for income taxes for continuing operations was calculated at rates different from the United States federal statutory income tax rate for the following reasons:

	2013			2012			2011
Statutory federal income taxes		34.0	%		34.0	%		34.0	%
State income taxes, net of federal benefit		(4.7	%)		(3.3	%)		(2.0	%)
General business credit		4.5	%		3.8	%		5.9	%
Stock compensation cancellations		(0.8	%)		(6.8	%)		—
Other		1.6	%		(1.7	%)		(1.2	%)
Federal true up and expiring NOLs and research credits		0.4	%		(8.6	%)		(3.7	%)
Valuation allowance		(35.0	%)		(17.4	%)		(33.0	%)
Effective income tax rate		—	%		—	%		—	%

The principal components of the Company's deferred tax assets and liabilities at December 31, 2013, 2012 and 2011, respectively are as follows:

	2013			2012			2011
	(In thousands)
Net Deferred Tax Asset:
Allowance for doubtful accounts	$	—		$	—		$	44
Depreciation and amortization		228			255			2,023
Accrued expenses		642			303			173
Capitalized research and development costs		23,603			8,192			—
Other		1,339			1,394			861
Stock based compensation		2,575			2,127			3,615
Deferred revenue		2,928			4,223			5,898
Research credit carryforwards		67,088			63,259			61,999
Net operating loss carryforwards		115,531			124,507			124,558
Total gross deferred tax asset		213,934			204,260			199,171
Valuation allowance		(213,934	)		(204,260	)		(199,171	)
Net deferred tax asset	$	—		$	—		$	—

As of December 31, 2013 and 2012, the Company had federal tax net operating loss carryforwards (NOLs) of $329.2 million and $344.9 million, respectively, available to reduce future taxable income, which expire at various times beginning in 2018 through 2033.  The Company also had federal research and experimentation and orphan drug credit carryforwards of approximately $61.6 million and $58.1 million as of December 31 2013 and 2012, respectively, available to reduce future tax liabilities which will expire at various dates beginning in 2018 through 2033.  The Company had state tax net operating loss carryforwards of approximately $93.8 million and $138.1 million as of December 31, 2013 and 2012, respectively, available to reduce future state taxable income, which will expire at various dates beginning in 2014 through 2033.  The Company also had state research and development and investment tax credit carryforwards of approximately $8.3 million and $7.8 million as of December 31, 2013 and 2012, respectively, available to reduce future tax liabilities which expire at various dates beginning in 2015 through 2028.

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Notes to Consolidated Financial Statements (Continued)

Included in the NOL carryforward of $329.2 million and $344.9 million are approximately $8.2 million and $4.9 million of tax deductions from the exercise of stock options at December 31, 2013 and 2012, respectively.  The Company has also recorded a deferred tax asset of approximately $1.8 million at both December 31, 2013 and 2012 reflecting the benefit of the deduction from the exercise of stock options which has been fully reserved until it is more likely than not that the benefit will be realized.  The benefit from these deductions will be recorded as a credit to additional paid-in capital if and when realized through a reduction of taxes paid in cash.

As required by ASC 740, management of the Company has evaluated the positive and negative evidence bearing upon the reliability of its deferred tax assets, which are comprised principally of NOL carryforwards, research and experimentation credit carry forwards, and capitalized start up expenditures and research and development expenditures amortizable over ten years straight-line.  Management has determined at this time that it is more likely than not that the Company will not recognize the benefits of its federal and state deferred tax assets and, as a result, a valuation allowance of approximately $213.9 million and $204.3 million has been established at December 31, 2013 and 2012, respectively.

The Company accounts for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions.  As of December 31, 2013, the Company had no unrecognized tax benefits or liabilities and had no accrued interest or penalties related to uncertain tax positions.

Utilization of the NOLs and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future, as provided by Section 382 of the Internal Revenue Code of 1986 (Section 382), as well as similar state and foreign provisions.  Ownership changes may limit the amount of NOLs and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.  In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of 5% shareholders or public groups in the stock of a corporation by more than 50 percent in the aggregate over a three-year period.  During 2012, the Company completed a study through December 31, 2012, to determine whether any ownership change has occurred since the Company's formation and has determined that transactions have resulted in two ownership changes, as defined by Section 382.  There could be additional ownership changes in the future that could further limit the amount of NOLs and tax credit carryforwards that the Company can utilize.

As of December 31, 2012, the Company’s federal tax NOLs available to reduce future taxable income without limitation are $252.3 million, which expire at various times beginning in 2024 through 2032.  The Company’s federal research and experimentation and orphan drug credit carryforward as of December 31, 2012 available to reduce future tax liabilities without limitation are $54.9 million, which will expire at various dates beginning in 2024 through 2032.  In addition the Company has NOLs and federal tax credits that are restricted and expire at various times beginning in 2018 through 2024.  These restricted NOLs and federal tax credits of $67.2 million and $4.8 million, respectively, may be utilized in part, subject to an annual limitation. Ownership changes after December 31, 2012 could further restrict the use of these NOLs and federal tax credits.

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Notes to Consolidated Financial Statements (Continued)

A full valuation allowance has been provided against the Company's NOL carryforwards and research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance.  Thus there would be no impact to the consolidated balance sheet or statement of operations if an adjustment were required.

The tax years 1999 through 2013 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the United States, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have or will be used in a future period.  The Company is currently not under examination in any jurisdictions for any tax years.

13. Business Segments

The Company discloses business segments under ASC 280, Segment Reporting.   The statement established standards for reporting information about operating segments in annual financial statements of public enterprises and in interim financial reports issued to shareholders.  It also established standards for related disclosures about products and services, geographic areas and major customers.  The Company operates as one business segment in one geographic area.

14. Litigation

As of December 31, 2013, there were no active legal proceedings that were expected to be material to the Company.  The Company makes provisions for claims specifically identified for which it believes the likelihood of an unfavorable outcome is probable and reasonably estimable.  The Company records at least the minimum estimated liability related to claims where there is a range of loss and the loss is considered probable and no estimate within the range is better than any other.  As additional information becomes available, the Company assesses the potential liability related to its pending claims and revises its estimates.  Future revisions in the estimates of the potential liability could materially impact the results of operations and financial position.  The Company maintains insurance coverage that limits the exposure for any single claim as well as total amounts incurred per policy year, and it believes that its insurance coverage is adequate.  The Company makes every effort to use the best information available in determining the level of liability reserves.

15. Unaudited Quarterly Operating Results

The following is a summary of unaudited quarterly and annual results of operations for the years ended December 31, 2013 and 2012:

Year ended December 31, 2013	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
	(in thousands, except share and per share)
Revenue	$	12,040		$	11,336		$	13,691		$	16,859		$	53,926
Income (loss) from operations	$	(8,463	)	$	(5,850	)	$	(3,641	)	$	755		$	(17,199	)
Net loss	$	(11,193	)	$	(8,432	)	$	(6,188	)	$	(1,964	)	$	(27,777	)
Shares used in computing basic and diluted net loss per share		99,644,227			104,977,247			109,731,276			119,573,601			108,539,613
Basic and diluted net loss per share:	$	(0.11	)	$	(0.08	)	$	(0.06	)	$	(0.02	)	$	(0.26	)

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Dyax Corp. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Year ended December 31, 2012	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
	(in thousands, except share and per share)
Revenue	$	11,489		$	14,030		$	13,101		$	16,030		$	54,650
Income (loss) from operations	$	(8,747	)	$	(5,389	)	$	(2,667	)	$	(2,082	)	$	(18,885	)
Net loss	$	(11,282	)	$	(7,939	)	$	(5,210	)	$	(4,834	)	$	(29,265	)
Shares used in computing basic and diluted net loss per share		98,798,426			98,820,699			99,069,928			99,271,225			98,991,056
Basic and diluted net loss per share:	$	(0.11	)	$	(0.08	)	$	(0.05	)	$	(0.05	)	$	(0.30	)

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ITEM 9.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.       CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as the Company's are designed to do, and management necessarily was required to apply its judgment in evaluating the risk related to controls and procedures.

In connection with the preparation of this Form 10-K, as of December 31, 2013, an evaluation was performed under the supervision and with the participation of our management, including the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).  Based on that evaluation, our management concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2013.  These conclusions were communicated to the Audit Committee.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.  Our internal control system is designed to provide reasonable assurance to the Company's management and Board of Directors regarding the preparation and fair presentation of published financial statements.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2013.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations (COSO) in its 1992 Internal Control — Integrated Framework.  Based on this assessment, our management has concluded that as of December 31, 2013 our internal control over financial reporting is effective based on these criteria s

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2013, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 8 above.

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Change in Internal Control Over Financial Reporting — There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.        OTHER INFORMATION

None.

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PART III

ITEM 10.        DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Portions of the response to this item are incorporated herein by reference from the discussion responsive thereto under the captions "Election of Directors—Nominees for Director", "Section 16(a) Beneficial Ownership Reporting Compliance", "Executive Officers" and "Corporate Governance—Board and Committee Matters" in the Company's Definitive Proxy Statement relating to the 2014 Annual Meeting of Stockholders (the 2014 Proxy Statement).

We have adopted a Code of Business Conduct and Ethics (the code of ethics) that applies to all of our directors, officers and employees.  The code of ethics is available on our website at www.dyax.com.  In addition, if we make any substantive amendments to the code of ethics or grant any waiver, including any implicit waiver, from a provision of the code to any of our executive officers or directors, we will disclose the nature of such amendment or waiver as required by applicable law.

ITEM 11.        EXECUTIVE COMPENSATION

The response to this item is incorporated herein by reference from the discussion responsive thereto under the following captions in the 2014 Proxy Statement: "Executive Compensation" and "Corporate Governance—Compensation Committee Interlocks and Insider Participation."

ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The response to this item is incorporated herein by reference in part from the discussion responsive thereto under the caption "Share Ownership" in the 2014 Proxy Statement.

The following table provides information about the securities authorized for issuance under the Company's equity compensation plans as of December 31, 2013:

Equity Compensation Plan Information
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted average exercise price of outstanding  options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
		(a)		(b)		(c)
Equity compensation plans approved by security holders(1)		10,628,879	$	2.47		4,382,846
Equity compensation plans not approved by security holders:		—		—		—
Totals:		10,628,879	$	2.47		4,382,846

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(1) Consists of the Amended and Restated 1995 Equity Incentive Plan, as amended, and the 1998 Employee Stock Purchase Plan, as amended.

(2) Does not include purchase rights currently accruing under the 1998 Employee Stock Purchase Plan, because the purchase price (and therefore the number of shares to be purchased) will not be determined until the end of the purchase period, which is May 31, 2014.

(3) Includes 267,960 shares issuable under the 1998 Employee Stock Purchase Plan, of which up to 50,000 of purchase rights are issuable in connection with the current offering period which ends on May 31, 2014.  The remaining shares consist of 4,114,886 under the 1995 Amended and Restated Equity Incentive Plan.  The plan may be amended, suspended, or terminated by the Compensation Committee of the Board of Directors at any time, subject to any required stockholder approval

ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The response to this item is incorporated herein by reference from the discussion responsive thereto under the caption "Election of Directors—Certain Relationships and Related Transactions" and "Corporate Governance – Board and Committee Matters" in the 2014 Proxy Statement.

ITEM 14.        PRINCIPAL ACCOUNTING FEES AND SERVICES

The response to this item is incorporated herein by reference from the discussion responsive thereto under the captions "Corporate Governance—Board and Committee Matters" and "Audit Committee Report – Audit Fees" in the 2014 Proxy Statement.

PART IV

ITEM 15.        EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) 1. FINANCIAL STATEMENTS

The financial statements are included under Part II, Item 8 of this Report.

      2. FINANCIAL STATEMENTS SCHEDULE

Schedules are omitted because they are not applicable, or are not required, or because the information is included in the consolidated financial statements and notes thereto.

94

      3. EXHIBITS –
 

The exhibits are listed below under Part IV, Item 15(b) of this Report.
 

      (b)   EXHIBITS
 

Exhibit No.	Description
3.1(a)	Amended and Restated Certificate of Incorporation of the Company.  Filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2008 and incorporated herein by reference.
3.1(b)	Certificate of Amendment of the Company’s Amended and Restated Certificate of Incorporation. Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 000-24537) filed May 13, 2011 and incorporated herein by reference.
3.2	Amended and Restated By-laws of the Company.  Filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2008 and incorporated herein by reference.
3.3(a)	Certificate of Designations Designating the Series A Junior Participating Preferred Stock of the Company. Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 000-24537) filed on June 27, 2001 and incorporated herein by reference.
3.3(b)	Certificate of Designations Designating the Series 1 Convertible Preferred Stock of the Company. Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 000-24537) filed May 16, 2013 and incorporated herein by reference.
4.1(a)	Specimen Common Stock Certificate.  Filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File No. 333-37394) and incorporated herein by reference.
4.1(b)	Specimen Series 1 Convertible Preferred Stock Certificate. Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 000-24537) filed May 16, 2013 and incorporated herein by reference.
4.3	Form of Warrant issued to Cowen Healthcare Royalty Partners, L.P. on August 5, 2008 and March 18, 2009.  Filed as an exhibit to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2008 and incorporated herein by reference.
10.1(a)	Amended and Restated 1995 Equity Incentive Plan.  Filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No. 333-182409) filed on June 28, 2012 and incorporated herein by reference.
10.1(b)	Form of the Company’s Incentive Stock Option Certificate under the Company’s Amended and Restated 1995 Equity Incentive Plan for all U.S. employees, including its executive officers.  Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2004 and incorporated herein by reference.
10.1(c)	Form of the Company’s Nonstatutory Stock Option Certificate under the Company’s Amended and Restated 1995 Equity Incentive Plan for its U.S. employees, including its executive officers.  Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2004 and incorporated herein by reference.

95

10.1(d)	Form of the Company’s Nonstatutory Stock Option Certificate under the Company’s Amended and Restated 1995 Equity Incentive Plan for its non-employee directors.  Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2004 and incorporated herein by reference.
10.1(e)	Form of the Company’s Restricted Stock Unit Certificate under the Company’s Amended and Restated 1995 Equity Incentive Plan for all U.S. employees, including its executive officers, for all RSUs awarded before 2014.  Filed as exhibit 10.1(e) to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2011 and incorporated herein by reference.
10.1(f)	Form of the Company’s Restricted Stock Unit Certificate under the Company’s Amended and Restated 1995 Equity Incentive Plan for all U.S. employees, including its executive officers, for all RSUs awarded after 2013.  Filed herewith.
10.2	1998 Employee Stock Purchase Plan, as amended on March 25, 2009.  Filed as Exhibit 10.2 to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2009 and incorporated herein by reference.
10.3*	Form of Indemnification Agreement by and between certain directors and executive officers of the Company and the Company.  Filed as Exhibit 10.32 to the Company’s Registration Statement on Form S-1 (File No. 333-37394) and incorporated herein by reference.
10.4	Amended and Restated Registration Rights Agreement, dated as of February 12, 2001, between holders of the Company’s capital stock named therein and the Company.  Filed as Exhibit 10.33 to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2000 and incorporated herein by reference.
10.5 †	Amended and Restated License Agreement between XOMA Ireland Limited and the Company dated as of October 27, 2006.  Filed as Exhibit 10.20(b) to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2007 and incorporated herein by reference.
10.6 †	Amended and Restated License Agreement by and between the Company and MedImmune Limited, formerly Cambridge Antibody Technology Limited (“MedImmune”), dated as of July 26, 2012. Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2012 and incorporated herein by reference.
10.7(a) †	Distribution Agreement by and between the Company and ASD Specialty Healthcare Inc. dated as of November 19, 2009.  Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 000-24537) filed on March 29, 2013 and incorporated herein by reference.
10.7(b) †	First Amendment to Distribution Agreement by and between the Company and ASD Specialty Healthcare Inc. dated as of August 25, 2011.  Filed as exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2011 and incorporated herein by reference.
10.7(c)	Second Amendment to Distribution Agreement by and between the Company and ASD Specialty Healthcare Inc. dated as of July 31, 2012.  Filed as Exhibit 10.7(c) to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2012 and incorporated herein by reference.
10.7(d)	Third Amendment to Distribution Agreement by and between the Company and ASD Specialty Healthcare Inc. dated as of December 3, 2012.  Filed as Exhibit 10.7(d) to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2012 and incorporated herein by reference.

96

10.7(e) †	Fourth Amendment to Distribution Agreement by and between the Company and ASD Specialty Healthcare Inc. dated as of December 19, 2012.  Filed as Exhibit 10.7(e) to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2012 and incorporated herein by reference.
10.8(a) †	Distribution Agreement by and between the Company and Walgreens Infusion Services, Inc. dated as of August 31, 2011; as amended by a First Amendment to Distribution Agreement dated August 31, 2012.  Filed as Exhibit 10.8(a) to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2012 and incorporated herein by reference.
10.8(b) †	Agreement for Services Related to KALBITOR® by and between the Company and Walgreens Infusion Services, Inc. effective as of September 1, 2011; as amended by a First Amendment to Agreement for Services Related to KALBITOR® dated August 31, 2012.  Filed as Exhibit 10.8(b) to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2012 and incorporated herein by reference.
10.9 †	Royalty Interest Purchase Agreement by and between the Company and KGH Domestic III, LP dated as of April 16, 2010.  Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended June 30, 2010, as amended, and incorporated herein by reference.
10.10 †	Joint Development and License Agreement by and between the Company and Defiante Farmaceutica S.A., a subsidiary of the pharmaceutical company Sigma-Tau SpA dated as of June 18, 2010.  Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended June 30, 2010, as amended, and incorporated herein by reference.
10.11(a) †	Amendment No. 1 to Joint Development and License Agreement by and between the Company and Defiante Farmaceutica S.A., a subsidiary of the pharmaceutical company Sigma-Tau SpA dated as of December 21, 2010.  Filed as Exhibit 10.27 to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2010 and incorporated herein by reference.
10.11(b) †	Amendment No. 2 to Joint Development and License Agreement by and between the Company and Defiante Farmaceutica S.A., a subsidiary of the pharmaceutical company Sigma-Tau SpA dated as of May 27, 2011.  Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended June 30, 2011 and incorporated herein by reference.
10.11(c)	Third Amendment, dated December 26, 2011, to Joint Development and License Agreement by and between the Company and Defiante Farmaceutica S.A., a subsidiary of the pharmaceutical company Sigma-Tau SpA dated as of June 18, 2010.  Filed as exhibit 10.14(c) to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2011 and incorporated herein by reference.

10.11(d)	Fourth Amendment to Joint Development and License Agreement by and between the Company and Sigma-Tau Rare Diseases S.A., as successor-in-interest to Defiante Farmaceutica S.A., dated as of May 29, 2012. Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended June 30, 2012 and incorporated herein by reference.
10.11(e)	Fifth Amendment to Joint Development and License Agreement by and between the Company and Sigma-Tau Rare Diseases S.A., as successor-in-interest to Defiante Farmaceutica S.A., dated as of June 21, 2012. Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended June 30, 2012 and incorporated herein by reference.

97

10.12†	Product Development and License Agreement by and between the Company and CMIC Co. Ltd. dated as of September 28, 2010.  Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2010 and incorporated herein by reference.
10.13*	Executive Retention Agreement by and between the Company and Gustav Christensen dated as of December 22, 2010.  Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-24537) filed on December 23, 2010 and incorporated herein by reference.
10.14*	Form of Executive Retention Agreement for executive officers other than the CEO. Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 000-24537) filed on December 23, 2010 and incorporated herein by reference.
10.15	Consulting Agreement by and between the Company and Ivana Magovcevic-Liebisch, dated as of March 29, 2013. Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-24537) filed March 29, 2013 and incorporated herein by reference.
10.16(a)	Lease, dated as of July 14, 2011, by and between the Company and Netview 5 and 6 LLC.  Filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2011 and incorporated herein by reference.
10.16(b)	First Amendment to Lease, dated as of November 4, 2011, by and between the Company and Netview 5 and 6 LLC.  Filed as exhibit 10.18(b) to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2011 and incorporated herein by reference.
10.16(c)	Second Amendment to Lease, dated as of January 5, 2012, by and between the Company and Netview 5 and 6 LLC. Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended March 31, 2012 and incorporated herein by reference.
10.17†	Loan Agreement by and between the Company and LFRP Investors, L.P. dated as of December 29, 2011.  Filed as exhibit 10.19 to the Company’s Annual Report on Form 10-K (File No. 000-24537) for the year ended December 31, 2011 and incorporated herein by reference.
10.18	Agreement by and between the Company and Fujifilm Diosynth Biotechnologies UK Limited, dated as of June 29, 2012. Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended June 30, 2012 and incorporated herein by reference.
10.19	Supply Agreement by and between the Company and Hollister-Stier Laboratories, LLC, dated as of June 21, 2013. Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended June 30, 2013 and incorporated herein by reference.
10.20	Hub Services Agreement by and between the Company and US Bioservices Corporation dated as of February 13, 2013. Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q/A (File No. 000-24537) for the quarter ended March 31, 2013 and incorporated herein by reference.
10.21	Commercial Outsourcing Services Agreement by and between the Company and Integrated Commercialization Solutions, Inc. dated as of February 12, 2013. Filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q/A (File No. 000-24537) for the quarter ended March 31, 2013 and incorporated herein by reference.
21.1	Subsidiaries of the Company. Filed herewith.

98

23.1	Consent of PricewaterhouseCoopers LLP, an independent registered public accounting firm.  Filed herewith.
31.1	Certification of Chief Executive Officer Pursuant to §240.13a-14 or §240.15d-14 of the Securities Exchange Act of 1934, as amended.  Filed herewith.
31.2	Certification of Chief Financial Officer Pursuant to §240.13a-14 or §240.15d-14 of the Securities Exchange Act of 1934, as amended.  Filed herewith.
32.1	Certification pursuant to 18 U.S.C. Section 1350.  Filed herewith.
101**	The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of December 31, 2011 and December 31, 2010, (ii) Consolidated Statements of Operations and Comprehensive Loss for the for the years ended December 31, 2011, 2010 and 2009, (iii) Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2011, 2010 and 2009 (iv) Consolidated Statements of Cash Flows for the for the years ended December 31, 2011, 2010 and 2009, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.

*	Indicates a contract with management.
**	Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
†	This Exhibit has been filed separately with the Commission pursuant to an application for confidential treatment.  The confidential portions of this Exhibit have been omitted and are marked by an asterisk.

99

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this third day of March, 2014.

DYAX CORP.
By:	/s/ Gustav A. Christensen
	Gustav A. Christensen
	Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company in the capacities and on the dates indicated.

Name	Title	Date
/s/ Gustav A. Christensen	President and Chief Executive Officer, and
Gustav A. Christensen	(Principal Executive Officer) and Director	March 3, 2014
/s/ George Migausky	Executive Vice President and Chief Financial
George Migausky	Officer  (Principal Financial Officer and	March 3, 2014
	Principal Accounting Officer)
/s/ Henry E. Blair
Henry E.  Blair	Chairman of the Board of Directors	March 3, 2014
/s/ Ron Cohen
Ron Cohen	Director	March 3, 2014
/s/ James W. Fordyce
James W. Fordyce	Director	March 3, 2014
/s/ Mary Ann Gray
Mary Ann Gray	Director	March 3, 2014
/s/ Thomas L. Kempner
Thomas L. Kempner	Director	March 3, 2014
/s/ Marc Kozin
Marc Kozin	Director	March 3, 2014
/s/ David J. McLachlan
David J. McLachlan	Director	March 3, 2014
/s/ Paolo Pucci
Paolo Pucci	Director	March 3, 2014

100

EX-21.1

Exhibit 21.1

Dyax Corp.

Subsidiaries of the Company

NAME	PARENT	STATE OR COUNTRY OF INCORPORATION
Dyax Holdings B.V.	Dyax Corp.	Netherlands
Dyax B.V.	Dyax Holdings B.V.	Netherlands
Dyax S.A.	Dyax Corp.	Belgium

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-192065) and Form S-8 (Nos. 333-182409, 333-168567, 333-168566, 333-146155, 333-146154, 333-131416, 333-119607, 333-105842, 333-97527, 333-97523, 333-49852 and  333-49856) of Dyax Corp. of our report dated March 3, 2014 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

March 3, 2014

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 240.13a-14 or 240.15d-14

of the Securities Exchange Act of 1934, as amended

I, Gustav A.  Christensen, certify that:

1. I have reviewed this annual report on Form 10-K of Dyax Corp.;

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 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 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: March 3, 2014
	/s/ Gustav A. Christensen
	Gustav A. Christensen
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 240.13a-14 or 240.15d-14

of the Securities Exchange Act of 1934, as amended

I, George Migausky, certify that:

1. I have reviewed this annual report on Form 10-K of Dyax Corp.;

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 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 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: March 3, 2014
	/s/ George Migausky
	George Migausky
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Periodic Financial Report

Pursuant to 18 U.S.C.  Section 1350

Each of the undersigned officers of Dyax Corp.  (the "Company") certifies, under the standards set forth in and solely for the purposes of 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K of the Company for the year ended December 31, 2013fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 3, 2014	/s/ Gustav A. Christensen
	Gustav A. Christensen
	Chief Executive Officer
Dated: March 3, 2014	/s/ George Migausky
	George Migausky
	Chief Financial Officer

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Components of Inventory (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Inventory [Line Items]
Raw Materials	$ 1,116	$ 1,116
Work in Progress	5,965	8,274
Finished Goods	1,281	599
Total	$ 8,362	$ 9,989

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Unvested Stock Option Activity (Detail)	12 Months Ended
	Dec. 31, 2013
Non-vested number of options
Beginning balance	6,252,662
Granted at fair market value	3,617,150
Vested	(2,635,583)
Forfeited	(1,151,996)
Ending balance	6,082,233

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Restructuring Charges - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2012
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 1,440,000
Date of completion of restructuring costs	Dec. 31, 2012
Charges
Restructuring Cost and Reserve [Line Items]
Restructuring charges	1,400,000
Severance and Benefits
Restructuring Cost and Reserve [Line Items]
Restructuring charges	1,200,000
Outplacement Costs
Restructuring Cost and Reserve [Line Items]
Restructuring charges	120,000
Stock Compensation Expense
Restructuring Cost and Reserve [Line Items]
Restructuring charges	55,000
Other Exit Costs
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 90,000

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Summary of Restricted Stock Unit Activity (Detail) (Restricted Stock Units (RSUs), USD $)	12 Months Ended
	Dec. 31, 2013
Restricted Stock Units (RSUs)
Shares
Beginning balance	373,749
Granted at fair market value
Vested	(61,250)
Forfeited	(59,375)
Ending balance	253,124
Weighted-Average Grant Date Fair Value
Unvested at beginning of year	$ 1.48
Granted at fair market value
Vested	$ 1.48
Forfeited	$ 1.48
Unvested at end of period	$ 1.48

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Activity under Loan Presented for Financial Reporting Purposes (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Beginning balance	$ 78,061,000	$ 75,372,000
Accretion of discount	198,000	198,000
Loan activity:
Interest Expense	10,447,000	10,199,000
Payments applied to principal		(96,000)
Payments applied to interest	(5,378,000)	(7,569,000)
Accrued interest payable	(1,812,000)
Ending balance	81,516,000	78,061,000
Tranche A Loan
Loan activity:
Discount on Tranche A Loan		$ (43,000)

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Accounting Policies - Additional Information (Detail) (USD $)	3 Months Ended								12 Months Ended
	Dec. 31, 2013 Location	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013 Customer Segment Location	Dec. 31, 2012 Customer	Dec. 31, 2011
Significant Accounting Policies [Line Items]
Number of major customers									2	2
Percentage of prompt payment discount accrued at the time of sale									100.00%
Standard product warranty description									Although allowances and accruals are recorded at the time of product sale, certain rebates are typically paid out, on average, up to six months or longer after the sale. Reserve estimates are evaluated quarterly and if necessary, adjusted to reflect actual results.
Revenue	$ 16,859,000	$ 13,691,000	$ 11,336,000	$ 12,040,000	$ 16,030,000	$ 13,101,000	$ 14,030,000	$ 11,489,000	$ 53,926,000	$ 54,650,000	$ 48,737,000
Unrecognized tax benefits	0	0			0				0	0
Stock options and warrants purchase									12,185,724	12,278,657	11,456,758
Number of business segment									1
Number of geographic area within which the company operates predominantly	1								1
Foreign Exchange
Significant Accounting Policies [Line Items]
Other expense											3,000
Other income									14,000	15,000
Not Substantive Milestones
Significant Accounting Policies [Line Items]
Revenue									3,100,000	3,300,000	3,300,000
Substantive Milestones
Significant Accounting Policies [Line Items]
Revenue									0	327,000	588,000
Development Milestones
Significant Accounting Policies [Line Items]
Milestones payment receipt									78,000,000
Regulatory Filing Milestones
Significant Accounting Policies [Line Items]
Milestones payment receipt									66,000,000
Marketing Approval Milestones
Significant Accounting Policies [Line Items]
Milestones payment receipt									95,000,000
Maximum
Significant Accounting Policies [Line Items]
Estimated useful life of property plant and equipment									7 years
Minimum
Significant Accounting Policies [Line Items]
Estimated useful life of property plant and equipment									3 years
Cash and Cash Equivalents
Significant Accounting Policies [Line Items]
Concentration risk percentage									89.00%	86.00%
Number of financial institution in which financial instruments invested	1								1
Cash and Cash Equivalents | Maximum
Significant Accounting Policies [Line Items]
Short term investment maturity period									90 days
Short-term Investments | Maximum
Significant Accounting Policies [Line Items]
Short term investment maturity period									1 year
Short-term Investments | Minimum
Significant Accounting Policies [Line Items]
Short term investment maturity period									90 days
US Treasury and Government
Significant Accounting Policies [Line Items]
Available-for-sale investment amortized cost	43,293,000				9,022,000				43,293,000	9,022,000
Available-for-sale estimated fair value	43,296,000				9,028,000				43,296,000	9,028,000
Unrealized gain on available-for-sale investments	$ 3,000				$ 6,000				$ 3,000	$ 6,000
Walgreens Infusion Services, Inc.
Significant Accounting Policies [Line Items]
Percentage of single significant customer balance to total Accounts Receivables	26.00%				50.00%				26.00%	50.00%
Walgreens Infusion Services, Inc. | Sales Revenue
Significant Accounting Policies [Line Items]
Concentration risk percentage									47.00%	53.00%	16.00%
US Bioservices Corporation
Significant Accounting Policies [Line Items]
Percentage of single significant customer balance to total Accounts Receivables	35.00%				34.00%				35.00%	34.00%
US Bioservices Corporation | Sales Revenue
Significant Accounting Policies [Line Items]
Concentration risk percentage									31.00%	39.00%	69.00%
Foreign Countries | Sales Revenue
Significant Accounting Policies [Line Items]
Concentration risk percentage									13.00%	13.00%	28.00%

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Provision for Income Taxes for Continuing Operations (Detail)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Reconciliation of Statutory Federal Tax Rate [Line Items]
Statutory federal income taxes	34.00%	34.00%	34.00%
State income taxes, net of federal benefit	(4.70%)	(3.30%)	(2.00%)
General business credit	4.50%	3.80%	5.90%
Stock compensation cancellations	(0.80%)	(6.80%)
Other	1.60%	(1.70%)	(1.20%)
Federal true up and expiring NOLs and research credits	0.40%	(8.60%)	(3.70%)
Valuation allowance	(35.00%)	(17.40%)	(33.00%)
Effective income tax rate

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Inventory (Tables)

12 Months Ended

Dec. 31, 2013

Components of Inventory

Inventory consists of the following:

	December 31,
	2013		2012
	(in thousands)
Raw Materials	$	1,116	$	1,116
Work in Progress		5,965		8,274
Finished Goods		1,281		599
Total	$	8,362	$	9,989

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Stock Compensation Expense (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Compensation expenses	$ 5,441,000	$ 3,640,000	$ 4,030,000
Research and Development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocation of stock-based compensation expense	1,671,000	839,000	1,193,000
Selling, General and Administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocation of stock-based compensation expense	3,770,000	2,746,000	2,837,000
Restructuring Charges
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocation of stock-based compensation expense		55,000
1995 Equity Incentive Plan (the Equity Plan)
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Compensation expenses	5,131,000	3,549,000	3,984,000
Allocation of stock-based compensation expense		46,000
Employee Stock Purchase Plans
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Compensation expenses	$ 310,000	$ 91,000	$ 46,000

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Components of Accounts Payable and Accrued Expenses (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Accounts Payable and Accrued Liabilities [Line Items]
Accounts payable	$ 1,407	$ 3,557
Accrued employee compensation and related taxes.	4,609	4,018
Accrued legal	456	518
Accounts payable and accrued expenses	12,542	12,472
Research and Development Operations
Accounts Payable and Accrued Liabilities [Line Items]
Accrued liabilities	1,778	1,652
Sales Allowances
Accounts Payable and Accrued Liabilities [Line Items]
Accrued liabilities	1,918	1,052
Other Accrued Liabilities
Accounts Payable and Accrued Liabilities [Line Items]
Accrued liabilities	$ 2,374	$ 1,675

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Marketable Securities (Detail) (US Treasury Bills and Notes, USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Marketable Securities [Line Items]
Amortized Cost	$ 43,293	$ 9,022
Gross Unrealized Gains	3	6
Gross Unrealized Losses
Fair Value	43,296	9,028
Due In One Year Or Less
Marketable Securities [Line Items]
Amortized Cost	2,001	9,022
Gross Unrealized Gains	1	6
Gross Unrealized Losses
Fair Value	2,002	9,028
Due After One Year Through Two Years
Marketable Securities [Line Items]
Amortized Cost	41,292
Gross Unrealized Gains	2
Gross Unrealized Losses
Fair Value	$ 41,294

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Fair Value of Shares Issued under Employee Stock Purchase Plan (Detail) (Employee Stock Purchase Plan)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected Option Term (in years)	6 months	6 months	6 months
Risk-free interest rate, minimum	0.06%	0.09%	0.07%
Risk-free interest rate, maximum	0.10%	0.12%	0.11%
Expected dividend yield	0.00%	0.00%	0.00%
Volatility factor, minimum	46.00%	45.00%	37.00%
Volatility factor, maximum	81.00%	54.00%	72.00%

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Summary of Unaudited Quarterly and Annual Results of Operations (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Quarterly Financial Information [Line Items]
Revenue	$ 16,859	$ 13,691	$ 11,336	$ 12,040	$ 16,030	$ 13,101	$ 14,030	$ 11,489	$ 53,926	$ 54,650	$ 48,737
Income (loss) from operations	755	(3,641)	(5,850)	(8,463)	(2,082)	(2,667)	(5,389)	(8,747)	(17,199)	(18,885)	(24,902)
Net (loss) income	$ (1,964)	$ (6,188)	$ (8,432)	$ (11,193)	$ (4,834)	$ (5,210)	$ (7,939)	$ (11,282)	$ (27,777)	$ (29,265)	$ (34,599)
Shares used in computing basic and diluted net loss per share	119,573,601	109,731,276	104,977,247	99,644,227	99,271,225	99,069,928	98,820,699	98,798,426	108,539,613	98,991,056	98,731,289
Basic and diluted net loss per share:	$ (0.02)	$ (0.06)	$ (0.08)	$ (0.11)	$ (0.05)	$ (0.05)	$ (0.08)	$ (0.11)	$ (0.26)	$ (0.30)	$ (0.35)

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Gross Minimum Future Lease Payments under Non-Cancelable Operating Leases (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2011
Debt Instrument [Line Items]
2014	$ 1,605
2015	1,615
2016	1,581
2017	1,588
2018	1,670
Thereafter	5,352
Total	$ 13,411	$ 15,000

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SIGNIFICANT TRANSACTIONS

12 Months Ended

Dec. 31, 2013

SIGNIFICANT TRANSACTIONS

3.   SIGNIFICANT TRANSACTIONS

CMIC

In 2010, the Company entered into an agreement with CMIC Co., Ltd. (CMIC) to develop and commercialize subcutaneous ecallantide for the treatment of HAE and other angioedema indications in Japan.  Under the terms of the agreement, the Company received a $4.0 million upfront payment and was eligible to receive development and sales milestones for ecallantide in HAE and other angioedema indications and royalties on net product sales. CMIC was solely responsible for all costs associated with development, regulatory activities, and commercialization of ecallantide for all angioedema indications in Japan.  In December, 2013, CMIC provided the Company written notice of CMIC’s intent to terminate the agreement.  The termination will take effect in June 2014, at which time all of the rights to develop ecallantide in Japan will return to the Company.  The Company has no obligations to CMIC in connection with, or following the termination.

Upon the commencement of the agreement in 2010, the Company analyzed this multiple element arrangement in accordance with ASC 605 and evaluated whether the performance obligations under this agreement, including the product license, development of ecallantide for the treatment of HAE and other angioedema indications in Japan, steering committee, and manufacturing services should be accounted for as a single unit or multiple units of accounting.  The Company determined that there were two units of accounting.  The first unit of accounting included the product license, the committed future development services and the steering committee involvement.  The second unit of accounting relates to the manufacturing services.  As the scope and timing of the future development of ecallantide for the treatment of HAE and other indications in the CMIC territory are the joint responsibility of the Company and CMIC, the Company could not reasonably estimate the level of effort required to fulfill its obligations under the first unit of accounting, and, as a result, the Company was recognizing revenue under the first unit of accounting on a straight-line basis over the estimated development period of ecallantide for the treatment of HAE in the CMIC territory.  Upon receiving notification of CMIC’s irrevocable intent to terminate, it was determined the Company had no further obligations under this arrangement, and therefore, the full amount of deferred revenue of $2.0 million was recognized in the quarter ending December 31, 2013.

The Company recognized revenue of approximately $2.6 million, $755,000 and $595,000 related to this agreement for the years ended December 31, 2013, 2012 and 2011, respectively.  As of December 31, 2012, the Company had deferred approximately $2.5 million, of revenue related to this arrangement, which was recorded in deferred revenue on the accompanying consolidated balance sheets.  There was no deferred balance related to this arrangement as of December 31, 2013.

CVie

In 2013, the Company entered into an agreement with CVie Therapeutics (CVie), a subsidiary of Lee’s Pharmaceutical Holdings Ltd., to develop and commercialize KALBITOR for the treatment of HAE and other angioedema indications in China, Hong Kong and Macau.  Under the terms of this exclusive license agreement, Dyax received a $1.0 million upfront payment and is eligible to receive up to $11 million in future regulatory and sales milestones.  Additionally, the Company is eligible to receive royalties on net product sales.  CVie is solely responsible for all costs associated with development, regulatory activities and the commercialization of KALBITOR in its licensed territories.  CVie will purchase drug product from the Company on a cost-plus basis for its commercial supply when and if KALBITOR is approved for commercial sale in the CVie territories.

The Company analyzed this multiple element arrangement in accordance with ASC 605 and evaluated whether the performance obligations under this agreement, including the product license, steering committee, and manufacturing services should be accounted for as a single unit or multiple units of accounting.  Because of the risk associated with obtaining approval for commercial sale in the CVie territories, manufacturing services associated with commercial supply are considered a contingent deliverable and will be accounted for if and when performed.  As CVie is required to obtain all drug product for both clinical development and commercial demand from the Company, all other deliverables under this arrangement were determined to provide no stand-alone value to the licensee.  Accordingly, it was determined that the license, manufacturing services associated with clinical supply, and steering committee performance obligations under this agreement represent a single unit of accounting.

At this time, the Company cannot reasonably estimate the level of effort required to fulfill its obligations and, therefore, is recognizing revenue on a straight-line basis over the estimated development period in the CVie territories through mid-2018.

The Company recognized revenue of $172,000 for the year ended December 31, 2013. As of December 31, 2013, the Company has deferred $828,000 of revenue related to this arrangement, which is recorded in deferred revenue on the accompanying consolidated balance sheets.

Novellus

In 2013, the Company entered into an agreement with Novellus Biopharma AG (Novellus) to develop and commercialize KALBITOR for the treatment of HAE and other angioedema indications in select countries in Latin America, including Argentina, Brazil, Chile, Colombia, Mexico and Venezuela.  Under the terms of the exclusive license agreement, the Company was entitled to receive payments totaling $800,000 in 2013, of which $500,000 was received through year-end.  Additionally, the Company is eligible to receive up to $5.2 million in future regulatory and sales milestones and royalties on net product sales.  Novellus is solely responsible for all costs associated with development, regulatory activities, and the commercialization of KALBITOR in their licensed territories.  Novellus will purchase drug product from the Company on a cost-plus basis for its commercial supply.

The Company analyzed this multiple element arrangement in accordance with ASC 605 and evaluated whether the performance obligations under this agreement, including the product license, steering committee, and manufacturing services should be accounted for as a single unit or multiple units of accounting.  As Novellus is required to obtain all drug product for both clinical and commercial demand from the Company, all other deliverables under this arrangement were determined to provide no stand-alone value to the licensee.  Accordingly, it was determined that performance obligations under this agreement represent a single unit of accounting.

The Company will recognize revenue related to this arrangement, including the upfront payments, on a unit output basis, as products under clinical and commercial supply are provided to Novellus.  As no supply has been provided to Novellus to date, no revenue has been recognized for the year ended December 31, 2013, and the Company has deferred $800,000 of revenue related to this arrangement, which is recorded in deferred revenue on the accompanying consolidated balance sheet at December 31, 2013.

Sigma Tau

In June 2010, the Company entered into a strategic collaboration agreement with Sigma-Tau Rare Diseases S.A. (as successor-in-interest to Defiante Farmaceutica S.A.) (SigmaTau) to develop and commercialize subcutaneous ecallantide for the treatment of HAE and other therapeutic indications throughout Europe, North Africa, the Middle East and Russia.  In December 2010, the original agreement was amended to expand the partnership to commercialize KALBITOR for the treatment of HAE in Australia and New Zealand (the first amendment).  In May 2011, the Company further amended its agreement with Sigma-Tau to include development and commercialization rights in Latin America (excluding Mexico), the Caribbean and certain Asian territories (the second amendment).  Three subsequent amendments to this agreement eliminated rights that Dyax had previously granted to Sigma Tau for the Asian territories, the Middle East, North Africa, Latin America and the Caribbean, and in March 2013 rights to the remaining territories (Europe, Russia, Australia and New Zealand) were eliminated under a termination agreement between the Company and Sigma Tau.

Through the date of termination, Sigma Tau made aggregate upfront payments of $7.0 million, and payments of $3.8 million for reimbursement associated with development services, and it purchased 787,647 shares of the Company’s common stock for an aggregate purchase price of $3.0 million.  

Through May 2011, revenue under this arrangement was recognized in accordance with Emerging Issues Task Force Issue 00-21, Revenue Arrangements with Multiple Deliverables.  In May 2011, in conjunction with the second amendment to this agreement, it was determined that the existing arrangement had been materially modified.  As a result, the Company re-evaluated the entire arrangement under ASU No. 2009-13, Revenue Recognition with Multiple Deliverables, as if all modifications since inception were part of the original agreement.  All undelivered items under the agreement were identified and allocated to separate units of accounting based on whether the deliverable provided stand-alone value to the licensee.  The undelivered items as of the date of the second amendment consisted of (i) committed future development services, (ii) steering committee services and (iii) manufacturing services.  Manufacturing services for commercial supply were determined to be a contingent deliverable as the performance of these services were contingent upon Sigma-Tau obtaining regulatory approval in its territories.

All deferred revenue as of the date of modification and additional proceeds received under the second amendment, determined to be attributable to the license granted based on the Company’s best estimate of selling price (BESP), were recognized during the second quarter of 2011.  Management allocated proceeds as of the date of modification to the steering committee and development services based on BESP which was recognized under the proportional performance model as work was performed. 

The principal terms of the March 2013 termination agreement included provision for (i) the revocation of all licenses granted by the Company to Sigma Tau, (ii) the termination of all other obligations under the license agreement, (iii) the issuance of 271,665 shares of the Company’s common stock to Sigma Tau, and (iv) the right of Sigma Tau to receive $500,000 for every $5.0 million of compensation received by the Company during the next ten years in relation to the potential license or supply of ecallantide exclusively in those territories that had been previously licensed to Sigma Tau.  In accordance with ASC 605-50, the $1.1 million determined to be the fair value of the common stock as of the date of issuance was recorded as a reduction to development and license fee revenue on the Company’s statement of operations and $85,000 of deferred revenue attributable to the JSC services was recognized as revenue for the year ended December 31, 2013.  No additional revenue is expected to be recognized in future periods.  For the years ended December 31, 2012 and 2011, revenue recognized under this arrangement totaled $204,000 and $10.5 million, respectively.

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Long-Term Obligations and Note Payable (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Debt Instrument [Line Items]
Note payable	$ 81,516	$ 78,061	$ 75,372
Obligations under equipment loan	931	1,376
Total	82,447	79,437
Less: current portion	(468)	(445)
Long-term obligations	$ 81,979	$ 78,992

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Stockholders' Deficit (Tables)

12 Months Ended

Dec. 31, 2013

Stock Compensation Expense

The following table reflects stock compensation expense recorded, net of amounts capitalized into inventory:

	Year Ended December 31,
Compensation expense related to:	2013		2012		2011
	(in thousands)
Equity incentive plan	$	5,131	$	3,549	$	3,984
Employee stock purchase plan		310		91		46
	$	5,441	$	3,640	$	4,030
Stock-based compensation expense charged to:
Research and development	$	1,671	$	839	$	1,193
General and administrative	$	3,770	$	2,746	$	2,837
Restructuring charges	$	—	$	55	$	—

Fair Value of Option

The fair value of each option was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	Year Ended December 31,
	2013	2012	2011
Expected Option Term (in years)	6 – 8	6 – 8	5.5 – 6
Risk-free interest rate	0.99% - 2.21%	0.86% - 1.37%	1.28% - 2.39%
Expected dividend yield	0	0	0
Volatility factor	70% - 73%	70% - 73%	74% - 75%

Fair Value of Shares Issued under Employee Stock Purchase Plan

The fair value of shares issued under the employee stock purchase plan was estimated on the commencement date of each offering period using the Black-Scholes option-pricing model with the following assumptions:

	Year Ended December 31,
	2013	2012	2011
Expected Option Term (in years)	0.5	0.5	0.5
Risk-free interest rate	0.06% - 0.10%	0.09% - 0.12%	0.07% - 0.11%
Expected dividend yield	0	0	0
Volatility factor	46% - 81%	45% - 54%	37% - 72%

Stock Options Activity

The following table summarizes stock option activity for the year ended December 31, 2013:

	Number of Options			Weighted-Avg. Exercise Price		Weighted-Avg. Remaining Contractual Life		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2012		10 528,474		$	2.28		6.84	$	13,864
Granted at fair market value		3,617,150		$	3.22
Exercised		(2,043,466	)	$	2.50
Forfeited		(1,152,738	)	$	2.33
Expired		(320,541	)	$	5.04
Outstanding as of December 31, 2013		10,628,879		$	2.47		6.99	$	53,978
Exercisable as of December 31, 2013		4,546,646		$	2.52		6.32	$	22,960
Vested and unvested expected to vest as of December 31, 2013		10,587,985		$	2.48		7.00	$	53,731

Unvested Stock Option Activity

The following table summarizes unvested stock option activity for the year ended December 31, 2013:

	Non-vested Number of Options
Unvested balance at December 31, 2012		6,252,662
Granted at fair market value		3,617,150
Vested		(2,635,583	)
Forfeited		(1,151,996	)
Unvested balance at December 31, 2013		6,082,233

Restricted Stock Unit Activity

The following table summarizes our RSU activity:

	Shares			Weighted-Avg Fair Value
Unvested balance at December 31, 2012		373,749		$	1.48
Granted at fair market value		—		$	—
Vested		(61,250	)	$	1.48
Forfeited		(59,375	)	$	1.48
Unvested balance at December 31, 2013		253,124		$	1.48

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Long-term Obligations (Tables)

12 Months Ended

Dec. 31, 2013

Long-Term Obligations and Note Payable

Long-term obligations and note payable consists of the following (in thousands):

	December 31,
	2013			2012
	(In thousands)
Note payable	$	81,516		$	78,061
Obligations under equipment loan		931			1,376
Total	$	82,447		$	79,437
Less: current portion		(468	)		(445	)
Long-term obligations	$	81,979		$	78,992

Minimum Future Payments under Long-Term Obligations and Note Payable

Estimated future payments under the Company's long-term obligations and note payable as of December 31, 2013 are as follows:

	(In thousands)
2014	$	10,652
2015		11,638
2016		10,435
2017		27,192
2018		71,428
Thereafter		—
Total estimated future payments		131,345
Less: amount representing interest		(45,941	)
Present value of estimated future payments		85,404
Less: current portion		(468	)
Less: unamortized portion of discount and deferred interest expense		(2,957	)
Long-term obligations and note payable	$	81,979

Activity under Loan Presented for Financial Reporting Purposes

Activity under the Loan is presented for financial reporting purposes, as follows:

	2013			2012
	(in thousands)
Balance, January 1	$	78,061		$	75,372
Accretion of discount		198			198
Loan activity:
Discount on Tranche A Loan		—			(43	)
Interest Expense		10,447			10,199
Payments applied to principal		—			(96	)
Payments applied to interest		(5,378	)		(7,569	)
Accrued interest payable		(1,812	)		—
Balance, December 31	$	81,516		$	78,061

Gross Minimum Future Lease Payments under Non-Cancelable Operating Leases

Gross minimum future lease payments under the Company's non-cancelable operating leases as of December 31, 2013 are as follows:

	(In thousands)
2014	$	1,605
2015		1,615
2016		1,581
2017		1,588
2018		1,670
Thereafter		5,352
Total	$	13,411

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Employee Savings and Retirement Plans - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Pension and Other Postretirement Benefits Disclosure [Line Items]
Employers discretionary matching contributions in percentage	100.00%
Company matching contributions in percentage	50.00%
Eligible pay in percentage for employee contributions	6.00%
Company's matching contributions amount	$ 451,000	$ 440,000	$ 431,000

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Minimum Future Payments Under Long-Term Obligations and Note Payables (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
2014	$ 10,652
2015	11,638
2016	10,435
2017	27,192
2018	71,428
Thereafter
Total estimated future payments	131,345
Less: amount representing interest	(45,941)
Present value of estimated future payments	85,404
Less: current portion	(468)	(445)
Less: unamortized portion of discount and deferred interest expense	(2,957)
Long-term obligations and note payable	$ 81,979

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Provision for Income Taxes for Continuing Operations

The provision for income taxes for continuing operations was calculated at rates different from the United States federal statutory income tax rate for the following reasons:

	2013			2012			2011
Statutory federal income taxes		34.0	%		34.0	%		34.0	%
State income taxes, net of federal benefit		(4.7	%)		(3.3	%)		(2.0	%)
General business credit		4.5	%		3.8	%		5.9	%
Stock compensation cancellations		(0.8	%)		(6.8	%)		—
Other		1.6	%		(1.7	%)		(1.2	%)
Federal true up and expiring NOLs and research credits		0.4	%		(8.6	%)		(3.7	%)
Valuation allowance		(35.0	%)		(17.4	%)		(33.0	%)
Effective income tax rate		—	%		—	%		—	%

Components of Deferred Tax Assets and Liabilities

The principal components of the Company's deferred tax assets and liabilities at December 31, 2013, 2012 and 2011, respectively are as follows:

	2013			2012			2011
	(In thousands)
Net Deferred Tax Asset:
Allowance for doubtful accounts	$	—		$	—		$	44
Depreciation and amortization		228			255			2,023
Accrued expenses		642			303			173
Capitalized research and development costs		23,603			8,192			—
Other		1,339			1,394			861
Stock based compensation		2,575			2,127			3,615
Deferred revenue		2,928			4,223			5,898
Research credit carryforwards		67,088			63,259			61,999
Net operating loss carryforwards		115,531			124,507			124,558
Total gross deferred tax asset		213,934			204,260			199,171
Valuation allowance		(213,934	)		(204,260	)		(199,171	)
Net deferred tax asset	$	—		$	—		$	—

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Unaudited Quarterly Operating Results (Tables)

12 Months Ended

Dec. 31, 2013

Summary of Unaudited Quarterly and Annual Results of Operations

The following is a summary of unaudited quarterly and annual results of operations for the years ended December 31, 2013 and 2012:

Year ended December 31, 2013	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
	(in thousands, except share and per share)
Revenue	$	12,040		$	11,336		$	13,691		$	16,859		$	53,926
Income (loss) from operations	$	(8,463	)	$	(5,850	)	$	(3,641	)	$	755		$	(17,199	)
Net loss	$	(11,193	)	$	(8,432	)	$	(6,188	)	$	(1,964	)	$	(27,777	)
Shares used in computing basic and diluted net loss per share		99,644,227			104,977,247			109,731,276			119,573,601			108,539,613
Basic and diluted net loss per share:	$	(0.11	)	$	(0.08	)	$	(0.06	)	$	(0.02	)	$	(0.26	)

Year ended December 31, 2012	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
	(in thousands, except share and per share)
Revenue	$	11,489		$	14,030		$	13,101		$	16,030		$	54,650
Income (loss) from operations	$	(8,747	)	$	(5,389	)	$	(2,667	)	$	(2,082	)	$	(18,885	)
Net loss	$	(11,282	)	$	(7,939	)	$	(5,210	)	$	(4,834	)	$	(29,265	)
Shares used in computing basic and diluted net loss per share		98,798,426			98,820,699			99,069,928			99,271,225			98,991,056
Basic and diluted net loss per share:	$	(0.11	)	$	(0.08	)	$	(0.05	)	$	(0.05	)	$	(0.30	)

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Accounting Policies

12 Months Ended

Dec. 31, 2013

Accounting Policies

2. Accounting Policies

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and the Company's European subsidiaries Dyax S.A. and Dyax BV. All inter-company accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The significant estimates and assumptions in these financial statements include revenue recognition, product sales allowances, effective interest rate calculation, useful lives with respect to long lived assets, valuation of stock options, accrued expenses and tax valuation reserves. Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, short-term investments and trade accounts receivable. At December 31, 2013 and 2012, approximately 89% and 86%, respectively, of the Company's cash, cash equivalents and short-term investments were invested in money market funds backed by U.S. Treasury obligations, U.S. Treasury notes and bills, and obligations of United States government agencies held by one financial institution. The Company maintains balances in various operating accounts in excess of federally insured limits.

The Company provides most of its services and licenses its technology to pharmaceutical and biomedical companies worldwide, and makes all product sales to its distributors. Concentrations of credit risk with respect to trade receivable balances associated the Company’s development and license fee revenue are usually limited on an ongoing basis, due to the diverse number of licensees and collaborators comprising the Company's customer base. Trade receivable balances associated with the Company’s product sales are comprised of a few customers due to the Company’s limited distribution network. The Company completes ongoing credit evaluations of their customers. As of December 31, 2013, two customers accounted for 35% (US Bio) and 26% (Walgreens) of the accounts receivable balance. Two customers accounted for approximately 50% (Walgreens) and 34% (US Bio), of the Company's accounts receivable balance as of December 31, 2012.

The Company’s two largest distributors of KABITOR are Walgreens and US Bio. During the years ended December 31, 2013, 2012 and 2011, sales to Walgreens were 47%, 53% and 16% of revenue, respectively. During the years ended December 31, 2013, 2012 and 2011, sales to US Bio were 31%, 39% and 69% of revenue, respectively.

Revenues from customers outside the United States were approximately 13%, 13% and 28% of the Company's total revenus for the years ended December 31, 2013, 2012 and 2011, respectively, principally related to development and license agreements.

Cash and Cash Equivalents

All highly liquid investments purchased with an original maturity of ninety days or less are considered to be cash equivalents. Cash and cash equivalents consist principally of cash, money market and U.S. Treasury funds.

Investments

Short-term investments primarily consist of investments with original maturities greater than ninety days and remaining maturities less than one year at period end. The Company has also classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of investments available-for-sale. Accordingly, these investments are recorded at fair value, which is based on quoted market prices. As of December 31, 2013, the Company's investments consisted of U.S. Treasury notes and bills with an amortized cost and estimated fair value of $43.3 million, and had an unrealized gain of $3,000. As of December 31, 2012, the Company's investments consisted of United States Treasury notes and bills with an estimated fair value and amortized cost of $9.0 million, and had an unrealized gain of $6,000, which is recorded in other comprehensive income on the accompanying consolidated balance sheet.

Inventories

Inventories are stated at the lower of cost or market with cost determined under the first-in, first-out, or FIFO, basis. The Company evaluates inventory levels and would write-down inventory that is expected to expire prior to being sold, inventory that has a cost basis in excess of its expected net realizable value, inventory in excess of expected sales requirements, or inventory that fails to meet commercial sale specifications, through a charge to cost of product sales. Included in the cost of inventory are employee stock-based compensation costs capitalized under Accounting Standards Codification (ASC) 718. Inventory on-hand that will be sold beyond the Company's normal operating cycle is classified as non-current and grouped with other assets on the Company's consolidated balance sheet.

Fixed Assets

Property and equipment are recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Laboratory and production equipment, furniture and office equipment are depreciated over a three to seven year period. Leasehold improvements are stated at cost and are amortized over the lesser of the non-cancelable term of the related lease or their estimated useful lives. Leased equipment is amortized over the lesser of the life of the lease or their estimated useful lives. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation and amortization are eliminated from the balance sheet and any resulting gains or losses are included in operations in the period of disposal.

The Company records all proceeds received from the lessor for tenant improvements under the terms of its operating lease as deferred rent. The amounts are amortized on a straight-line basis over the term of the lease as an offset to rent expense.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flow to the recorded value of the asset or asset group. If impairment is indicated, the asset is written down to its estimated fair value on a discounted cash flow basis.

Revenue Recognition

The Company’s principal sources of revenue are product sales of KALBITOR and license fees, funding for research and development, and milestones and royalties derived from collaboration and license agreements. In all instances, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, collectability of the resulting receivable is reasonably assured and the Company has no further performance obligations.

Product Sales and Allowances

Product Sales. Product sales are generated from the sale of KALBITOR to the Company’s customers, primarily wholesale and specialty distributors, and are recorded upon delivery when title and risk of loss have passed to the customer. Product sales are recorded net of applicable reserves for trade prompt pay and other discounts, government rebates, patient financial assistance programs, product returns and other applicable allowances.

Product Sales Allowances. The Company establishes reserves for trade distributor, prompt pay and volume discounts, government rebates, patient financial assistance programs, product returns and other applicable allowances. Reserves established for these discounts and allowances are classified as a reduction of accounts receivable (if the amount is payable to the customer) or a liability (if the amount is payable to a party other than the customer).

Allowances against receivable balances primarily relate to prompt payment discounts and are recorded at the time of sale, resulting in a reduction in product sales revenue. Accruals related to government rebates, patient financial assistance programs, product returns and other applicable allowances are recognized at the time of sale, resulting in a reduction in product sales revenue and the recording of an increase in accrued expenses.

The Company maintains service contracts with its distributors. These contracts include services such as inventory maintenance and patient support services, which include on-demand nursing services. Accounting standards related to consideration given by a vendor to a customer, including a reseller of a vendor’s product, specify that each consideration given by a vendor to a customer is presumed to be a reduction of the selling price. Consideration should be characterized as a cost if the company receives, or will receive, an identifiable benefit in exchange for the consideration, and fair value of the benefit can be reasonably estimated. The Company has established that patient support services are at fair value and represent a separate and identifiable benefit because these services could be provided by separate third-party vendors. Accordingly, these costs are classified as selling, general and administrative expense.

Inventory maintenance fees are calculated as a percentage of KALBITOR sales price and accordingly, are classified as a reduction in product sales revenue.

Prompt Payment and Other Discounts. The Company offers a prompt payment discount to its United States distributors. Since the Company expects that these distributors will take advantage of this discount, the Company accrues 100% of the prompt payment discount that is based on the gross amount of each invoice, at the time of sale. This accrual is adjusted quarterly to reflect actual earned discounts. The Company also offers volume discounts to certain distributors which are accrued quarterly based on sales during the period.

Government Rebates and Chargebacks. The Company estimates reductions to product sales for Medicaid and Veterans' Administration (VA) programs and the Medicare Part D Coverage Gap Program, as well as for certain other qualifying federal and state government programs. The Company estimates the amount of these reductions based on available KALBITOR patient data, actual sales data and rebate claims. These allowances are adjusted each period based on actual experience.

Medicaid rebate reserves relate to the Company’s estimated obligations to state jurisdictions under the established reimbursement arrangements of each applicable state. Rebate accruals are recorded during the same period in which the related product sales are recognized. Actual rebate amounts are determined at the time of claim by the state, and the Company will generally make cash payments for such amounts after receiving billings from the state.

VA rebates or chargeback reserves represent the Company’s estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at a price lower than the list price charged to the Company’s distributor. The distributor will charge the Company for the difference between what the distributor pays for the product and the ultimate selling price to the qualified healthcare provider. Rebate accruals are established during the same period in which the related product sales are recognized. Actual chargeback amounts for Public Health Service are determined at the time of resale to the qualified healthcare provider from the distributor, and the Company will generally issue credits for such amounts after receiving notification from the distributor.

Although allowances and accruals are recorded at the time of product sale, certain rebates are typically paid out, on average, up to six months or longer after the sale. Reserve estimates are evaluated quarterly and if necessary, adjusted to reflect actual results. Any such adjustments will be reflected in the Company’s operating results in the period of the adjustment.

Product Returns. Allowances for product returns are recorded during the period in which the related product sales are recognized, resulting in a reduction to product revenue. The Company does not provide its distributors with a general right of product return. The Company permits returns if the product is damaged or defective when received by customers or if the product shelf life has expired. The Company estimates product returns based upon actual returns history and data provided by a distributor.

Patient Financial Assistance. The Company offers a financial assistance program for commercially insured KALBITOR patients in order to defray patients’ out-of-pocket expenses, including co-payments, to aid patients’ access to KALBITOR. The Company estimates its liability for this program based on actual but unpaid, as well as, an estimated reserve for product sold to and held by distributors as of period end, based on the Company’s historical redemption rates.

An analysis of the amount of, and change in, reserves related to sales allowances is summarized as follows:

(In thousands)	Prompt pay and other discounts			Patient financial assistance			Government rebates and chargebacks			Returns			Total
Balance, as of December 31, 2011	$	170		$	193		$	283		$	49		$	695
Current provisions relating to sales in current year		1,726			408			856			502			3,492
Adjustments relating to prior years		—			(60	)		(22	)		—			(82	)
Payments relating to sales in current year		(1,338	)		(243	)		(398	)		—			(1,979	)
Payments/returns relating to sales in prior years		(170	)		(133	)		(154	)		—			(457	)
Balance, as of December 31, 2012		388			165			565			551			1,669
Current provisions relating to sales in current year		2,565			498			2,806			145			6,014
Adjustments relating to prior years		23			(38	)		(79	)		(141	)		(235	)
Payments relating to sales in current year		(2,165	)		(378	)		(1,380	)		—			(3,923	)
Payments/returns relating to sales in prior years		(327	)		(157	)		(278	)		(232	)		(994	)
Balance, as of December 31, 2013	$	484		$	90		$	1,634		$	323		$	2,531

Development and License Fee Revenues

Collaboration Agreements. The Company enters into collaboration agreements with other companies for the research and development of therapeutic, diagnostic and separations products. The terms of the agreements may include non-refundable signing and licensing fees, funding for research and development, payments related to manufacturing services, milestone payments and royalties on any product sales derived from collaborations. These multiple element arrangements are analyzed to determine how the deliverables, which often include license and performance obligations such as research, steering committee and manufacturing services, are separated into units of accounting.

For agreements entered into prior to 2011, the Company evaluated license arrangements with multiple elements in accordance with ASC, 605-25 Revenue Recognition – Multiple-Element Arrangements. Since 2011, the Company has applied the guidance of ASU 2009-13 to evaluate license arrangements with multiple elements. This guidance amended the accounting standards for certain multiple element arrangements to:

· Provide updated guidance on whether multiple elements exist, how the elements in an arrangement should be separated and how the arrangement considerations should be allocated to the separate elements;

· Require an entity to allocate arrangement consideration to each element based on a selling price hierarchy, also called the relative selling price method, where the selling price for an element is based on vendor-specific objective evidence (VSOE), if available; third-party evidence (TPE), if available and VSOE is not available; or the best estimate of selling price (BESP), if neither VSOE or TPE is available; and

· Eliminate the use of the residual method and require an entity to allocate arrangement consideration using the selling price hierarchy.

The Company evaluates all deliverables within an arrangement to determine whether or not they provide value to the licensee on a stand-alone basis. Based on this evaluation, the deliverables are separated into units of accounting. If VSOE or VOE is not available to determine the fair value of a deliverable, the Company determines the best estimate of selling price associated with the deliverable. The arrangement consideration, including upfront license fees and funding for research and development, is allocated to the separate units based on relative fair value.

VSOE is based on the price charged when an element is sold separately and represents the actual price charged for that deliverable. When VSOE cannot be established, we attempt to establish the selling price of the elements of a license arrangement based on VOE. VOE is determined based on third party evidence for similar deliverables when sold separately. In circumstances when the Company charges a licensee for pass-through costs paid to external vendors for development services, these costs represent VOE.

When we are unable to establish the selling price of an element using VSOE or VOE, management determines BESP for that element. The objective of BESP is to determine the price at which we would transact a sale if the element within the license agreement was sold on a stand-alone basis. Our process for establishing BESP involves management’s judgment and considers multiple factors including discounted cash flows, estimated direct expenses and other costs and available data.

Based on the value allocated to each unit of accounting within an arrangement, upfront fees and other guaranteed payments are allocated to each unit based on relative value. The appropriate revenue recognition method is applied to each unit and revenue is accordingly recognized as each unit is delivered.

For agreements entered into prior to 2011, revenue related to upfront license fees was spread over the full period of performance under the agreement, unless the license was determined to provide value to the licensee on a stand-alone basis and the fair value of the undelivered performance obligations, typically including research or steering committee services was determinable.

Steering committee services that were not inconsequential or perfunctory and were determined to be performance obligations were combined with other research services or performance obligations required under an arrangement, if any, to determine the level of effort required in an arrangement and the period over which the Company expected to complete its aggregate performance obligations.

Whenever the Company determined that an arrangement should be accounted for as a single unit of accounting, it determined the period over which the performance obligations would be completed. Revenue is recognized using either an efforts-based or time-based proportional performance (i.e. straight-line) method. The Company recognizes revenue using an efforts-based proportional performance method when the level of effort required to complete its performance obligations under an arrangement can be reasonably estimated and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time equivalents are typically used as the measurement of performance.

If the Company cannot reasonably estimate the level of effort to complete its performance obligations under an arrangement, then revenue under the arrangement is recognized on a straight-line basis over the period the Company is expected to complete its performance obligations.

Many of the Company's collaboration agreements entitle it to additional payments upon the achievement of performance-based milestones. Milestones that are tied to regulatory approval are not considered probable of being achieved until such approval was received. All milestones which are determined to be substantive milestones are recognized as revenue in the period in which they are met in accordance with Accounting Standards Update (ASU) No. 2010-17, Revenue Recognition – Milestone Method. Milestones tied to counter-party performance are not included in the Company’s revenue model until performance conditions are met. Milestones determined to be non-substantive are allocated to each unit of accounting within an arrangement when met. The allocation of the milestone to each unit is based on relative value and revenue related to each unit is recognized accordingly.

Royalty revenue is recognized upon the sale of the related products provided the Company has no remaining performance obligations under the arrangement.

Costs of revenues related to product development and license fees are classified as research and development in the consolidated statements of operations and comprehensive loss.

Phage Display Library Licenses. Standard terms of the proprietary phage display library agreements generally include non-refundable signing fees, license maintenance fees, development milestone payments, product license payments and royalties on product sales. Signing fees and maintenance fees are generally recognized on a straight line basis over the term of the agreement as deliverables within these arrangements are determined to not provide the licensee with value on a stand-alone basis and therefore are accounted for as a single unit of accounting. As milestones are achieved under a phage display library license, a portion of the milestone payment, equal to the percentage of the performance period completed when the milestone is achieved, multiplied by the amount of the milestone payment, will be recognized. The remaining portion of the milestone will be recognized over the remaining performance period on a straight-line basis. If the Company has no future obligations under the license, milestone payments under these license arrangements are recognized as revenue when the milestone is achieved. Product license payments, which are optional to the licensee, are substantive and therefore are excluded from the initial allocation of the arrangement consideration. These payments are recognized as revenue when the license is issued upon exercise of the licensee’s option, if the Company has no future obligations under the agreement. If there are future obligations under the agreement, product license payments are recognized as revenue only to the extent of the fair value of the license. Amounts paid in excess of fair value are recognized in a manner similar to milestone payments. Royalty revenue is recognized upon the sale of the related products provided the Company has no remaining performance obligations under the arrangement.

Payments received that have not met the appropriate criteria for revenue recognition are recorded as deferred revenue.

Phage Display Patent Licenses. The Company previously licensed its phage display patents on a non-exclusive basis to third parties for use in connection with the research and development of therapeutic, diagnostic, and other products. The core patents in this portfolio expired in November 2012. Even after patent expiration, the Company generally remains eligible under these patent licenses to receive milestones and/or royalties for products discovered prior to patent expiration, although certain existing patent licenses will no longer have a royalty obligation. The Company does not expect the expiration of these patents to have a material impact on its LFRP business.

Standard terms of the patent rights agreements include non-refundable signing fees, non-refundable license maintenance fees, development milestone payments and/or royalties on product sales. Signing fees and maintenance fees are generally recognized on a straight line basis over the term of the agreement or through the date of patent expiry, if shorter, except that in the case of perpetual patent licenses for which fees were recognized immediately if it was determined that the Company had no future obligations under the agreement and the payments were made upfront. If the Company has no remaining performance obligations under the patent license agreement, milestones are recognized as revenue in the period in which the milestone is achieved, and royalty revenue is recognized upon the sale of the related products.

LFRP Milestones

Non-substantive Milestones. Under the LFRP, the Company is eligible to receive clinical development, regulatory filing and marketing approval milestones, which vary from licensee to licensee. Achievement of these milestones is contingent upon the licensees’ efforts and involves risks and uncertainty related to drug development, regulatory approval and intellectual property which could lead to milestones never being met.

Based on information available to the Company regarding pre-clinical and clinical candidates in the LFRP developed using its technology and through intellectual property rights granted, it is estimated that the Company could receive up to $78 million in development milestones, $66 million in regulatory filing milestones and $95 million in marketing approval milestones. As achievement of these milestones is outside the control of the Company and is contingent upon the licensees’ efforts, they have been determined to be non-substantive milestones.

The Company recognized revenue of approximately $3.1 million, $3.3 million and $3.3 million related to milestones under the LFRP for the years ended December 31, 2013, 2012 and 2011, respectively.

Substantive Milestones. Under certain collaboration agreements, the Company performs funded research for various collaborators using its phage display technology and libraries. These arrangements typically include technical milestones which are based on agreed upon objectives to be met under the research campaign, which are considered to be commensurate with the Company’s performance and therefore have been determined to be substantive milestones.

During the years ended December 31, 2012 and 2011, the Company recognized revenue of approximately $327,000 and $588,000, respectively, for technical milestones. There was no amount recognized during the year ended December 31, 2013. The Company is not eligible to receive any future technical milestones at this time.

Non-LFRP Milestones

In certain countries outside of the U.S., the Company has entered into licensing agreements for the development and commercialization of KALBITOR for the treatment of HAE and other angioedema indications. Under these agreements, the Company is eligible to receive certain development and sales milestones. See Note 3, Significant Transactions.

Cost of Product Sales

Cost of product sales includes costs to procure, manufacture and distribute KALBITOR and manufacturing royalties. Costs associated with the manufacture of KALBITOR prior to regulatory approval in the United States were expensed when incurred as a research and development cost and accordingly, KALBITOR units sold during the years ended December 31, 2012 and 2011 do not include the full cost of drug manufacturing. For the year ended December 31, 2013, KALBITOR sales were comprised of a combination of product manufactured both prior to and following FDA approval. Accordingly, cost of product sales for the year ended December 31, 2013 does not reflect the full KALBITOR manufacturing cost.

Research and Development

Research and development costs include all direct costs, including salaries and benefits for research and development personnel, outside consultants, costs of clinical trials, sponsored research, clinical trials insurance, other outside costs, depreciation and facility costs related to the development of drug candidates. Costs of revenues related to product development and license fees are classified as research and development in the consolidated statements of operations and comprehensive loss.

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes in accordance with ASC 740. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities using the enacted statutory tax rates. At December 31, 2013 and 2012, there were no unrecognized tax benefits.

The Company accounts for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions.

Translation of Foreign Currencies

Assets and liabilities of the Company's foreign subsidiaries are translated at period end exchange rates. Amounts included in the statements of operations are translated at the average exchange rate for the period. All currency translation adjustments are recorded to other income (expense) in the consolidated statement of operations and comprehensive loss. The Company recorded other income of $14,000 and $15,000, for the years ended December 31, 2013 and 2012, respectively, and other expense of $3,000 for the year ended December 31, 2011.

Share-Based Compensation

The Company’s share-based compensation program consists of share-based awards granted to employees in the form of stock options and restricted stock units, as well as its 1998 Employee Stock Purchase Plan, as amended (the Purchase Plan). The Company’s share-based compensation expense is recorded in accordance with ASC 718.

Income or Loss Per Share

The Company follows the two-class method when computing net loss per share, as it has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends, as if all income for the period had been distributed. The Company’s convertible preferred stock issued during May 2013 contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in losses of the Company.

The Company presents two earnings or loss per share (EPS) amounts, basic and diluted in accordance with ASC 260. Basic earnings or loss per share is computed using the weighted average number of shares of common stock outstanding. Diluted net loss per share does not differ from basic net loss per share since potential common shares from the exercise of stock options, warrants or rights under the Purchase Plan are anti-dilutive for the years ended December 31, 2013, 2012 and 2011, and therefore, are excluded from the calculation of diluted net loss per share.

The weighted average of stock options and warrants outstanding totaled 12,185,724, 12,278,657 and 11,456,758 at December 31, 2013, 2012, and 2011, respectively.

Comprehensive Income (Loss)

The Company accounts for comprehensive income (loss) under ASC 220, Comprehensive Income, which established standards for reporting and displaying comprehensive income (loss) and its components in a full set of general purpose financial statements. The statement requires that all components of comprehensive income (loss) be reported in a financial statement that is displayed with the same prominence as other financial statements.

Accumulated other comprehensive income (loss) consists entirely of changes in unrealized gains (losses) on investments.

Business Segments

The Company discloses business segments under ASC 280, Segment Reporting. The statement established standards for reporting information about operating segments and disclosures about products and services, geographic areas and major customers. The Company operates as one business segment within predominantly one geographic area.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies, which are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

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Nature of Business - Additional Information (Detail) (LFRP, Phase 3 Trials)	12 Months Ended
	Dec. 31, 2013 Product
LFRP | Phase 3 Trials
Product Information [Line Items]
Number of products to be developed	3

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Components of Fixed Assets (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Fixed Assets [Line Items]
Laboratory equipment	$ 3,932	$ 7,628
Furniture and office equipment	815	1,619
Software and computers	2,958	4,763
Leasehold improvements	4,510	4,502
Construction in process		197
Total	12,215	18,709
Less: accumulated depreciation and amortization	(7,255)	(13,380)
Property, plant and equipment, Net	$ 4,960	$ 5,329

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Stock Options Activity (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Options
Granted at fair market value	3,617,150	5,897,221	2,624,160
Stock Options
Options
Beginning balance	10,528,474
Granted at fair market value	3,617,150
Exercised	(2,043,466)
Forfeited	(1,152,738)
Expired	(320,541)
Ending balance	10,628,879	10,528,474
Exercisable at end of year	4,546,646
Vested and unvested expected to vest at end of year	10,587,985
Weighted Average Exercise Price
Beginning balance	$ 2.28
Granted at fair market value	$ 3.22
Exercised	$ 2.50
Forfeited	$ 2.33
Expired	$ 5.04
Ending balance	$ 2.47	$ 2.28
Exercisable at end of year	$ 2.52
Vested and unvested expected to vest at end of year	$ 2.48
Weighted Average Remaining Contractual Life
Outstanding at end of period	6 years 11 months 27 days	6 years 10 months 2 days
Exercisable at end of period	6 years 3 months 26 days
Vested and unvested expected to vest at end of period	7 years
Aggregate Intrinsic Value
Outstanding at end of period	$ 13,864
Outstanding at end of period	53,978	13,864
Exercisable at end of period	22,960
Vested and unvested expected to vest at end of period	$ 53,731

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 68,085	$ 20,018
Short-term investments	43,296	9,028
Accounts receivable, net	6,506	7,507
Inventory	2,827	4,085
Other current assets	1,618	2,159
Total current assets	122,332	42,797
Fixed assets, net	4,960	5,329
Restricted cash	1,100	1,100
Other assets	5,815	6,260
Total assets	134,207	55,486
Current liabilities:
Accounts payable and accrued expenses	12,542	12,472
Current portion of deferred revenue	2,686	5,449
Current portion of long-term obligations	468	445
Other current liabilities	1,812
Total current liabilities	17,508	18,366
Deferred revenue	5,335	6,402
Note payable	81,516	78,061
Long-term obligations	463	931
Deferred rent and other long-term liabilities	3,063	3,286
Total liabilities	107,885	107,046
Commitments and Contingencies
Stockholders' equity (deficit):
Preferred stock, $0.01 par value; 1,000,000 shares authorized; 41,418 and 0 shares issued and outstanding at December 31, 2013 and 2012, respectively
Common stock, $0.01 par value; 200,000,000 shares authorized; 121,704,480 and 99,482,629 shares issued and outstanding at December 31, 2013 and 2012, respectively	1,217	995
Additional paid-in capital	559,065	453,625
Accumulated deficit	(533,963)	(506,186)
Accumulated other comprehensive income	3	6
Total stockholders' equity (deficit)	26,322	(51,560)
Total liabilities and stockholders' equity (deficit)	$ 134,207	$ 55,486

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Long-Term Obligations - Additional Information (Detail) (USD $)	1 Months Ended	12 Months Ended		1 Months Ended	12 Months Ended				1 Months Ended	12 Months Ended				12 Months Ended	1 Months Ended	12 Months Ended					12 Months Ended					24 Months Ended							12 Months Ended
	Dec. 31, 2011 sqft	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011 Maximum	Dec. 31, 2013 Operating Leases	Dec. 31, 2012 Operating Leases	Dec. 31, 2011 Operating Leases	Jan. 31, 2012 Operating Leases	Dec. 31, 2011 Extended Term	Dec. 31, 2013 Warrant Tranche A and Tranche B Loans (Original Loan)	Dec. 31, 2013 Refinanced Term Loan Tranche B Loan	Dec. 31, 2013 Healthcare Royalty Partners	Dec. 31, 2012 Healthcare Royalty Partners	Dec. 31, 2013 Healthcare Royalty Partners Legal Fee	Nov. 30, 2013 Healthcare Royalty Partners Tranche B Loan	Dec. 31, 2013 Healthcare Royalty Partners Tranche B Loan Loan One	Dec. 31, 2013 Healthcare Royalty Partners Tranche B Loan Loan Two	Dec. 31, 2013 Healthcare Royalty Partners Tranche A and Tranche B Loans (Original Loan)	Dec. 31, 2013 Healthcare Royalty Partners Tranche A and Tranche B Loans (Original Loan) Phase 3 Trials	Dec. 31, 2013 Healthcare Royalty Partners Tranche A and Tranche B Loans (Original Loan) Group Two	Dec. 31, 2013 Healthcare Royalty Partners Tranche A and Tranche B Loans (Original Loan) Group Two Minimum	Dec. 31, 2013 Healthcare Royalty Partners Refinanced Term Loan Tranche A Loan Legal Fee	Dec. 31, 2011 Healthcare Royalty Partners Refinanced Term Loan Tranche A Loan Second Affiliated	Dec. 31, 2013 Healthcare Royalty Partners Refinanced Term Loan Tranche A Loan Second Affiliated	Dec. 31, 2012 Healthcare Royalty Partners Refinanced Term Loan Tranche A Loan Second Affiliated	Dec. 31, 2009 Healthcare Royalty Partners Refinanced Term Loan Tranche B Loan Second Affiliated	Dec. 31, 2013 Healthcare Royalty Partners Refinanced Term Loan Tranche B Loan Second Affiliated	Jul. 31, 2012 Healthcare Royalty Partners Refinanced Term Loan Tranche B Loan Second Affiliated	Dec. 31, 2013 Healthcare Royalty Partners LFRP	Dec. 31, 2013 Healthcare Royalty Partners LFRP Tranche A Loan	Dec. 31, 2013 Healthcare Royalty Partners LFRP Tranche B Loan	Dec. 31, 2013 Healthcare Royalty Partners LFRP Tranche A and Tranche B Loans (Original Loan)	Dec. 31, 2012 Silicon Valley Bank Equipment lease	Dec. 31, 2013 Silicon Valley Bank Equipment lease	Dec. 31, 2012 Silicon Valley Bank Equipment lease Negotiable Order of Withdrawal Accounts
Debt Disclosure [Line Items]
Secured Loan																													$ 84,500,000	$ 22,800,000	$ 61,700,000
Debt maturity date																																2018-08
Interest on lease																							13.00%				17.40%					12.00%	6.00%
Debt instrument maturity date																		Sep. 30, 2016
Percentage of required payment for partial repayment of debt																		90.00%	75.00%	25.00%
Annual net LFRP receipts amount used as a basis for repayment of loan																			15,000,000		15,000,000
Principal amount of Loan																												57,600,000		21,700,000	58,800,000
Proceed from unsecured loan											57,600,000												20,000,000			65,000,000
Effective interest rate																								12.60%	13.00%
Decrease in note payable		198,000	198,000							1,300,000				580,000								193,000
Issuance of warrants to purchase common stock															0	250,000	250,000
Warrant exercise price per share																5.50	2.87
Warrant right expiration date																2016-08	2016-08
Estimated fair value of warrant at issuance date																853,000	477,000
Volatility factor																83.64%	85.98%
Risk-free interest rate																4.07%	2.77%
Expected term																8 years	7 years 4 months
Expected dividend yield																$ 0	$ 0
Stock issued in exercise of warrants															233,438
Loan principal balance												84,500,000	81,200,000
Fair value of note payable		83,200,000
Line of credit, maximum borrowing capacity																																	3,000,000
Line of credit																																			1,400,000
Lease agreement term	10 years								5 years																								3 years
Line of credit, outstanding balance																																	1,400,000	931,000.0
Rentable square feet of office and laboratory facilities	45,000
Aggregate minimum lease commitment over payment lease term	15,000,000	13,411,000
Letter of Credit given to landlord to secure lease obligation	1,100,000							1,300,000
Tenant improvement allowance				2,600,000
Capitalized leasehold improvements		4,510,000	4,502,000
Rent expense					1,500,000	1,600,000	3,400,000
sublease rental income							$ 194,000

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Cash flows from operating activities:
Net loss	$ (27,777)	$ (29,265)	$ (34,599)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of investment premium/discount	30	64	229
Depreciation and amortization of fixed assets and intangible assets	861	1,060	1,417
Non-cash interest expense	3,455	2,784	1,955
Gain on disposal of fixed assets		(110)
Share-based compensation expense	5,441	3,640	4,030
Provision for doubtful accounts		(80)	35
Non-cash stock issuance	1,076
Non-cash other income		(68)
Changes in operating assets and liabilities
Accounts receivable	1,001	(1,335)	(810)
Other current assets	541	2,809	(1,720)
Inventory	1,637	(2,916)	(5,201)
Accounts payable and accrued expenses	1,900	(2,113)	1,426
Deferred revenue	(3,830)	(4,051)	(5,434)
Long-term deferred rent	(123)	685	1,417
Other	(28)	414	803
Net cash used in operating activities	(15,816)	(28,482)	(36,452)
Cash flows from investing activities:
Purchase of investments	(43,301)	(6,057)	(3,021)
Proceeds from maturity of investments	9,000	23,000	35,502
Purchase of fixed assets	(507)	(4,066)	(1,694)
Proceeds from sale of fixed assets		200
Restricted cash		1,266	(178)
Net cash (used in) provided by investing activities	(34,808)	14,343	30,609
Cash flows from financing activities:
Gross proceeds from common stock offerings	99,000		323
Fees associated with common stock offerings	(5,225)
Proceeds from issuance of note payable		1,382	19,850
Repayment of long-term obligations	(445)	(135)	(1,682)
Proceeds from the issuance of common stock under employee stock purchase plan and exercise of stock options	5,361	1,442	219
Net cash provided by financing activities	98,691	2,689	18,710
Net increase (decrease) in cash and cash equivalents	48,067	(11,450)	12,867
Cash and cash equivalents at beginning of the period	20,018	31,468	18,601
Cash and cash equivalents at end of the period	68,085	20,018	31,468
Supplemental disclosure of cash flow information:
Issuance of common shares on exercise of warrants - see Note 8	2,093
Interest paid	$ 5,525	$ 9,364	$ 9,108

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Income Taxes - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013	Dec. 31, 2011
Income Taxes [Line Items]
Federal tax net operating loss carryforward	$ 329,200,000	$ 344,900,000
Federal research and experimentation	61,600,000	58,100,000
State tax net operating loss carryforward	93,800,000	138,100,000
Deferred tax asset, exercise of stock options	1,800,000	1,800,000
Deferred tax assets valuation allowance	213,934,000	204,260,000		199,171,000
Unrecognized tax benefits or liabilities	0	0	0
Accrued interest or penalties related to uncertain tax positions	0
Research and Development Credit Carryforwards
Income Taxes [Line Items]
Federal research and experimentation	8,300,000	7,800,000
Federal Tax
Income Taxes [Line Items]
Federal tax net operating loss carryforward		252,300,000
Federal research and experimentation		54,900,000
Restricted NOLs		67,200,000
Federal tax credits		4,800,000
Stock Option
Income Taxes [Line Items]
Federal tax net operating loss carryforward	$ 8,200,000	$ 4,900,000
Minimum
Income Taxes [Line Items]
Tax years open to examination by major taxing jurisdictions	1999
Maximum
Income Taxes [Line Items]
Tax years open to examination by major taxing jurisdictions	2013

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Significant Transactions - Additional Information (Detail) (USD $)	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Oct. 31, 2013	May 31, 2013
Significant Transactions [Line Items]
Revenue	$ 16,859,000	$ 13,691,000	$ 11,336,000	$ 12,040,000	$ 16,030,000	$ 13,101,000	$ 14,030,000	$ 11,489,000	$ 53,926,000	$ 54,650,000	$ 48,737,000
Common stock purchase price	121,704,480				99,482,629				121,704,480	99,482,629		10,615,385	8,901,675
CMIC Co., Ltd, (CMIC)
Significant Transactions [Line Items]
Revenue	2,000,000								2,600,000	755,000.0	595,000.0
Deferred revenue	0				2,500,000				0	2,500,000
CMIC Co., Ltd, (CMIC) | Up-front Payment Arrangement
Significant Transactions [Line Items]
Collaboration arrangement payment									4,000,000
Sigma Tau
Significant Transactions [Line Items]
Reduction to development and license fee revenue									1,100,000
Deferred revenue, revenue recognized									85,000.0	204,000.0	10,500,000
Sigma Tau | Contract Termination
Significant Transactions [Line Items]
Common stock purchase price	271,665								271,665
Consideration contractually obligated to pay contingent upon future sales									500,000
Compensation received during the next ten years in relation to the license or supply of ecallantide									5,000,000
Sigma Tau | Development Services
Significant Transactions [Line Items]
Collaboration arrangement payment									7,000,000
Reimbursement from collaboration arrangement									3,800,000
Common stock purchase price	787,647								787,647
Common stock aggregate purchase price	3,000,000								3,000,000
CVie Therapeutics
Significant Transactions [Line Items]
Revenue									172,000
Deferred revenue	828,000								828,000
CVie Therapeutics | Up-front Payment Arrangement
Significant Transactions [Line Items]
Collaboration arrangement payment									1,000,000
CVie Therapeutics | Up-front Payment Arrangement | Maximum
Significant Transactions [Line Items]
Collaboration arrangement receivable									11,000,000
Novellus Plan
Significant Transactions [Line Items]
Deferred revenue	800,000								800,000
Collaboration arrangement receivable									800,000
Novellus Plan | Up-front Payment Arrangement
Significant Transactions [Line Items]
Collaboration arrangement payment									500,000
Novellus Plan | Up-front Payment Arrangement | Maximum
Significant Transactions [Line Items]
Collaboration arrangement receivable									$ 5,200,000

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Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

Basis of Consolidation

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and the Company's European subsidiaries Dyax S.A. and Dyax BV.  All inter-company accounts and transactions have been eliminated.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods.  The significant estimates and assumptions in these financial statements include revenue recognition, product sales allowances, effective interest rate calculation, useful lives with respect to long lived assets, valuation of stock options, accrued expenses and tax valuation reserves.  Actual results could differ from those estimates.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, short-term investments and trade accounts receivable. At December 31, 2013 and 2012, approximately 89% and 86%, respectively, of the Company's cash, cash equivalents and short-term investments were invested in money market funds backed by U.S. Treasury obligations, U.S. Treasury notes and bills, and obligations of United States government agencies held by one financial institution. The Company maintains balances in various operating accounts in excess of federally insured limits.

The Company provides most of its services and licenses its technology to pharmaceutical and biomedical companies worldwide, and makes all product sales to its distributors. Concentrations of credit risk with respect to trade receivable balances associated the Company’s development and license fee revenue are usually limited on an ongoing basis, due to the diverse number of licensees and collaborators comprising the Company's customer base. Trade receivable balances associated with the Company’s product sales are comprised of a few customers due to the Company’s limited distribution network. The Company completes ongoing credit evaluations of their customers. As of December 31, 2013, two customers accounted for 35% (US Bio) and 26% (Walgreens) of the accounts receivable balance. Two customers accounted for approximately 50% (Walgreens) and 34% (US Bio), of the Company's accounts receivable balance as of December 31, 2012.

The Company’s two largest distributors of KABITOR are Walgreens and US Bio. During the years ended December 31, 2013, 2012 and 2011, sales to Walgreens were 47%, 53% and 16% of revenue, respectively. During the years ended December 31, 2013, 2012 and 2011, sales to US Bio were 31%, 39% and 69% of revenue, respectively.

Revenues from customers outside the United States were approximately 13%, 13% and 28% of the Company's total revenus for the years ended December 31, 2013, 2012 and 2011, respectively, principally related to development and license agreements.

Cash and Cash Equivalents

Cash and Cash Equivalents

All highly liquid investments purchased with an original maturity of ninety days or less are considered to be cash equivalents.  Cash and cash equivalents consist principally of cash, money market and U.S. Treasury funds.

Investments

Investments

Short-term investments primarily consist of investments with original maturities greater than ninety days and remaining maturities less than one year at period end.  The Company has also classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of investments available-for-sale.  Accordingly, these investments are recorded at fair value, which is based on quoted market prices.  As of December 31, 2013, the Company's investments consisted of U.S. Treasury notes and bills with an amortized cost and estimated fair value of $43.3 million, and had an unrealized gain of $3,000.  As of December 31, 2012, the Company's investments consisted of United States Treasury notes and bills with an estimated fair value and amortized cost of $9.0 million, and had an unrealized gain of $6,000, which is recorded in other comprehensive income on the accompanying consolidated balance sheet.

Inventories

Inventories

Inventories are stated at the lower of cost or market with cost determined under the first-in, first-out, or FIFO, basis. The Company evaluates inventory levels and would write-down inventory that is expected to expire prior to being sold, inventory that has a cost basis in excess of its expected net realizable value, inventory in excess of expected sales requirements, or inventory that fails to meet commercial sale specifications, through a charge to cost of product sales. Included in the cost of inventory are employee stock-based compensation costs capitalized under Accounting Standards Codification (ASC) 718.  Inventory on-hand that will be sold beyond the Company's normal operating cycle is classified as non-current and grouped with other assets on the Company's consolidated balance sheet.

Fixed Assets

Fixed Assets

Property and equipment are recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Laboratory and production equipment, furniture and office equipment are depreciated over a three to seven year period. Leasehold improvements are stated at cost and are amortized over the lesser of the non-cancelable term of the related lease or their estimated useful lives. Leased equipment is amortized over the lesser of the life of the lease or their estimated useful lives. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation and amortization are eliminated from the balance sheet and any resulting gains or losses are included in operations in the period of disposal.

The Company records all proceeds received from the lessor for tenant improvements under the terms of its operating lease as deferred rent.  The amounts are amortized on a straight-line basis over the term of the lease as an offset to rent expense.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flow to the recorded value of the asset or asset group. If impairment is indicated, the asset is written down to its estimated fair value on a discounted cash flow basis.

Revenue Recognition

Revenue Recognition

The Company’s principal sources of revenue are product sales of KALBITOR and license fees, funding for research and development, and milestones and royalties derived from collaboration and license agreements.  In all instances, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, collectability of the resulting receivable is reasonably assured and the Company has no further performance obligations.

Product Sales and Allowances

Product Sales and Allowances

Product Sales. Product sales are generated from the sale of KALBITOR to the Company’s customers, primarily wholesale and specialty distributors, and are recorded upon delivery when title and risk of loss have passed to the customer. Product sales are recorded net of applicable reserves for trade prompt pay and other discounts, government rebates, patient financial assistance programs, product returns and other applicable allowances.

Product Sales Allowances. The Company establishes reserves for trade distributor, prompt pay and volume discounts, government rebates, patient financial assistance programs, product returns and other applicable allowances. Reserves established for these discounts and allowances are classified as a reduction of accounts receivable (if the amount is payable to the customer) or a liability (if the amount is payable to a party other than the customer).

Allowances against receivable balances primarily relate to prompt payment discounts and are recorded at the time of sale, resulting in a reduction in product sales revenue. Accruals related to government rebates, patient financial assistance programs, product returns and other applicable allowances are recognized at the time of sale, resulting in a reduction in product sales revenue and the recording of an increase in accrued expenses.

The Company maintains service contracts with its distributors. These contracts include services such as inventory maintenance and patient support services, which include on-demand nursing services. Accounting standards related to consideration given by a vendor to a customer, including a reseller of a vendor’s product, specify that each consideration given by a vendor to a customer is presumed to be a reduction of the selling price. Consideration should be characterized as a cost if the company receives, or will receive, an identifiable benefit in exchange for the consideration, and fair value of the benefit can be reasonably estimated. The Company has established that patient support services are at fair value and represent a separate and identifiable benefit because these services could be provided by separate third-party vendors. Accordingly, these costs are classified as selling, general and administrative expense.

Inventory maintenance fees are calculated as a percentage of KALBITOR sales price and accordingly, are classified as a reduction in product sales revenue.

Prompt Payment and Other Discounts. The Company offers a prompt payment discount to its United States distributors. Since the Company expects that these distributors will take advantage of this discount, the Company accrues 100% of the prompt payment discount that is based on the gross amount of each invoice, at the time of sale. This accrual is adjusted quarterly to reflect actual earned discounts. The Company also offers volume discounts to certain distributors which are accrued quarterly based on sales during the period.

Government Rebates and Chargebacks. The Company estimates reductions to product sales for Medicaid and Veterans' Administration (VA) programs and the Medicare Part D Coverage Gap Program, as well as for certain other qualifying federal and state government programs. The Company estimates the amount of these reductions based on available KALBITOR patient data, actual sales data and rebate claims. These allowances are adjusted each period based on actual experience.

Medicaid rebate reserves relate to the Company’s estimated obligations to state jurisdictions under the established reimbursement arrangements of each applicable state. Rebate accruals are recorded during the same period in which the related product sales are recognized. Actual rebate amounts are determined at the time of claim by the state, and the Company will generally make cash payments for such amounts after receiving billings from the state.

VA rebates or chargeback reserves represent the Company’s estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at a price lower than the list price charged to the Company’s distributor. The distributor will charge the Company for the difference between what the distributor pays for the product and the ultimate selling price to the qualified healthcare provider. Rebate accruals are established during the same period in which the related product sales are recognized. Actual chargeback amounts for Public Health Service are determined at the time of resale to the qualified healthcare provider from the distributor, and the Company will generally issue credits for such amounts after receiving notification from the distributor.

Although allowances and accruals are recorded at the time of product sale, certain rebates are typically paid out, on average, up to six months or longer after the sale. Reserve estimates are evaluated quarterly and if necessary, adjusted to reflect actual results. Any such adjustments will be reflected in the Company’s operating results in the period of the adjustment.

Product Returns. Allowances for product returns are recorded during the period in which the related product sales are recognized, resulting in a reduction to product revenue. The Company does not provide its distributors with a general right of product return. The Company permits returns if the product is damaged or defective when received by customers or if the product shelf life has expired. The Company estimates product returns based upon actual returns history and data provided by a distributor.

Patient Financial Assistance. The Company offers a financial assistance program for commercially insured KALBITOR patients in order to defray patients’ out-of-pocket expenses, including co-payments, to aid patients’ access to KALBITOR. The Company estimates its liability for this program based on actual but unpaid, as well as, an estimated reserve for product sold to and held by distributors as of period end, based on the Company’s historical redemption rates.

An analysis of the amount of, and change in, reserves related to sales allowances is summarized as follows:

(In thousands)	Prompt pay and other discounts			Patient financial assistance			Government rebates and chargebacks			Returns			Total
Balance, as of December 31, 2011	$	170		$	193		$	283		$	49		$	695
Current provisions relating to sales in current year		1,726			408			856			502			3,492
Adjustments relating to prior years		—			(60	)		(22	)		—			(82	)
Payments relating to sales in current year		(1,338	)		(243	)		(398	)		—			(1,979	)
Payments/returns relating to sales in prior years		(170	)		(133	)		(154	)		—			(457	)
Balance, as of December 31, 2012		388			165			565			551			1,669
Current provisions relating to sales in current year		2,565			498			2,806			145			6,014
Adjustments relating to prior years		23			(38	)		(79	)		(141	)		(235	)
Payments relating to sales in current year		(2,165	)		(378	)		(1,380	)		—			(3,923	)
Payments/returns relating to sales in prior years		(327	)		(157	)		(278	)		(232	)		(994	)
Balance, as of December 31, 2013	$	484		$	90		$	1,634		$	323		$	2,531

Development and License Fee Revenues

Development and License Fee Revenues

Collaboration Agreements.  The Company enters into collaboration agreements with other companies for the research and development of therapeutic, diagnostic and separations products. The terms of the agreements may include non-refundable signing and licensing fees, funding for research and development, payments related to manufacturing services, milestone payments and royalties on any product sales derived from collaborations.  These multiple element arrangements are analyzed to determine how the deliverables, which often include license and performance obligations such as research, steering committee and manufacturing services, are separated into units of accounting.

For agreements entered into prior to 2011, the Company evaluated license arrangements with multiple elements in accordance with ASC, 605-25 Revenue Recognition – Multiple-Element Arrangements.  Since 2011, the Company has applied the guidance of ASU 2009-13 to evaluate license arrangements with multiple elements.  This guidance amended the accounting standards for certain multiple element arrangements to:

·   Provide updated guidance on whether multiple elements exist, how the elements in an arrangement should be separated and how the arrangement considerations should be allocated to the separate elements;

·   Require an entity to allocate arrangement consideration to each element based on a selling price hierarchy, also called the relative selling price method, where the selling price for an element is based on vendor-specific objective evidence (VSOE), if available; third-party evidence (TPE), if available and VSOE is not available; or the best estimate of selling price (BESP), if neither VSOE or TPE is available; and

·   Eliminate the use of the residual method and require an entity to allocate arrangement consideration using the selling price hierarchy.

The Company evaluates all deliverables within an arrangement to determine whether or not they provide value to the licensee on a stand-alone basis.  Based on this evaluation, the deliverables are separated into units of accounting.  If VSOE or VOE is not available to determine the fair value of a deliverable, the Company determines the best estimate of selling price associated with the deliverable.  The arrangement consideration, including upfront license fees and funding for research and development, is allocated to the separate units based on relative fair value.

VSOE is based on the price charged when an element is sold separately and represents the actual price charged for that deliverable.  When VSOE cannot be established, we attempt to establish the selling price of the elements of a license arrangement based on VOE.  VOE is determined based on third party evidence for similar deliverables when sold separately.  In circumstances when the Company charges a licensee for pass-through costs paid to external vendors for development services, these costs represent VOE.

When we are unable to establish the selling price of an element using VSOE or VOE, management determines BESP for that element.  The objective of BESP is to determine the price at which we would transact a sale if the element within the license agreement was sold on a stand-alone basis.  Our process for establishing BESP involves management’s judgment and considers multiple factors including discounted cash flows, estimated direct expenses and other costs and available data.

Based on the value allocated to each unit of accounting within an arrangement, upfront fees and other guaranteed payments are allocated to each unit based on relative value.  The appropriate revenue recognition method is applied to each unit and revenue is accordingly recognized as each unit is delivered.

For agreements entered into prior to 2011, revenue related to upfront license fees was spread over the full period of performance under the agreement, unless the license was determined to provide value to the licensee on a stand-alone basis and the fair value of the undelivered performance obligations, typically including research or steering committee services was determinable.

Steering committee services that were not inconsequential or perfunctory and were determined to be performance obligations were combined with other research services or performance obligations required under an arrangement, if any, to determine the level of effort required in an arrangement and the period over which the Company expected to complete its aggregate performance obligations.

Whenever the Company determined that an arrangement should be accounted for as a single unit of accounting, it determined the period over which the performance obligations would be completed. Revenue is recognized using either an efforts-based or time-based proportional performance (i.e. straight-line) method. The Company recognizes revenue using an efforts-based proportional performance method when the level of effort required to complete its performance obligations under an arrangement can be reasonably estimated and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time equivalents are typically used as the measurement of performance.

If the Company cannot reasonably estimate the level of effort to complete its performance obligations under an arrangement, then revenue under the arrangement is recognized on a straight-line basis over the period the Company is expected to complete its performance obligations.

Many of the Company's collaboration agreements entitle it to additional payments upon the achievement of performance-based milestones. Milestones that are tied to regulatory approval are not considered probable of being achieved until such approval was received. All milestones which are determined to be substantive milestones are recognized as revenue in the period in which they are met in accordance with Accounting Standards Update (ASU) No. 2010-17, Revenue Recognition – Milestone Method.  Milestones tied to counter-party performance are not included in the Company’s revenue model until performance conditions are met.  Milestones determined to be non-substantive are allocated to each unit of accounting within an arrangement when met.  The allocation of the milestone to each unit is based on relative value and revenue related to each unit is recognized accordingly.

Royalty revenue is recognized upon the sale of the related products provided the Company has no remaining performance obligations under the arrangement.

Costs of revenues related to product development and license fees are classified as research and development in the consolidated statements of operations and comprehensive loss.

Phage Display Library Licenses.  Standard terms of the proprietary phage display library agreements generally include non-refundable signing fees, license maintenance fees, development milestone payments, product license payments and royalties on product sales.  Signing fees and maintenance fees are generally recognized on a straight line basis over the term of the agreement as deliverables within these arrangements are determined to not provide the licensee with value on a stand-alone basis and therefore are accounted for as a single unit of accounting. As milestones are achieved under a phage display library license, a portion of the milestone payment, equal to the percentage of the performance period completed when the milestone is achieved, multiplied by the amount of the milestone payment, will be recognized. The remaining portion of the milestone will be recognized over the remaining performance period on a straight-line basis. If the Company has no future obligations under the license, milestone payments under these license arrangements are recognized as revenue when the milestone is achieved. Product license payments, which are optional to the licensee, are substantive and therefore are excluded from the initial allocation of the arrangement consideration.  These payments are recognized as revenue when the license is issued upon exercise of the licensee’s option, if the Company has no future obligations under the agreement. If there are future obligations under the agreement, product license payments are recognized as revenue only to the extent of the fair value of the license. Amounts paid in excess of fair value are recognized in a manner similar to milestone payments. Royalty revenue is recognized upon the sale of the related products provided the Company has no remaining performance obligations under the arrangement.

Payments received that have not met the appropriate criteria for revenue recognition are recorded as deferred revenue.

Phage Display Patent Licenses.  The Company previously licensed its phage display patents on a non-exclusive basis to third parties for use in connection with the research and development of therapeutic, diagnostic, and other products.  The core patents in this portfolio expired in November 2012.  Even after patent expiration, the Company generally remains eligible under these patent licenses to receive milestones and/or royalties for products discovered prior to patent expiration, although certain existing patent licenses will no longer have a royalty obligation.  The Company does not expect the expiration of these patents to have a material impact on its LFRP business.

Standard terms of the patent rights agreements include non-refundable signing fees, non-refundable license maintenance fees, development milestone payments and/or royalties on product sales. Signing fees and maintenance fees are generally recognized on a straight line basis over the term of the agreement or through the date of patent expiry, if shorter, except that in the case of perpetual patent licenses for which fees were recognized immediately if it was determined that the Company had no future obligations under the agreement and the payments were made upfront.  If the Company has no remaining performance obligations under the patent license agreement, milestones are recognized as revenue in the period in which the milestone is achieved, and royalty revenue is recognized upon the sale of the related products.

LFRP Milestones

Non-substantive Milestones.  Under the LFRP, the Company is eligible to receive clinical development, regulatory filing and marketing approval milestones, which vary from licensee to licensee.  Achievement of these milestones is contingent upon the licensees’ efforts and involves risks and uncertainty related to drug development, regulatory approval and intellectual property which could lead to milestones never being met.

Based on information available to the Company regarding pre-clinical and clinical candidates in the LFRP developed using its technology and through intellectual property rights granted, it is estimated that the Company could receive up to $78 million in development milestones, $66 million in regulatory filing milestones and $95 million in marketing approval milestones.  As achievement of these milestones is outside the control of the Company and is contingent upon the licensees’ efforts, they have been determined to be non-substantive milestones.

The Company recognized revenue of approximately $3.1 million, $3.3 million and $3.3 million related to milestones under the LFRP for the years ended December 31, 2013, 2012 and 2011, respectively.

Substantive Milestones. Under certain collaboration agreements, the Company performs funded research for various collaborators using its phage display technology and libraries.  These arrangements typically include technical milestones which are based on agreed upon objectives to be met under the research campaign, which are considered to be commensurate with the Company’s performance and therefore have been determined to be substantive milestones.
 

During the years ended December 31, 2012 and 2011, the Company recognized revenue of approximately $327,000 and $588,000, respectively, for technical milestones.  There was no amount recognized during the year ended December 31, 2013.  The Company is not eligible to receive any future technical milestones at this time.

Non-LFRP Milestones

In certain countries outside of the U.S., the Company has entered into licensing agreements for the development and commercialization of KALBITOR for the treatment of HAE and other angioedema indications.  Under these agreements, the Company is eligible to receive certain development and sales milestones. See Note 3, Significant Transactions.

Cost of Product Sales

Cost of Product Sales

Cost of product sales includes costs to procure, manufacture and distribute KALBITOR and manufacturing royalties. Costs associated with the manufacture of KALBITOR prior to regulatory approval in the United States were expensed when incurred as a research and development cost and accordingly, KALBITOR units sold during the years ended December 31, 2012 and 2011 do not include the full cost of drug manufacturing.  For the year ended December 31, 2013, KALBITOR sales were comprised of a combination of product manufactured both prior to and following FDA approval.  Accordingly, cost of product sales for the year ended December 31, 2013 does not reflect the full KALBITOR manufacturing cost.

Research and Development

Research and Development

Research and development costs include all direct costs, including salaries and benefits for research and development personnel, outside consultants, costs of clinical trials, sponsored research, clinical trials insurance, other outside costs, depreciation and facility costs related to the development of drug candidates. Costs of revenues related to product development and license fees are classified as research and development in the consolidated statements of operations and comprehensive loss.

Income Taxes

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes in accordance with ASC 740.  Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities using the enacted statutory tax rates.  At December 31, 2013 and 2012, there were no unrecognized tax benefits.

The Company accounts for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions.

Translation of Foreign Currencies

Translation of Foreign Currencies

Assets and liabilities of the Company's foreign subsidiaries are translated at period end exchange rates. Amounts included in the statements of operations are translated at the average exchange rate for the period. All currency translation adjustments are recorded to other income (expense) in the consolidated statement of operations and comprehensive loss.  The Company recorded other income of $14,000 and $15,000, for the years ended December 31, 2013 and 2012, respectively, and other expense of $3,000 for the year ended December 31, 2011.

Share-Based Compensation

Share-Based Compensation

The Company’s share-based compensation program consists of share-based awards granted to employees in the form of stock options and restricted stock units, as well as its 1998 Employee Stock Purchase Plan, as amended (the Purchase Plan).  The Company’s share-based compensation expense is recorded in accordance with ASC 718.

Income or Loss Per Share

Income or Loss Per Share

The Company follows the two-class method when computing net loss per share, as it has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends, as if all income for the period had been distributed. The Company’s convertible preferred stock issued during May 2013 contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in losses of the Company.

The Company presents two earnings or loss per share (EPS) amounts, basic and diluted in accordance with ASC 260.  Basic earnings or loss per share is computed using the weighted average number of shares of common stock outstanding. Diluted net loss per share does not differ from basic net loss per share since potential common shares from the exercise of stock options, warrants or rights under the Purchase Plan are anti-dilutive for the years ended December 31, 2013, 2012 and 2011, and therefore, are excluded from the calculation of diluted net loss per share.

The weighted average of stock options and warrants outstanding totaled 12,185,724, 12,278,657 and 11,456,758 at December 31, 2013, 2012, and 2011, respectively.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

The Company accounts for comprehensive income (loss) under ASC 220, Comprehensive Income, which established standards for reporting and displaying comprehensive income (loss) and its components in a full set of general purpose financial statements. The statement requires that all components of comprehensive income (loss) be reported in a financial statement that is displayed with the same prominence as other financial statements.

Accumulated other comprehensive income (loss) consists entirely of changes in unrealized gains (losses) on investments.

Business Segments

Business Segments

The Company discloses business segments under ASC 280, Segment Reporting.   The statement established standards for reporting information about operating segments and disclosures about products and services, geographic areas and major customers.  The Company operates as one business segment within predominantly one geographic area.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies, which are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

XML

Financial Assets Measured at Fair Value (Detail) (Fair Value, Measurements, Recurring, USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Financial Assets Measured at Fair Value [Line Items]
Assets fair value disclosure Recurring	$ 98,865	$ 24,938
Quoted Prices in Active Markets (Level 1)
Financial Assets Measured at Fair Value [Line Items]
Assets fair value disclosure Recurring	55,569	15,910
Significant Other Observable Inputs (Level 2)
Financial Assets Measured at Fair Value [Line Items]
Assets fair value disclosure Recurring	43,296	9,028
Money Market Funds
Financial Assets Measured at Fair Value [Line Items]
Assets fair value disclosure Recurring	55,569	15,910
Money Market Funds | Quoted Prices in Active Markets (Level 1)
Financial Assets Measured at Fair Value [Line Items]
Assets fair value disclosure Recurring	55,569	15,910
US Treasury Bills and Notes
Financial Assets Measured at Fair Value [Line Items]
Assets fair value disclosure Recurring	43,296	9,028
US Treasury Bills and Notes | Significant Other Observable Inputs (Level 2)
Financial Assets Measured at Fair Value [Line Items]
Assets fair value disclosure Recurring	$ 43,296	$ 9,028

XML

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2013

Financial Assets Measured at Fair Value

Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.

Description	December 31, 2013		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Assets:
Money Market Funds	$	55,569	$	55,569	$	—	$	—
US Treasury Bills and Notes		43,296		—		43,296		—
Total	$	98,865	$	55,569	$	43,296	$	—

Description	December 31, 2012		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Assets:
Money Market Funds	$	15,910	$	15,910	$	—	$	—
US Treasury Bills and Notes		9,028		—		9,028		—
Total	$	24,938	$	15,910	$	9,028	$	—

Marketable Securities

The following tables summarize the Company’s marketable securities at December 31, 2013 and 2012:

	December 31, 2013
Description	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
US Treasury Bills and Notes (due within 1 year)	$	2,001	$	1	$	—	$	2,002
US Treasury Bills and Notes (due after 1 year through 2 years)		41,292		2		—		41,294
Total	$	43,293	$	3	$	—	$	43,296

	December 31, 2012
Description	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
US Treasury Bills and Notes (due within 1 year)	$	9,022	$	6	$	—	$	9,028
US Treasury Bills and Notes (due after 1 year through 2 years)		—		—		—		—
Total	$	9,022	$	6	$	—	$	9,028

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Nature of Business

12 Months Ended

Dec. 31, 2013

Nature of Business

1.   Nature of Business

Dyax Corp. (Dyax or the Company) is a biopharmaceutical company focused on:

●   Hereditary Angioedema and Other Plasma-Kallikrein-Mediated Disorders

The principal focus of the Company’s efforts is to develop and commercialize treatments for hereditary angioedema and to identify other disorders that are mediated by plasma kallikrein.

The Company developed KALBITOR on its own, and since 2010, has been selling it in the United States for the treatment of acute attacks of HAE.  The Company is also developing DX-2930, a fully human monoclonal antibody inhibitor of plasma kallikrein, which is believed to be a candidate to treat HAE prophylactically.

The Company has also completed development of a biomarker assay that should assist in detecting the activation of plasma kallikrein in patient blood.  It intends to use this assay to potentially expedite the development of DX-2930 and to potentially determine if plasma kallikrein activation occurs with other PKM disorders.

●   Licensing and Funded Research Portfolio

The Company has a portfolio of product candidates being developed by licensees using its phage display technology.  This portfolio currently includes multiple product candidates in various stages of clinical development, including three in Phase 3 trials, for which the Company is eligible to receive future royalties and/or milestone payments.

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Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	41,418	0
Preferred stock, shares outstanding	41,418	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	121,704,480	99,482,629
Common stock, shares outstanding	121,704,480	99,482,629

XML

Employee Savings and Retirement Plans

12 Months Ended

Dec. 31, 2013

Employee Savings and Retirement Plans

11. Employee Savings and Retirement Plans

The Company has an employee savings and retirement plan (the "Retirement Plan"), qualified under Section 401(k) of the Internal Revenue Code, covering substantially all of the Company's employees.  Employees may elect to contribute a portion of their pretax compensation to the Retirement Plan up to the annual maximum allowed under the Retirement Plan.  Employees are 100% vested in company matching contributions which have been 50% of employee contributions up to 6% of eligible pay.  For the years ended December 31, 2013, 2012 and 2011, the Company's matching contributions amounted to $451,000, $440,000 and $431,000, respectively.

XML

Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Feb. 28, 2014	Jun. 28, 2013
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Trading Symbol	DYAX
Entity Registrant Name	DYAX CORP
Entity Central Index Key	0000907562
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		126,065,222
Entity Public Float			$ 318,530,901

XML

Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes

12. Income Taxes

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using future enacted rates.  A valuation allowance is recorded against deferred tax assets for which the Company determines that it does not meet the criteria under ASC 740.

The provision for income taxes for continuing operations was calculated at rates different from the United States federal statutory income tax rate for the following reasons:

	2013			2012			2011
Statutory federal income taxes		34.0	%		34.0	%		34.0	%
State income taxes, net of federal benefit		(4.7	%)		(3.3	%)		(2.0	%)
General business credit		4.5	%		3.8	%		5.9	%
Stock compensation cancellations		(0.8	%)		(6.8	%)		—
Other		1.6	%		(1.7	%)		(1.2	%)
Federal true up and expiring NOLs and research credits		0.4	%		(8.6	%)		(3.7	%)
Valuation allowance		(35.0	%)		(17.4	%)		(33.0	%)
Effective income tax rate		—	%		—	%		—	%

The principal components of the Company's deferred tax assets and liabilities at December 31, 2013, 2012 and 2011, respectively are as follows:

	2013			2012			2011
	(In thousands)
Net Deferred Tax Asset:
Allowance for doubtful accounts	$	—		$	—		$	44
Depreciation and amortization		228			255			2,023
Accrued expenses		642			303			173
Capitalized research and development costs		23,603			8,192			—
Other		1,339			1,394			861
Stock based compensation		2,575			2,127			3,615
Deferred revenue		2,928			4,223			5,898
Research credit carryforwards		67,088			63,259			61,999
Net operating loss carryforwards		115,531			124,507			124,558
Total gross deferred tax asset		213,934			204,260			199,171
Valuation allowance		(213,934	)		(204,260	)		(199,171	)
Net deferred tax asset	$	—		$	—		$	—

As of December 31, 2013 and 2012, the Company had federal tax net operating loss carryforwards (NOLs) of $329.2 million and $344.9 million, respectively, available to reduce future taxable income, which expire at various times beginning in 2018 through 2033.  The Company also had federal research and experimentation and orphan drug credit carryforwards of approximately $61.6 million and $58.1 million as of December 31 2013 and 2012, respectively, available to reduce future tax liabilities which will expire at various dates beginning in 2018 through 2033.  The Company had state tax net operating loss carryforwards of approximately $93.8 million and $138.1 million as of December 31, 2013 and 2012, respectively, available to reduce future state taxable income, which will expire at various dates beginning in 2014 through 2033.  The Company also had state research and development and investment tax credit carryforwards of approximately $8.3 million and $7.8 million as of December 31, 2013 and 2012, respectively, available to reduce future tax liabilities which expire at various dates beginning in 2015 through 2028.

Included in the NOL carryforward of $329.2 million and $344.9 million are approximately $8.2 million and $4.9 million of tax deductions from the exercise of stock options at December 31, 2013 and 2012, respectively.  The Company has also recorded a deferred tax asset of approximately $1.8 million at both December 31, 2013 and 2012 reflecting the benefit of the deduction from the exercise of stock options which has been fully reserved until it is more likely than not that the benefit will be realized.  The benefit from these deductions will be recorded as a credit to additional paid-in capital if and when realized through a reduction of taxes paid in cash.

As required by ASC 740, management of the Company has evaluated the positive and negative evidence bearing upon the reliability of its deferred tax assets, which are comprised principally of NOL carryforwards, research and experimentation credit carry forwards, and capitalized start up expenditures and research and development expenditures amortizable over ten years straight-line.  Management has determined at this time that it is more likely than not that the Company will not recognize the benefits of its federal and state deferred tax assets and, as a result, a valuation allowance of approximately $213.9 million and $204.3 million has been established at December 31, 2013 and 2012, respectively.

The Company accounts for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions.  As of December 31, 2013, the Company had no unrecognized tax benefits or liabilities and had no accrued interest or penalties related to uncertain tax positions.

Utilization of the NOLs and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future, as provided by Section 382 of the Internal Revenue Code of 1986 (Section 382), as well as similar state and foreign provisions.  Ownership changes may limit the amount of NOLs and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.  In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of 5% shareholders or public groups in the stock of a corporation by more than 50 percent in the aggregate over a three-year period.  During 2012, the Company completed a study through December 31, 2012, to determine whether any ownership change has occurred since the Company's formation and has determined that transactions have resulted in two ownership changes, as defined by Section 382.  There could be additional ownership changes in the future that could further limit the amount of NOLs and tax credit carryforwards that the Company can utilize.

As of December 31, 2012, the Company’s federal tax NOLs available to reduce future taxable income without limitation are $252.3 million, which expire at various times beginning in 2024 through 2032.  The Company’s federal research and experimentation and orphan drug credit carryforward as of December 31, 2012 available to reduce future tax liabilities without limitation are $54.9 million, which will expire at various dates beginning in 2024 through 2032.  In addition the Company has NOLs and federal tax credits that are restricted and expire at various times beginning in 2018 through 2024.  These restricted NOLs and federal tax credits of $67.2 million and $4.8 million, respectively, may be utilized in part, subject to an annual limitation. Ownership changes after December 31, 2012 could further restrict the use of these NOLs and federal tax credits.

A full valuation allowance has been provided against the Company's NOL carryforwards and research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance.  Thus there would be no impact to the consolidated balance sheet or statement of operations if an adjustment were required.

The tax years 1999 through 2013 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the United States, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have or will be used in a future period.  The Company is currently not under examination in any jurisdictions for any tax years.

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Consolidated Statements of Operations and Comprehensive Loss (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Revenues:
Product sales, net	$ 40,526	$ 39,783	$ 22,884
Development and license fees	13,400	14,867	25,853
Total revenues	53,926	54,650	48,737
Costs and expenses:
Cost of product sales	2,688	2,152	1,223
Research and development	29,695	30,028	34,676
Selling, general and administrative	38,742	39,915	37,740
Restructuring		1,440
Total costs and expenses	71,125	73,535	73,639
Loss from operations	(17,199)	(18,885)	(24,902)
Other income (expense):
Interest and other income	214	111	554
Interest expense	(10,792)	(10,491)	(10,251)
Total other expense, net	(10,578)	(10,380)	(9,697)
Net loss	(27,777)	(29,265)	(34,599)
Other comprehensive loss:
Unrealized loss on investments	(3)	(1)	(37)
Comprehensive loss	$ (27,780)	$ (29,266)	$ (34,636)
Basic and diluted net loss per share:
Net loss per share attributable to common stockholders	$ (0.26)	$ (0.30)	$ (0.35)
Shares used in computing basic and diluted net loss per share	108,539,613	98,991,056	98,731,289

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Fixed Assets

12 Months Ended

Dec. 31, 2013

Fixed Assets

6.   Fixed Assets

Fixed assets consist of the following:

	December 31,
	2013			2012
	(In thousands)
Laboratory equipment	$	3,932		$	7,628
Furniture and office equipment		815			1,619
Software and computers		2,958			4,763
Leasehold improvements		4,510			4,502
Construction in process		—			197
Total		12,215			18,709
Less: accumulated depreciation and amortization		(7,255	)		(13,380	)
	$	4,960		$	5,329

Depreciation expense for the years ended December 31, 2013, 2012, and 2011 was approximately $859,000, $1.1 million and $1.4 million, respectively.

During 2013, the Company retired fixed assets of $7.0 million with no remaining net book value.  During 2012, the Company retired fixed assets of $6.8 million with no remaining net book value.  Additionally in 2012 the Company sold fixed assets totaling $1.5 million with a remaining net book value of $90,000.  Proceeds from this sale totaled $200,000, resulting in a gain on sale of fixed assets of $110,000.

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Inventory

12 Months Ended

Dec. 31, 2013

Inventory

5.   Inventory

Costs associated with the manufacture of KALBITOR prior to regulatory approval by the FDA in 2009 were expensed when incurred, and therefore were not capitalized as inventory.  The supply of KALBITOR produced prior to FDA approval met commercial needs into 2013.  Subsequent to FDA approval, all costs associated with the manufacture of KALBITOR have been recorded as inventory.

Inventory on-hand that will be sold beyond the Company's normal operating cycle is classified as non-current and grouped with other assets on the Company's balance sheet. As of December 31, 2013 and 2012, approximately $5.5 million and $5.9 million of inventory, respectively, is classified as non-current.

Inventory consists of the following:

	December 31,
	2013		2012
	(in thousands)
Raw Materials	$	1,116	$	1,116
Work in Progress		5,965		8,274
Finished Goods		1,281		599
Total	$	8,362	$	9,989

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Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Reserves Related to Sales Allowances

An analysis of the amount of, and change in, reserves related to sales allowances is summarized as follows:

(In thousands)	Prompt pay and other discounts			Patient financial assistance			Government rebates and chargebacks			Returns			Total
Balance, as of December 31, 2011	$	170		$	193		$	283		$	49		$	695
Current provisions relating to sales in current year		1,726			408			856			502			3,492
Adjustments relating to prior years		—			(60	)		(22	)		—			(82	)
Payments relating to sales in current year		(1,338	)		(243	)		(398	)		—			(1,979	)
Payments/returns relating to sales in prior years		(170	)		(133	)		(154	)		—			(457	)
Balance, as of December 31, 2012		388			165			565			551			1,669
Current provisions relating to sales in current year		2,565			498			2,806			145			6,014
Adjustments relating to prior years		23			(38	)		(79	)		(141	)		(235	)
Payments relating to sales in current year		(2,165	)		(378	)		(1,380	)		—			(3,923	)
Payments/returns relating to sales in prior years		(327	)		(157	)		(278	)		(232	)		(994	)
Balance, as of December 31, 2013	$	484		$	90		$	1,634		$	323		$	2,531

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Business Segments

12 Months Ended

Dec. 31, 2013

Business Segments

13. Business Segments

The Company discloses business segments under ASC 280, Segment Reporting.   The statement established standards for reporting information about operating segments in annual financial statements of public enterprises and in interim financial reports issued to shareholders.  It also established standards for related disclosures about products and services, geographic areas and major customers.  The Company operates as one business segment in one geographic area.

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Restructuring Charges

12 Months Ended

Dec. 31, 2013

Restructuring Charges

9.   Restructuring Charges

In 2012, the Company realigned its business structure and implemented a number of strategic and operational initiatives.  As part of these initiatives, a workforce reduction was implemented.  As a result of the restructuring, during the year ended December 31, 2012, the Company recorded charges of approximately $1.4 million, which included severance and benefits related charges of approximately $1.2 million, outplacement costs of approximately $120,000, stock compensation expense of $55,000 for amendments to the exercise schedules to certain options and other exit costs of $90,000.  All restructuring costs were paid as of December 31, 2012.

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Business Segments - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2013 Segment Location
Segment Information [Line Items]
Number of business segment	1
Number of geographic area within which the company operates predominantly	1

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Accounts Payable and Accrued Expenses

12 Months Ended

Dec. 31, 2013

Accounts Payable and Accrued Expenses

7.   Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

	December 31,
	2013		2012
	(In thousands)
Accounts payable	$	1,407	$	3,557
Accrued employee compensation and related taxes		4,609		4,018
Accrued external research and development and sales expense		1,778		1,652
Accrued legal		456		518
Accrued sales allowances		1,918		1,052
Other accrued liabilities		2,374		1,675
	$	12,542	$	12,472

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Long-term Obligations

12 Months Ended

Dec. 31, 2013

Long-term Obligations

8.   Long-term Obligations

Long-term obligations and note payable consists of the following (in thousands):

	December 31,
	2013			2012
	(In thousands)
Note payable	$	81,516		$	78,061
Obligations under equipment loan		931			1,376
Total	$	82,447		$	79,437
Less: current portion		(468	)		(445	)
Long-term obligations	$	81,979		$	78,992

Estimated future payments under the Company's long-term obligations and note payable as of December 31, 2013 are as follows:

	(In thousands)
2014	$	10,652
2015		11,638
2016		10,435
2017		27,192
2018		71,428
Thereafter		—
Total estimated future payments		131,345
Less: amount representing interest		(45,941	)
Present value of estimated future payments		85,404
Less: current portion		(468	)
Less: unamortized portion of discount and deferred interest expense		(2,957	)
Long-term obligations and note payable	$	81,979

Note Payable:

HealthCare Royalty Partners

In August 2012, the Company completed the second closing under an agreement with an affiliate of HealthCare Royalty Partners, formerly Cowen Healthcare Partners (HC Royalty), which the Company entered into in December 2011 to refinance its existing loans from HC Royalty.  At December 31, 2013, the aggregate principal amount of the new loan was $84.5 million, consisting of a $22.8 million Tranche A Loan and a $61.7 million Tranche B Loan (collectively, the “Loan”). The Loan bears interest at a rate of 12% per annum, payable quarterly.  The Loan will mature in August 2018, and can be repaid without penalty beginning in August 2015.

In connection with the Loan, the Company entered into a security agreement granting HC Royalty a security interest in the intellectual property related to the LFRP, and the revenues generated by the Company through the licenses of the intellectual property related to the LFRP. The security agreement does not apply to the Company's internal drug development or to any of the Company's co-development programs for ecallantide.

Under the terms of the agreement, the Company is required to repay the Loan based on the annual net LFRP receipts.  Until September 30, 2016, required payments are equal to the sum of 75% of the first $15.0 million in specified annual LFRP receipts and 25% of specified annual LFRP receipts over $15.0 million.  After September 30, 2016, and until the maturity date or the complete repayment of the Loan, HC Royalty will receive 90% of all included LFRP receipts.  If the HC Royalty portion of LFRP receipts for any quarter exceeds the interest for that quarter, then the principal balance will be reduced.  Any unpaid principal will be due upon the maturity of the Loan.  If the HC Royalty portion of LFRP revenues for any quarterly period is insufficient to cover the cash interest due for that period, the deficiency may be added to the outstanding principal or paid in cash by the Company. After five years from the dates of the Tranche A Loan and the Tranche B Loan, respectively, the Company must repay to HC Royalty all additional accumulated principal above the original loan amounts of $21.7 million and $58.8 million, respectively.

Tranche A Loan

Under the terms of the agreement, the Company received a loan of $20 million (Tranche A Loan) in December 2011 and a commitment to refinance the amounts outstanding under the Company’s March 2009 amended and restated loan agreement (the March 2009 Loan) at a reduced interest rate in August 2012.  The Tranche A Loan was unsecured and accrued interest at an annual rate of 13% through August 2012.

Upon execution of the Tranche A Loan, the terms of the Original Loans (defined below) were determined to be modified under ASC 470.  During the years ended December 31, 2013 and 2012, interest expense on the Loan is being recorded in the Company’s financial statements at an effective interest rate of 12.6 and 13.0%, respectively.

Upon modification of the Original Loans, the note payable balance related to the Tranche A Loan was reduced by $193,000 to reflect payment of the lender’s legal fees in conjunction with the Tranche A Loan; these fees are being accreted over the life of the Loan, through August 2018.

Tranche B Loan

In August 2012, the Company completed a second closing under the agreement that refinanced on the same terms as the Tranche A Loan approximately $57.6 million outstanding under the March 2009 Loan (Tranche B Loan).

Original Loans

In 2008 and 2009, the Company entered into loan agreements with an affiliate of HC Royalty that provided aggregate loan proceeds of $65.0 million (the Original Loans), which  had an outstanding  principal and accrued interest balance of $57.6 million at the time of their refinancing in August 2012.  The Original Loans bore interest at an annual rate of 17.4%, payable quarterly, and were secured by the Company’s LFRP.

In connection with the Original Loans, the Company issued affiliates of HC Royalty warrants to purchase shares of the Company’s common stock.  In August 2008, the Company issued warrants to purchase 250,000 shares of the Company’s common stock at an exercise price of $5.50 per share. This warrant became exercisable in August 2009 and could be exercised through August 2016.  The Company estimated the relative fair value of the warrant to be $853,000 on the date of issuance, using the Black-Scholes valuation model, assuming a volatility factor of 83.64%, risk-free interest rate of 4.07%, an eight-year expected term and an expected dividend yield of zero.  In March 2009, the Company issued HC Royalty a second warrant to purchase 250,000 shares of the Company’s common stock at an exercise price of $2.87 per share. This warrant became exercisable in March 2010 and could be exercised through August 2016.  The Company estimated the relative fair value of the warrant to be $477,000 on the date of issuance, using the Black-Scholes valuation model, assuming a volatility factor of 85.98%, risk-free interest rate of 2.77%, a seven-year, four-month expected term and an expected dividend yield of zero.  The relative fair values of the warrants as of the date of issuance are recorded in additional paid-in capital on the Company's consolidated balance sheets. In November 2013, HC Royalty executed their right to complete a cashless exercise of their warrants to purchase shares of the Company's common stock issued in conjunction with the loan. As a result, 233,438 shares were issued to HC Royalty and no further warrants remain outstanding under this agreement.

The cash proceeds from the Original Loans were recorded as a note payable on the Company's consolidated balance sheet.  The note payable balance was reduced by $1.3 million for the fair value of the warrants issued, and by $580,000 for payment of HC Royalty’s legal fees in conjunction with the Original Loan.  Prior to the December 2011 issuance of the Tranche A Loan, each of these amounts was being accreted over the life of the note through August 2016.  Subsequent to the modification of the debt arrangement in December 2011, the unamortized portion of these amounts is being accreted over the life of the Loan through August 2018.

The Loan principal balance at December 31, 2013 and 2012 was $84.5 million and $81.2 million, respectively.  For financial reporting purposes, the Loan is adjusted for discounts associated with the debt issuance, including warrants and fees.

Activity under the Loan is presented for financial reporting purposes, as follows:

	2013			2012
	(in thousands)
Balance, January 1	$	78,061		$	75,372
Accretion of discount		198			198
Loan activity:
Discount on Tranche A Loan		—			(43	)
Interest Expense		10,447			10,199
Payments applied to principal		—			(96	)
Payments applied to interest		(5,378	)		(7,569	)
Accrued interest payable		(1,812	)		—
Balance, December 31	$	81,516		$	78,061

The estimated fair value of the note payable was $83.2 million at December 31, 2013 which was calculated based on level 3 inputs due to the limited availability of comparable data points.  The note payable was valued using expected cash flows discounted at our estimate of the currently available market interest rate.

Obligations Under Equipment Loan Arrangements

In 2012, the Company entered into an equipment lease line of credit for up to $3 million with Silicon Valley Bank.  When drawn, the note bears interest at a 6% annual rate.  The Company drew down $1.4 million from this line, which will be financed over a 3-year term.  The outstanding balance of this loan was $931,000 and $1.4 million, as of December 31, 2013 and 2012, respectively.

Operating Leases

In 2011, the Company entered into a lease agreement for new premises located in Burlington, Massachusetts and in January 2012, the Company relocated its operations to the new facility.  The new premises, consisting of approximately 45,000 rentable square feet of office and laboratory facilities, serves as the Company’s principal offices and corporate headquarters.  The term of the lease is ten years, and the Company has rights to extend the term for an additional five years at fair market value subject to specified terms and conditions. The aggregate minimum lease commitment over the ten year term of the new lease is approximately $15.0 million.  The Company has provided the landlord a Letter of Credit of $1.1 million to secure its obligations under the lease, which is classified as restricted cash on the Company’s balance sheet at December 31, 2013 and 2012.

Under the terms of the lease agreement, the landlord has provided the Company with a tenant improvement allowance of $2.6 million which was used towards the cost of leasehold improvements.  Through December 31, 2012, the Company capitalized approximately $4.5 million in leasehold improvements associated with the Burlington facility.  Costs reimbursed under the tenant improvement allowance have been recorded as deferred rent and are being amortized as a reduction to rent expense over the lease term.  All rent payments due over the term of the lease are being expensed on a straight-line basis in the Company’s statement of operations.

In January 2012, the Company’s lease agreement associated with its former facility terminated and the $1.3 million Letter of Credit which secured the Company’s obligations under the lease was released.  This Letter of Credit was classified on the Company’s balance sheet as restricted cash at December 31, 2011.

Gross minimum future lease payments under the Company's non-cancelable operating leases as of December 31, 2013 are as follows:

	(In thousands)
2014	$	1,605
2015		1,615
2016		1,581
2017		1,588
2018		1,670
Thereafter		5,352
Total	$	13,411

Rent expense for the years ended December 31, 2013, 2012, and 2011 was approximately $1.5 million, $1.6 million and $3.4 million, respectively.  Rent expense for the year ended December 31, 2011 is reflected as net of sublease payments of $194,000.

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Stockholders' Deficit

12 Months Ended

Dec. 31, 2013

Stockholders' Deficit

10. Stockholders' Equity (Deficit)

Sale of Common and Preferred Stock

In October 2013, the Company issued 10,615,385 shares of common stock at $6.50 per share in an underwritten public offering, which included 1,384,615 shares issued to the underwriters upon exercise in full of their underwriters’ option. Net proceeds from the offering were approximately $64.7 million, after deducting offering expenses.

In May 2013, the Company issued 8,901,675 shares of common stock at $2.30 per share and 41,418 shares of Series 1 convertible preferred stock at $230 per share in a registered direct offering.  Each share of Series 1 convertible preferred stock is convertible into 100 shares of common stock, provided, however, that the holder is prohibited from converting Series 1 convertible preferred stock into shares of common stock if, as a result of such conversion, the holder, together with affiliates, would own more than 9.99% of the total shares of the Company’s common stock then issued and outstanding.  The Company may not pay any dividends on shares of its common stock (other than dividends in the form of common stock) unless the holders of Series 1 convertible preferred stock shall first receive dividends on shares of Series 1 convertible preferred stock held by them (on an as-if-converted-to-common-stock basis) in an amount equal to and in the same form as any such dividends (other than dividends in the form of common stock) to be paid on shares of the common stock.  Net proceeds from the offering were approximately $29.1 million, after deducting offering expenses.

In February 2014, 41,418 shares of preferred stock outstanding was converted into 4,141,800 shares of common stock. The Company has no remaining preferred stock outstanding.

Stock-Based Compensation Expense

The Company measures compensation cost for all stock awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest.  The fair value of stock options was determined using the Black-Scholes valuation model. Such value is recognized as expense over the service period, net of estimated forfeitures and adjusted for actual forfeitures. The estimation of stock options that will ultimately vest requires significant judgment. The Company considers many factors when estimating expected forfeitures, including historical experience. Actual results and future changes in estimates may differ substantially from the Company's current estimates.

The following table reflects stock compensation expense recorded, net of amounts capitalized into inventory:

	Year Ended December 31,
Compensation expense related to:	2013		2012		2011
	(in thousands)
Equity incentive plan	$	5,131	$	3,549	$	3,984
Employee stock purchase plan		310		91		46
	$	5,441	$	3,640	$	4,030
Stock-based compensation expense charged to:
Research and development	$	1,671	$	839	$	1,193
General and administrative	$	3,770	$	2,746	$	2,837
Restructuring charges	$	—	$	55	$	—

Stock-based compensation of $9,000, $23,000 and $31,000 was capitalized into inventory for the each of the years ended December 31, 2013, 2012 and 2011, respectively.  Capitalized stock-based compensation is recognized into cost of product sales when the related product is sold.

Stock-based compensation expense for the year ended December 31, 2013, 2012 and 2011 included $1.6 million, $467,000 and $273,000, respectively, related to the modification of certain stock options.  The 2013 expense included $1.1 million recognized in relation to the extension of exercisability and vesting of options held by a former executive officer.

Valuation Assumptions for Stock Options

For the years ended December 31, 2013, 2012 and 2011,3,617,150, 5,897,221 and 2,624,160 stock options were granted, respectively.  The fair value of each option was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	Year Ended December 31,
	2013	2012	2011
Expected Option Term (in years)	6 – 8	6 – 8	5.5 – 6
Risk-free interest rate	0.99% - 2.21%	0.86% - 1.37%	1.28% - 2.39%
Expected dividend yield	0	0	0
Volatility factor	70% - 73%	70% - 73%	74% - 75%

Valuation Assumptions for Employee Stock Purchase Plans

The fair value of shares issued under the employee stock purchase plan was estimated on the commencement date of each offering period using the Black-Scholes option-pricing model with the following assumptions:

	Year Ended December 31,
	2013	2012	2011
Expected Option Term (in years)	0.5	0.5	0.5
Risk-free interest rate	0.06% - 0.10%	0.09% - 0.12%	0.07% - 0.11%
Expected dividend yield	0	0	0
Volatility factor	46% - 81%	45% - 54%	37% - 72%

Expected volatilities are based on historical volatilities of our common stock; the expected life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and our historical exercise and cancellation patterns; and the risk-free rate is based on the United States Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option.

Equity Incentive Plan

The Company's 1995 Equity Incentive Plan (the Equity Plan), as amended, is an equity plan under which equity awards, including awards of restricted stock and incentive and nonqualified stock options to purchase shares of common stock may be granted to employees, consultants and directors of the Company by action of the Compensation Committee of the Board of Directors. Options are generally granted at the current fair market value on the date of grant, generally vest ratably over a 48-month period, and expire within ten years from date of grant.  Restricted stock units are generally granted at the current fair market value on the date of grant, generally vest over a four year period in equal installments on each anniversary of the grant date.  The Equity Plan is intended to attract and retain employees and to provide an incentive for employees, consultants and directors to assist the Company to achieve long-range performance goals and to enable them to participate in the long-term growth of the Company.

At the Annual Meeting of Stockholders held in May 2012 (the Annual Meeting), the Company’s shareholders approved a stock option exchange program for employees, executive officers and non-employee directors.  Under this option exchange program, outstanding options to purchase an aggregate of 4,192,310 shares of the Company’s common stock were exchanged for new options to purchase an aggregate of 2,473,596 shares of the Company’s common stock at an exercise price equal to $2.06 per share, which was the closing price of the Company’s common stock on the grant date of June 20, 2012.  All new options issued in the option exchange program are subject to a new, extended vesting schedule, the terms of which differ depending on the holder’s status as an executive, director or non-executive employee.  The new options have a term equal to the greater of (i) the term of the original options for which they were exchanged, or (ii) five years from date of grant.  The new options had a fair value approximately equal to the fair value of the surrendered options, based on a Black-Scholes option pricing model applied immediately prior to commencement of the exchange program.  Accordingly, approximately $46,000 of expense was recorded during the year ended December 31, 2012 related to the modification of the exchanged options.

Also at the Annual Meeting, the Company’s shareholders approved an amendment to the Equity Plan to increase the number of shares of common stock available for issuance under the plan by 5,000,000 shares less the net number of shares, if any, returned to the Equity Plan for issuance following the option exchange program.  Accordingly, 3,281,286 additional shares of common stock, constituting the approved 5,000,000 share increase net of the 1,718,714 shares that were returned to the Equity Plan as a result of the option exchange program, became available for issuance under the plan.

At December 31, 2013, a total of 4,114,886 shares were available for future grants under the Equity Plan.

Stock Option Activity

The following table summarizes stock option activity for the year ended December 31, 2013:

	Number of Options			Weighted-Avg. Exercise Price		Weighted-Avg. Remaining Contractual Life		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2012		10 528,474		$	2.28		6.84	$	13,864
Granted at fair market value		3,617,150		$	3.22
Exercised		(2,043,466	)	$	2.50
Forfeited		(1,152,738	)	$	2.33
Expired		(320,541	)	$	5.04
Outstanding as of December 31, 2013		10,628,879		$	2.47		6.99	$	53,978
Exercisable as of December 31, 2013		4,546,646		$	2.52		6.32	$	22,960
Vested and unvested expected to vest as of December 31, 2013		10,587,985		$	2.48		7.00	$	53,731

The aggregate intrinsic value in the table above represents the total intrinsic value of the options outstanding, options exercisable and options vested and unvested which are expected to vest, based on the Company’s common stock closing price of $7.54 as of December 31, 2013, which would have been received by the option holders had all option holders exercised their options and sold the underlying common stock as of that date.  The total number of in-the-money options exercisable as of December 31, 2013 was 4,516,135.

The weighted average grant date fair values of options, as determined under ASC 718, granted during the years ended December 31, 2013, 2012 and 2011 were $2.06, $1.00 and $1.17 per share, respectively.  The total intrinsic value of options exercised during years ended December 31, 2013, 2012 and 2011 was approximately $5.4 million, $375,000, and $0, respectively.  The total cash received from employees as a result of employee stock option exercises during the years ended December 31, 2013, 2012 and 2011 was approximately $5.1 million, $1.3 million, and $2,000, respectively.

As of December 31, 2013 future compensation cost related to non-vested stock options is approximately $8.8 million and will be recognized over an estimated weighted average period of approximately 1.98 years.

The following table summarizes unvested stock option activity for the year ended December 31, 2013:

	Non-vested Number of Options
Unvested balance at December 31, 2012		6,252,662
Granted at fair market value		3,617,150
Vested		(2,635,583	)
Forfeited		(1,151,996	)
Unvested balance at December 31, 2013		6,082,233

The total fair value of options vested during the years ended December 31, 2013, 2012 and 2011 were $3.4 million, $3.0 million and $3.7 million, respectively.

Restricted Stock Unit Activity

The fair market value of restricted stock units is expensed over the period of vesting. Restricted stock units generally vest over a four year period in equal installments on each anniversary of the grant date. The fair value of restricted stock units was determined based on the closing market price of the underlying stock on the grant date.

The following table summarizes our RSU activity:

	Shares			Weighted-Avg Fair Value
Unvested balance at December 31, 2012		373,749		$	1.48
Granted at fair market value		—		$	—
Vested		(61,250	)	$	1.48
Forfeited		(59,375	)	$	1.48
Unvested balance at December 31, 2013		253,124		$	1.48

As of December 31, 2013, there was $213,000 of total unrecognized compensation cost related to non-vested restricted stock units. This expense, net of forfeitures is expected to be recognized over a weighted average period of approximately 2.15 years. Of the 253,124 unvested shares, the Company estimates that 227,714 will vest.

Employee Stock Purchase Plan

The Company's Purchase Plan allows employees to purchase shares of the Company's common stock at a discount from fair market value.  Under this Plan, eligible employees may purchase shares during six-month offering periods commencing on June 1 and December 1 of each year at a price per share of 85% of the lower of the fair market value price per share on the first or last day of each six-month offering period.  Participating employees may elect to have up to 10% of their base pay withheld and applied toward the purchase of such shares, subject to the limitation of 875 shares per participant per quarter.  The rights of participating employees under the Purchase Plan terminate upon voluntary withdrawal from the Purchase Plan at any time or upon termination of employment.  The compensation expense in connection with the Plan for the years ended December 31, 2013, 2012 and 2011 was approximately $310,000, $91,000 and $46,000, respectively. There were 94,979, 93,974 and 137,167 shares purchased under the Plan during the years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013, a total of 267,960 shares were reserved and available for issuance under this Plan.

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Reserves Related to Sales Allowances (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Valuation Allowance [Line Items]
Beginning balance	$ 1,669	$ 695
Current provisions relating to sales in current year	6,014	3,492
Adjustments relating to prior years	(235)	(82)
Payments relating to sales in current year	(3,923)	(1,979)
Payments/returns relating to sales in prior years	(994)	(457)
Ending balance	2,531	1,669
Prompt pay and other discounts
Valuation Allowance [Line Items]
Beginning balance	388	170
Current provisions relating to sales in current year	2,565	1,726
Adjustments relating to prior years	23
Payments relating to sales in current year	(2,165)	(1,338)
Payments/returns relating to sales in prior years	(327)	(170)
Ending balance	484	388
Patient financial assistance
Valuation Allowance [Line Items]
Beginning balance	165	193
Current provisions relating to sales in current year	498	408
Adjustments relating to prior years	(38)	(60)
Payments relating to sales in current year	(378)	(243)
Payments/returns relating to sales in prior years	(157)	(133)
Ending balance	90	165
Government rebates and chargebacks
Valuation Allowance [Line Items]
Beginning balance	565	283
Current provisions relating to sales in current year	2,806	856
Adjustments relating to prior years	(79)	(22)
Payments relating to sales in current year	(1,380)	(398)
Payments/returns relating to sales in prior years	(278)	(154)
Ending balance	1,634	565
Returns
Valuation Allowance [Line Items]
Beginning balance	551	49
Current provisions relating to sales in current year	145	502
Adjustments relating to prior years	(141)
Payments/returns relating to sales in prior years	(232)
Ending balance	$ 323	$ 551

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Fair Value of Option (Detail) (Stock Option)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate, minimum	0.99%	0.86%	1.28%
Risk-free interest rate, maximum	2.21%	1.37%	2.39%
Expected dividend yield	0.00%	0.00%	0.00%
Volatility factor, minimum	70.00%	70.00%	74.00%
Volatility factor, maximum	73.00%	73.00%	75.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected Option Term (in years)	6 years	6 years	5 years 6 months
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected Option Term (in years)	8 years	8 years	6 years

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Unaudited Quarterly Operating Results

12 Months Ended

Dec. 31, 2013

Unaudited Quarterly Operating Results

15. Unaudited Quarterly Operating Results

The following is a summary of unaudited quarterly and annual results of operations for the years ended December 31, 2013 and 2012:

Year ended December 31, 2013	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
	(in thousands, except share and per share)
Revenue	$	12,040		$	11,336		$	13,691		$	16,859		$	53,926
Income (loss) from operations	$	(8,463	)	$	(5,850	)	$	(3,641	)	$	755		$	(17,199	)
Net loss	$	(11,193	)	$	(8,432	)	$	(6,188	)	$	(1,964	)	$	(27,777	)
Shares used in computing basic and diluted net loss per share		99,644,227			104,977,247			109,731,276			119,573,601			108,539,613
Basic and diluted net loss per share:	$	(0.11	)	$	(0.08	)	$	(0.06	)	$	(0.02	)	$	(0.26	)

Year ended December 31, 2012	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
	(in thousands, except share and per share)
Revenue	$	11,489		$	14,030		$	13,101		$	16,030		$	54,650
Income (loss) from operations	$	(8,747	)	$	(5,389	)	$	(2,667	)	$	(2,082	)	$	(18,885	)
Net loss	$	(11,282	)	$	(7,939	)	$	(5,210	)	$	(4,834	)	$	(29,265	)
Shares used in computing basic and diluted net loss per share		98,798,426			98,820,699			99,069,928			99,271,225			98,991,056
Basic and diluted net loss per share:	$	(0.11	)	$	(0.08	)	$	(0.05	)	$	(0.05	)	$	(0.30	)

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Fixed Assets (Tables)

12 Months Ended

Dec. 31, 2013

Components of Fixed Assets

Fixed assets consist of the following:

	December 31,
	2013			2012
	(In thousands)
Laboratory equipment	$	3,932		$	7,628
Furniture and office equipment		815			1,619
Software and computers		2,958			4,763
Leasehold improvements		4,510			4,502
Construction in process		—			197
Total		12,215			18,709
Less: accumulated depreciation and amortization		(7,255	)		(13,380	)
	$	4,960		$	5,329

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Stockholders' Deficit - Additional Information (Detail) (USD $)	1 Months Ended		12 Months Ended				1 Months Ended		12 Months Ended												12 Months Ended					12 Months Ended
	Oct. 31, 2013	May 31, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Oct. 31, 2013 Over-allotment Option Exercise By Underwriters	Feb. 28, 2014 Subsequent Event	May 31, 2012 1995 Equity Incentive Plan (the Equity Plan)	Dec. 31, 2013 1995 Equity Incentive Plan (the Equity Plan)	Dec. 31, 2012 1995 Equity Incentive Plan (the Equity Plan)	Dec. 31, 2011 1995 Equity Incentive Plan (the Equity Plan)	Dec. 31, 2013 Employee Stock Purchase Plans	Dec. 31, 2012 Employee Stock Purchase Plans	Dec. 31, 2011 Employee Stock Purchase Plans	Dec. 31, 2013 Stock Compensation Plan	Dec. 31, 2012 Stock Compensation Plan	Dec. 31, 2011 Stock Compensation Plan	Dec. 31, 2013 Stock Compensation Plan Former Executive Officer	Dec. 31, 2013 Stock Options	Dec. 31, 2012 Stock Options	Dec. 31, 2013 Stock Options 1995 Equity Incentive Plan (the Equity Plan)	Dec. 31, 2013 Restricted Stock	Dec. 31, 2013 Restricted Stock 1995 Equity Incentive Plan (the Equity Plan)	Dec. 31, 2013 Restricted Stock Units (RSUs)	Dec. 31, 2012 Restricted Stock Units (RSUs)	Dec. 31, 2013 Non Vested Restricted Stock
Stockholders Equity Note [Line Items]
Common stock, shares issued	10,615,385	8,901,675	121,704,480	99,482,629		1,384,615
Common stock, per share	$ 6.50	$ 2.30	$ 0.01	$ 0.01
Proceed from offering	$ 64,700,000	$ 29,100,000
Convertible preferred stock, shares issued		41,418					4,141,800
Convertible preferred stock, per share		$ 230	$ 0.01	$ 0.01
Common stock issuable on conversion of preferred stock		100
Percentage equity ownership by holder, together with affiliates		9.99%
Number of preferred stock converted to common stock							41,418
Preferred stock outstanding			41,418	0			0
Stock based compensation capitalized into inventory															9,000	23,000	31,000
Stock-based compensation expense related to modification of certain stock options			5,441,000	3,640,000	4,030,000										1,600,000	467,000.0	273,000.0	1,100,000
Stock option granted			3,617,150	5,897,221	2,624,160														3,617,150
Vesting period																					48 months	4 years	4 years
Contractual life of option																					10 years
Number of shares purchased in period								4,192,310				94,979	93,974	137,167
Newly issued options in period								2,473,596
Option exercise price at grant date								$ 2.06											$ 2.47	$ 2.28
Option grant date								Jun. 20, 2012
Expense related to modification of exchanged options										46,000
Number of shares available for future grants								5,000,000	4,114,886
Additional number of shares of common stock available for issuance								3,281,286
Number of shares of common stock available for issuance, increase								1,718,714
Common Stock closing price			$ 7.54
Total number of in-the-money options exercisable			4,516,135
Weighted average grant date fair values of options			$ 2.06	$ 1.00	$ 1.17
Intrinsic value of options exercised			5,400,000	375,000	0
Cash received from employee stock option exercises			5,100,000	1,300,000	2,000
Compensation cost related to non-vested stock options			8,800,000
Estimated weighted average period			1 year 11 months 23 days																							2 years 1 month 24 days
Total fair value of options vested			3,400,000	3,000,000	3,700,000
Unrecognized compensation cost																								213,000
Unvested shares																								253,124	373,749	253,124
Unvested shares expected to be vest																										227,714
Percentage of price per share												85.00%
Employee stock purchase plan offering period												6 months
Contribution of employee in percentage												10.00%
Contribution of employee in shares												875
Compensation expense			$ 5,441,000	$ 3,640,000	$ 4,030,000				$ 5,131,000	$ 3,549,000	$ 3,984,000	$ 310,000	$ 91,000	$ 46,000
Number of shares reserved and available for issuance												267,960

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Fixed Assets - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Fixed Assets [Line Items]
Depreciation expense	$ 859,000.0	$ 1,100,000	$ 1,400,000
Fixed assets retirement	7,000,000	6,800,000
Sale of fixed assets		1,500,000
Net gain on retirement		110,000
Proceeds from sale of fixed assets		200,000
Remaining net book value	$ 0	$ 90,000

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Consolidated Statements of Changes in Stockholders' Equity (Deficit) (USD $) In Thousands, except Share data	Total USD ($)	Common Stock USD ($)	Preferred Stock	Additional Paid-in Capital USD ($)	Accumulated Deficit USD ($)	Accumulated Other Comprehensive Income USD ($)
Beginning Balance at Dec. 31, 2010	$ 2,633	$ 985		$ 443,926	$ (442,322)	$ 44
Beginning Balance (in shares) at Dec. 31, 2010		98,508,487
Issuance of common stock under the Equity Incentive plan (in shares)		138,063
Issuance of common stock under the Equity Incentive plan	219	1		218
Sale of common and preferred stock (in shares)		151,515
Sale of common and preferred stock	323	2		321
Share-based compensation expense	4,062			4,062
Unrealized loss on investments	(37)					(37)
Net loss	(34,599)				(34,599)
Ending Balance at Dec. 31, 2011	(27,399)	988		448,527	(476,921)	7
Ending Balance (in shares) at Dec. 31, 2011		98,798,065
Issuance of common stock under the Equity Incentive plan (in shares)		684,564
Issuance of common stock under the Equity Incentive plan	1,442	7		1,435
Share-based compensation expense	3,663			3,663
Unrealized loss on investments	(1)					(1)
Net loss	(29,265)				(29,265)
Ending Balance at Dec. 31, 2012	(51,560)	995		453,625	(506,186)	6
Ending Balance (in shares) at Dec. 31, 2012		99,482,629
Issuance of common stock under the Equity Incentive plan (in shares)		2,199,688
Issuance of common stock under the Equity Incentive plan	5,360	22		5,338
Sale of common and preferred stock (in shares)		19,517,060	41,418
Sale of common and preferred stock	93,775	195		93,580
Exercise of warrants (in shares)		233,438
Exercise of warrants		2		(2)
Other issuance of common stock (in shares)		271,665
Other issuance of common stock	1,076	3		1,073
Share-based compensation expense	5,451			5,451
Unrealized loss on investments	(3)					(3)
Net loss	(27,777)				(27,777)
Ending Balance at Dec. 31, 2013	$ 26,322	$ 1,217		$ 559,065	$ (533,963)	$ 3
Ending Balance (in shares) at Dec. 31, 2013		121,704,480	41,418

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Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Fair Value Measurements

4.   Fair Value Measurements

The following tables present information about the Company's financial assets that have been measured at fair value as of December 31, 2013 and 2012, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value.  In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities.  Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices, for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.  Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.

Description	December 31, 2013		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Assets:
Money Market Funds	$	55,569	$	55,569	$	—	$	—
US Treasury Bills and Notes		43,296		—		43,296		—
Total	$	98,865	$	55,569	$	43,296	$	—

Description	December 31, 2012		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Assets:
Money Market Funds	$	15,910	$	15,910	$	—	$	—
US Treasury Bills and Notes		9,028		—		9,028		—
Total	$	24,938	$	15,910	$	9,028	$	—

The following tables summarize the Company’s marketable securities at December 31, 2013 and 2012:

	December 31, 2013
Description	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
US Treasury Bills and Notes (due within 1 year)	$	2,001	$	1	$	—	$	2,002
US Treasury Bills and Notes (due after 1 year through 2 years)		41,292		2		—		41,294
Total	$	43,293	$	3	$	—	$	43,296

	December 31, 2012
Description	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
US Treasury Bills and Notes (due within 1 year)	$	9,022	$	6	$	—	$	9,028
US Treasury Bills and Notes (due after 1 year through 2 years)		—		—		—		—
Total	$	9,022	$	6	$	—	$	9,028

As of December 31, 2013 and 2012, the Company's cash equivalents which are invested in money market funds are valued based on Level 1 inputs.  As of December 31, 2013 and 2012, the Company’s short-term investments consisted of United States Treasury notes and bills which are valued based on Level 2 inputs.  The Company has also classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

The carrying amounts reflected in the consolidated balance sheets for cash, cash equivalents, accounts receivable, other current assets, accounts payable and accrued expenses and other current liabilities approximate fair value due to their short-term maturities.

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Components of Deferred Tax Assets and Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Net Deferred Tax Asset:
Allowance for doubtful accounts			$ 44
Depreciation and amortization	228	255	2,023
Accrued expenses	642	303	173
Capitalized research and development costs	23,603	8,192
Other	1,339	1,394	861
Stock based compensation	2,575	2,127	3,615
Deferred revenue	2,928	4,223	5,898
Research credit carryforwards	67,088	63,259	61,999
Net operating loss carryforwards	115,531	124,507	124,558
Total gross deferred tax asset	213,934	204,260	199,171
Valuation allowance	(213,934)	(204,260)	(199,171)
Net deferred tax asset

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Accounts Payable and Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2013

Components of Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

	December 31,
	2013		2012
	(In thousands)
Accounts payable	$	1,407	$	3,557
Accrued employee compensation and related taxes		4,609		4,018
Accrued external research and development and sales expense		1,778		1,652
Accrued legal		456		518
Accrued sales allowances		1,918		1,052
Other accrued liabilities		2,374		1,675
	$	12,542	$	12,472

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Inventory - Additional Information (Detail) (Other Noncurrent Assets, USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Other Noncurrent Assets
Inventory [Line Items]
Inventory classified as non-current	$ 5.5	$ 5.9

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Litigation

12 Months Ended

Dec. 31, 2013

Litigation

14. Litigation

As of December 31, 2013, there were no active legal proceedings that were expected to be material to the Company.  The Company makes provisions for claims specifically identified for which it believes the likelihood of an unfavorable outcome is probable and reasonably estimable.  The Company records at least the minimum estimated liability related to claims where there is a range of loss and the loss is considered probable and no estimate within the range is better than any other.  As additional information becomes available, the Company assesses the potential liability related to its pending claims and revises its estimates.  Future revisions in the estimates of the potential liability could materially impact the results of operations and financial position.  The Company maintains insurance coverage that limits the exposure for any single claim as well as total amounts incurred per policy year, and it believes that its insurance coverage is adequate.  The Company makes every effort to use the best information available in determining the level of liability reserves.