Radius Health, Inc.
Radius Health, Inc. (Form: 10-Q, Received: 08/04/2016 17:26:45)
Table of Contents

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2016
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 001-35726
 
Radius Health, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
80-0145732
(State or other jurisdiction of
 
(IRS Employer
Incorporation or organization)
 
Identification Number)
 
950 Winter Street
Waltham, Massachusetts 02451
(Address of Principal Executive Offices and Zip Code)
 
(617) 551-4000
(Registrant’s telephone number, including area code)
 
Indicate by check mark 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   No o
 
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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer  x
 
Accelerated filer  o
 
 
 
Non-accelerated filer  o
 
Smaller reporting company  o
 
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

Number of shares of the registrant’s Common Stock, $.0001 par value per share, outstanding as of August 1, 2016 : 43,082,740 shares
 
 
 
 
 


Table of Contents

RADIUS HEALTH, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2016
 
TABLE OF CONTENTS
 
PART I FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

CURRENCY AND CONVERSIONS
 
In this report, references to “dollar” or “$” are to the legal currency of the United States, and references to “euro” or “€” are to the single currency introduced on January 1, 1999 at the start of the third stage of European Economic and Monetary Union, pursuant to the Treaty establishing the European Communities, as amended by the Treaty on European Union and the Treaty of Amsterdam. Unless otherwise indicated, the financial information in this report has been expressed in U.S. dollars. Unless otherwise stated, the U.S. dollar equivalent information translating euros into U.S. dollars has been made, for convenience purposes, on the basis of the noon buying rate published by the Board of Governors of the Federal Reserve as of June 30, 2016 , which was €1.00 = $ 1.1032 . Such translations should not be construed as a representation that the euro has been, could have been or could be converted into U.S. dollars at the rate indicated, any particular rate or at all.
 
Trademarks appearing in this report are the property of their respective holders.


1

Table of Contents

Item 1. Condensed Consolidated Financial Statements

Radius Health, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
 
 
June 30,
2016
 
December 31,
2015
 
(unaudited)
 
 
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
120,554

 
$
159,678

Marketable securities
280,302

 
313,661

Prepaid expenses and other current assets
5,197

 
6,969

Total current assets
406,053

 
480,308

Property and equipment, net
2,945

 
1,897

Other assets
448

 
260

Total assets
$
409,446

 
$
482,465

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
3,027

 
$
6,228

Accrued expenses and other current liabilities
16,545

 
14,952

Total current liabilities
19,572

 
21,180

 
 
 
 
Total liabilities
$
19,572

 
$
21,180

Commitments and contingencies


 


Stockholders’ equity:
 

 
 

Common stock, $.0001 par value; 200,000,000 shares authorized, 43,060,593 shares and 42,984,243 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively
4

 
4

Additional paid-in-capital
919,343

 
907,040

Accumulated other comprehensive income
188

 
5

Accumulated deficit
(529,661
)
 
(445,764
)
Total stockholders’ equity
389,874

 
461,285

Total liabilities and stockholders’ equity
$
409,446

 
$
482,465

 
See accompanying notes to unaudited condensed consolidated financial statements.


2

Table of Contents

Radius Health, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited, in thousands, except share and per share amounts)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
OPERATING EXPENSES:
 

 
 

 
 
 
 
Research and development
$
26,891

 
$
16,278

 
$
54,374

 
$
27,837

General and administrative
17,193

 
6,000

 
30,839

 
10,756

Loss from operations
(44,084
)
 
(22,278
)
 
(85,213
)
 
(38,593
)
OTHER (EXPENSE) INCOME:
 

 
 

 
 

 
 

Other (expense) income, net
(95
)
 
(78
)
 
(96
)
 
(128
)
Interest income
744

 
185

 
1,411

 
290

Interest expense

 
(794
)
 

 
(1,591
)
NET LOSS
$
(43,435
)
 
$
(22,965
)
 
$
(83,898
)
 
$
(40,022
)
OTHER COMPREHENSIVE LOSS, NET OF TAX:
 

 
 

 
 

 
 

Unrealized (loss) gain from available-for-sale securities
(49
)
 
(31
)
 
183

 
31

COMPREHENSIVE LOSS
$
(43,484
)
 
$
(22,996
)
 
$
(83,715
)
 
$
(39,991
)
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS - BASIC AND DILUTED (Note 10)
$
(43,435
)
 
$
(22,965
)
 
$
(83,898
)
 
$
(40,022
)
LOSS PER SHARE:
 

 
 

 
 

 
 

Basic and diluted
$
(1.01
)
 
$
(0.61
)
 
$
(1.95
)
 
$
(1.08
)
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE SHARES:
 

 
 

 
 

 
 

Basic and diluted
43,042,883

 
37,895,651

 
43,027,903

 
37,089,642

 
See accompanying notes to unaudited condensed consolidated financial statements.


3

Table of Contents

Radius Health, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
 
 
Six Months Ended
June 30,
 
2016
 
2015
CASH FLOWS USED IN OPERATING ACTIVITIES:
 

 
 

Net loss
$
(83,898
)
 
$
(40,022
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
 

Depreciation and amortization
216

 
78

Amortization of premium (accretion of discount) marketable securities, net
782

 
682

Stock-based compensation
10,632

 
5,850

Non-cash interest

 
156

Changes in operating assets and liabilities:
 

 
 

Prepaid expenses and other current assets
1,772

 
(1,006
)
Other long-term assets
(188
)
 
(30
)
Accounts payable
(3,201
)
 
999

Accrued expenses and other current liabilities
1,248

 
(5,906
)
Net cash used in operating activities
(72,637
)
 
(39,199
)
CASH FLOWS USED IN INVESTING ACTIVITIES:
 

 
 

Purchases of property and equipment
(919
)
 
(186
)
Purchases of marketable securities
(225,497
)
 
(179,338
)
Sales and maturities of marketable securities
258,257

 
75,802

Net cash used in investing activities
31,841

 
(103,722
)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
 

 
 

Proceeds from exercise of stock options
1,672

 
359

Proceeds from issuance of common stock, net

 
158,414

Net cash provided by financing activities
1,672

 
158,773

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(39,124
)
 
15,852

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
159,678

 
28,518

CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
120,554

 
$
44,370

SUPPLEMENTAL DISCLOSURES:
 

 
 

Cash paid for interest
$

 
$
1,253

Property and equipment purchases in accrued expenses at period end
$
345

 
$

 
See accompanying notes to unaudited condensed consolidated financial statements.


4

Table of Contents

Radius Health, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
1. Organization
 
Radius Health, Inc. (“Radius” or the “Company”) is a science-driven biopharmaceutical company that is committed to developing innovative therapeutics in the areas of osteoporosis, oncology and endocrine diseases. Radius’ lead product candidate, the investigational drug abaloparatide for subcutaneous injection (“abaloparatide-SC”), has completed Phase 3 development for potential use in the reduction of fracture risk in postmenopausal women with osteoporosis. Radius’ Marketing Authorisation Application ("MAA") for abaloparatide-SC for the treatment of postmenopausal women with osteoporosis is under regulatory review in Europe and a New Drug Application (“NDA”) has been accepted for filing by the U.S. Food and Drug Administration (“FDA”) with a Prescription Drug User Fee Act date of March 30, 2017. The Radius clinical pipeline also includes an investigational abaloparatide transdermal patch for potential use in osteoporosis and the investigational drug RAD1901 for potential use in hormone-driven and/or hormone-resistant breast cancer, and vasomotor symptoms in postmenopausal women. Radius’ preclinical pipeline includes RAD140, a non-steroidal, selective androgen receptor modulator under investigation for potential use in multiple applications including cancer.
 
The Company is subject to the risks associated with a limited operating history, including dependence on key individuals, a developing business model, the necessity of securing regulatory approval to market its investigational product candidates, market acceptance of the Company’s investigational product candidates following receipt of regulatory approval, competition for its investigational product candidates following receipt of regulatory approval, and the continued ability to obtain adequate financing to fund the Company’s future operations. The Company has incurred losses and expects to continue to incur additional losses for the foreseeable future. As of June 30, 2016 , the Company had an accumulated deficit of $ 529.7  million, and total cash, cash equivalents and marketable securities of $ 400.9  million.
 
Based upon its cash, cash equivalents and marketable securities balance as of June 30, 2016 , the Company believes that, prior to the consideration of revenue from the potential future sales of any of its investigational products that may receive regulatory approval or proceeds from collaboration activities, it has sufficient capital to fund its development plans, U.S. commercial scale-up and other operational activities into 2018. The Company expects to finance the future development costs of its clinical product portfolio with its existing cash and cash equivalents and marketable securities, or through strategic financing opportunities that could include, but are not limited to collaboration agreements, future offerings of its equity, or the incurrence of debt. However, there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If the Company fails to obtain additional future capital, it may be unable to complete its planned preclinical studies and clinical trials and obtain approval of certain investigational product candidates from the FDA or foreign regulatory authorities.
 
2. Basis of Presentation and Significant Accounting Policies
 
Basis of Presentation —The accompanying unaudited condensed consolidated financial statements and the related disclosures of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included.
 
When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2016 . Subsequent events have been evaluated up to the date of issuance of these financials. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes, which are contained in our Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on February 25, 2016.
 
Significant Accounting Policies — The significant accounting policies identified in the Company’s 2015 Form 10-K that require the Company to make estimates and assumptions include: research and development costs, stock-based compensation and fair value measures. There were no changes to significant accounting policies during the six months ended June 30, 2016 .


5


Accounting Standards Updates — In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 provides guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The amendments under ASU 2014-15 are effective for interim and annual fiscal periods beginning after December 15, 2016, with early adoption permitted. The Company does not expect the adoption of ASU 2014-15 to have a material impact on its results of operations, financial position or cash flows.
 
In January 2016, the FASB issued Accounting Standards Update No. 2016-01,  Financial Statements—Overall (Subtopics 825-10) (“ASU 2016-01”). ASU 2016-01 provides updated guidance on the recognition and measurement of financial assets and financial liabilities that will supersede most current guidance. ASU 2016-01 primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The amendments in ASU 2016-01 supersede the guidance to classify equity securities with readily determinable fair values into different categories and require equity securities to be measured at fair value with changes in the fair value recognized through net income. The amendments under ASU 2016-01 are effective, for public business entities, for periods beginning after December 15, 2017, including interim periods within those fiscal years, and with early adoption permitted. The Company does not expect the adoption of ASU 2016-01 to have a material impact on its results of operations, financial position or cash flows.
 
In February 2016, the FASB issued Accounting Standards Update No. 2016-02,  Leases  (“ASU 2016-02”). ASU 2016-02 supersedes the lease guidance under FASB Accounting Standards Codification (“ASC”) Topic 840,  Leases , resulting in the creation of FASB ASC Topic 842,  Leases . ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the potential impact of adopting ASU 2016-02 on its financial statements and related disclosures.
 
In March 2016, the FASB issued Accounting Standards Update No. 2016-09,  Improvements to Employee Share-Based Payment Accounting  (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently assessing the potential impact of adopting ASU 2016-09 on its financial statements and related disclosures.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Statements ("ASU 2016-13"). ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 affects loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have contractual right to receive cash. ASU 2016-13 requires that a financial asset (or a group of financial assets) measured at amortized cost basis be presented at the net amount expected to be collected using an allowance for credit losses valuation account. ASU 2016-13 requires that credit losses relating to available-for-sale debt securities should be limited by the amount which the fair value is below amortized cost. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently assessing the potential impact of adopting ASU 2016-13 on its financial statements and related disclosures.
 
3. Accrued Expenses and Other Current Liabilities
 
Accrued expenses and other current liabilities consist of the following (in thousands):
 
 
June 30,
2016
 
December 31,
2015
Research costs - Nordic(1)
$
2,675

 
$
2,898

Research costs - other
5,530

 
5,178

Payroll and employee benefits
3,607

 
3,330

Professional fees
4,733

 
3,546

Total accrued expenses and other current liabilities
$
16,545

 
$
14,952


6


 
 
 
 
 
(1)          Includes amounts accrued ratably over the estimated per patient treatment period under the Work Statement NB-3 with Nordic Bioscience Clinical Development VII A/S (“Nordic”).  Amounts do not include pass-through costs which are expensed as incurred or upon delivery.  See note 8 for additional information.
 
4.  Loan and Security Agreement
 
On May 30, 2014, the Company entered into a Loan and Security Agreement (the “Credit Facility”), with Solar Capital Ltd. (“Solar”), as collateral agent and a lender, and Oxford Finance LLC (“Oxford”), as a lender (the “Lenders”), pursuant to which Solar and Oxford agreed to make available to the Company $30.0 million in the aggregate subject to certain conditions to funding. An initial term loan was made on May 30, 2014 in an aggregate principal amount equal to $21.0 million (the “Initial Term Loan”).

On July 10, 2014, the Company entered into a first amendment to the Credit Facility (the “First Amendment”).  The terms of the First Amendment, among other things, provided the Company with, subject to certain customary funding conditions, additional term loans in an aggregate principal amount of $4.0 million upon the closing of the First Amendment. The Company borrowed the additional $4.0 million on July 10, 2014.
 
The Initial Term Loan bore interest per annum at 9.85% plus one-month LIBOR (customarily defined).
 
On August 4, 2015, the Company prepaid all amounts owed under the Credit Facility and the First Amendment.  After consideration of relevant fees required under the Credit Facility and the First Amendment, the total payment amounted to $26.5 million , which resulted in a loss on retirement of $1.6 million during the third quarter of 2015 .
 
5. Marketable Securities
 
Available-for-sale marketable securities and cash and cash equivalents consist of the following (in thousands):
 
 
June 30, 2016
 
Amortized Cost Value
 
Gross 
Unrealized 
Gains
 
Gross 
Unrealized 
Losses
 
Fair Value
Cash and cash equivalents:
 

 
 

 
 

 
 

Cash
$
3,303

 
$

 
$

 
$
3,303

Money market funds
114,750

 

 

 
114,750

Domestic corporate commercial paper
2,501

 

 

 
2,501

Total
$
120,554

 
$

 
$

 
$
120,554

 
 
 
 
 
 
 
 
Marketable securities:
 

 
 

 
 

 
 

Domestic corporate debt securities
$
108,873

 
$
6

 
$
(19
)
 
$
108,860

Domestic corporate commercial paper
84,202

 
175

 

 
84,377

Asset-backed securities
87,039

 
26

 

 
87,065

Total
$
280,114

 
$
207

 
$
(19
)
 
$
280,302

 

7


 
December 31, 2015
 
Amortized Cost Value
 
Gross 
Unrealized 
Gains
 
Gross 
Unrealized 
Losses
 
Fair Value
Cash and cash equivalents:
 

 
 

 
 

 
 

Cash
$
2,934

 
$

 
$

 
$
2,934

Money market funds
83,257

 

 

 
83,257

Domestic corporate commercial paper
39,984

 

 

 
39,984

Government-sponsored enterprise debt securities
15,996

 

 

 
15,996

Domestic corporate debt securities
10,007

 

 

 
10,007

Asset-backed securities
7,500

 

 

 
7,500

Total
$
159,678

 
$

 
$

 
$
159,678

 
 
 
 
 
 
 
 
Marketable securities:
 

 
 

 
 

 
 

Domestic corporate debt securities
$
173,142

 
$

 
$
(107
)
 
$
173,035

Domestic corporate commercial paper
84,004

 
154

 

 
84,158

Asset-backed securities
56,510

 
1

 
(43
)
 
56,468

Total
$
313,656

 
$
155

 
$
(150
)
 
$
313,661

 
There were no debt securities that had been in an unrealized loss position for more than 12 months as of June 30, 2016 or December 31, 2015 . There were 15 debt securities in an unrealized loss position for less than 12 months at June 30, 2016 and there were 57 debt securities that had been in an unrealized loss position for less than 12 months at December 31, 2015 . The aggregate unrealized loss on these securities as of June 30, 2016 and December 31, 2015 was less than $19 thousand and $150 thousand, respectively, and the fair value was $72.1 million and $225.7 million, respectively. The Company considered the decline in market value for these securities to be primarily attributable to current economic conditions. As it was not more likely than not that the Company would be required to sell these securities before the recovery of their amortized cost basis, which may be maturity, the Company did not consider these investments to be other-than-temporarily impaired as of June 30, 2016 .

As of June 30, 2016 , marketable securities consisted of investments that mature within one year.
 
6. Fair Value Measurements
 
The Company determines the fair values of its financial instruments based upon the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Below are the three levels of inputs that may be used to measure fair value:
 
Level 1—Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2—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 assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
The following table summarizes the financial instruments measured at fair value on a recurring basis in the accompanying condensed consolidated balance sheets as of June 30, 2016 and December 31, 2015 (in thousands):
 

8


 
As of June 30, 2016
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 

 
 

 
 

 
 

Cash and cash equivalents:
 

 
 

 
 

 
 

Cash
$
3,303

 
$

 
$

 
$
3,303

Money market funds (1)
114,750

 

 

 
114,750

Domestic corporate commercial paper (2)

 
2,501

 

 
2,501

Total
$
118,053

 
$
2,501

 
$

 
$
120,554

Marketable Securities
 

 
 

 
 

 
 

Domestic corporate debt securities (2)
$

 
$
108,860

 
$

 
108,860

Domestic corporate commercial paper (2)

 
84,377

 

 
84,377

Asset-backed securities (2)

 
87,065

 

 
87,065

Total
$

 
$
280,302

 
$

 
$
280,302

 
 
As of December 31, 2015
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 

 
 

 
 

 
 

Cash and cash equivalents:
 

 
 

 
 

 
 

Cash
$
2,934

 
$

 
$

 
$
2,934

Money market funds (1)
83,257

 

 

 
83,257

Domestic corporate commercial paper (2)

 
39,984

 

 
39,984

Government-sponsored enterprise debt securities (2)

 
15,996

 

 
15,996

Domestic corporate debt securities (2)

 
10,007

 

 
10,007

Asset-backed securities (2)

 
7,500

 

 
7,500

Total
$
86,191

 
$
73,487

 
$

 
$
159,678

Marketable Securities
 

 
 

 
 

 
 

Domestic corporate debt securities (2)
$

 
$
173,035

 
$

 
173,035

Domestic corporate commercial paper (2)

 
84,158

 

 
84,158

Asset-backed securities (2)

 
56,468

 

 
56,468

Total
$

 
$
313,661

 
$

 
$
313,661

 
 
 
 
 
(1)                            Fair value is based upon quoted market prices.
(2)                            Fair value is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.  Inputs are obtained from various sources, including market participants, dealers and brokers.
 
7. License Agreements
 
Ipsen
 
On September 27, 2005, the Company entered into a license agreement (the “Ipsen Agreement”), as amended, with SCRAS S.A.S, a French corporation on behalf of itself and its affiliates (collectively, “Ipsen”). Under the Ipsen Agreement, Ipsen granted to the Company an exclusive right and license under certain Ipsen compound technology and related patents to research, develop, manufacture and commercialize certain compounds and related products, including abaloparatide, in all countries, except Japan (where the Company does not hold development and commercialization rights) and France (where the Company’s commercialization rights are subject to certain co-marketing and co-promotion rights exercisable by Ipsen, provided that certain conditions included in the Ipsen Agreement have been met). Ipsen also granted the Company an exclusive right and license under the Ipsen compound technology and related patents to make and have made compounds or product in Japan. Ipsen also granted the Company an exclusive right and license under certain Ipsen formulation technology and related patents solely for purposes of enabling the Company to develop, manufacture and commercialize compounds and

9


products covered by the compound technology license in all countries, except Japan (where the Company does not hold commercialization rights) and France (where the Company’s commercialization rights are subject to certain co-marketing and co-promotion rights exercisable by Ipsen, provided that certain conditions included in the Ipsen Agreement have been met).
 
In consideration for these licenses, the Company made a nonrefundable, non-creditable payment of $0.25 million to Ipsen, which was expensed during 2005. The Ipsen Agreement provides for further payments upon the achievement of certain future regulatory and commercial milestones, including upon acceptance of an NDA submission for review by the FDA. The range of milestone payments that could be paid under the agreement is €10.0 million to €36.0 million ( $11.0 million to $39.7 million ). Following acceptance of the Company's NDA submission for review by the FDA in the second quarter of 2016, the Company made a milestone payment of €3.0 million ( $3.3 million ) to Ipsen, which was recognized as research and development expense during the three months ended June 30, 2016. Should abaloparatide be approved and subsequently commercialized, the Company will be obligated to pay to Ipsen a fixed five percent royalty based on net sales of the product by the Company or its sublicensees on a country-by-country basis until the later of the last to expire of the licensed patents or for a period of 10  years after the first commercial sale in such country.
 
If the Company sublicenses the rights licensed from Ipsen, then the Company will also be required to pay Ipsen a percentage of certain payments received from such sublicensee (in lieu of milestone payments not achieved at the time of such sublicense). The applicable percentage is in the low double digit range. In addition, if the Company or its sublicensees commercialize a product that includes a compound discovered by it based on or derived from confidential Ipsen know-how, it will be obligated to pay to Ipsen a fixed low single digit royalty on net sales of such product on a country-by-country basis until the later of the last to expire of licensed patents that cover such product or for a period of 10  years after the first commercial sale of such product in such country.
 
Eisai Co. Ltd.
 
In June 2006, the Company entered into a license agreement (the “Eisai Agreement”), with Eisai Co. Ltd., (“Eisai”). Under the Eisai Agreement, Eisai granted to the Company an exclusive right and license to research, develop, manufacture and commercialize RAD1901 and related products from Eisai in all countries, except Japan. In consideration for the rights to RAD1901, the Company paid Eisai an initial license fee of $0.5 million , which was expensed during 2006. The Eisai Agreement provides for further payments in the range of $1.0 million to $20.0 million (inclusive of the $0.5 million initial license fee), payable upon the achievement of certain clinical and regulatory milestones.
 
On March 9, 2015, the Company entered into an amendment to the Eisai Agreement (the “Eisai Amendment”) in which Eisai granted to the Company the exclusive right and license to research, develop, manufacture and commercialize RAD1901 in Japan. In consideration for the rights to RAD1901 in Japan, the Company paid Eisai an initial license fee of $0.4 million upon execution of the Eisai Amendment, which was recognized as research and development expense in 2015 . The Eisai Amendment also provides for additional payments, payable upon the achievement of certain clinical and regulatory milestones in Japan.
 
Under the Eisai Agreement, as amended, should a product covered by the licensed technology be commercialized, the Company will be obligated to pay to Eisai royalties in a variable mid-single digit range based on net sales of the product on a country-by-country basis. The royalty rate will be reduced, on a country-by-country basis, at such time as the last remaining valid claim in the licensed patents expires, lapses or is invalidated and the product is not covered by data protection clauses. In addition, the royalty rate will be reduced further, on a country-by-country basis, at such time as sales of lawful generic versions of the product account for more than a specified minimum percentage of the total sales of all products that contain the licensed compound. The latest valid claim to expire, barring any extension thereof, is expected on August 18, 2026.
 
The Eisai Agreement, as amended, also grants the Company the right to grant sublicenses with prior written approval from Eisai. If the Company sublicenses the licensed technology to a third party, the Company will be obligated to pay Eisai, in addition to the milestones referenced above, a fixed low double digit percentage of certain fees received from such sublicensee and royalties in the low single digit range based on net sales of the sublicensee. The license agreement expires on a country-by-country basis on the later of (1) the date the last remaining valid claim in the licensed patents expires, lapses or is invalidated in that country, the product is not covered by data protection clauses, and the sales of a lawful generic version of the product account for more than a specified percentage of the total sales of all pharmaceutical products containing the licensed compound in that country; or (2) a period of 10  years after the first commercial sale of the licensed products in such country, unless it is sooner terminated.
 
8. Research Agreements
 
Abaloparatide-SC Phase 3 Clinical Extension Study

10


 
The Company entered into agreements with Nordic to conduct its Phase 3 clinical trial of abaloparatide-SC (the "Phase 3 Clinical Trial"). On February 21, 2013, the Company entered into a Work Statement NB-3 with Nordic, as amended on February 28, 2014, March 23, 2015, July 8, 2015, October 21, 2015 and January 15, 2016 (the “Work Statement NB-3”). Pursuant to the Work Statement NB-3, Nordic performed an extension study to evaluate six months of standard-of-care osteoporosis management following the completion of the Phase 3 Clinical Trial (the “Extension Study”), and, upon completion of the Extension Study, an additional period of 18  months of standard-of-care osteoporosis management (the “Second Extension Period”).
 
In April 2015, the Company entered into an amendment to the Work Statement NB-3 (the “NB-3 Amendment”). The NB-3 Amendment was effective as of March 23, 2015 and provides that Nordic will perform additional services, including additional monitoring of patients enrolled in the Second Extension Period. Payments in cash to be made to Nordic under the NB-3 Amendment are denominated in euros and total up to approximately € 4.1  million ($ 4.5  million).
 
Payments in cash to be made to Nordic under the Work Statement NB-3 are denominated in both euros and U.S. dollars and total up to € 11.9  million ($ 13.1  million) and $ 1.1  million, respectively. In addition, payments were due to Nordic in connection with the Work Statement NB-3 pursuant to the Stock Issuance Agreement entered into between the Company and Nordic, as amended and restated on May 16, 2011, and as further amended on February 21, 2013, March 28, 2014, and May 19, 2014. As of June 30, 2016 , services related to the Second Extension Period are ongoing. All obligations due to Nordic in relation to the Extension Study were paid as of September 30, 2015.
 
The Company recognizes research and development expense for the amounts due to Nordic under the Extension Study and the Second Extension Period ratably over the estimated per patient treatment periods beginning upon enrollment, or over a nine -month and 19 -month period, respectively. The Company recorded $ 0.9 million and $ 1.2 million for the three months ended June 30, 2016 and 2015 , respectively, and $ 1.9  million and $ 2.6  million for the six months ended June 30, 2016 and 2015 , respectively, for per patient costs incurred.
 
As of June 30, 2016 , the Company had a liability of $ 2.7  million reflected in accrued expenses and other current liabilities on the condensed consolidated balance sheet resulting from services provided by Nordic under the Second Extension Period, which are payable in cash.
 
9. Stock-Based Compensation
 
Stock Options
 
A summary of stock option activity during the six months ended June 30, 2016 is as follows (in thousands, except for per share amounts):
 
Shares
 
Weighted-
Average
Exercise
Price (in
dollars per
share)
 
Weighted-
Average
Contractual
Life (In
Years)
 
Aggregate
Intrinsic
Value
Options outstanding at December 31, 2015
4,408

 
$
28.75

 
 
 
 

Granted
1,821

 
33.85

 
 
 
 

Exercised
(76
)
 
21.90

 
 
 
 

Cancelled
(73
)
 
38.18

 
 
 
 

Expired

 

 
 
 
 

Options outstanding at June 30, 2016
6,080

 
$
30.25

 
8.31
 
$
72,281

Options exercisable at June 30, 2016
2,227

 
$
15.93

 
6.86
 
$
48,459

Options vested or expected to vest at June 30, 2016
5,949

 
$
30.05

 
8.29
 
$
71,598

 
The weighted-average grant-date fair value per share of options granted during the three and six months ended June 30, 2016 was $ 18.95 and $ 18.05 , respectively. As of June 30, 2016 , there was approximately $69.9 million of total unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately three years.


11


Restricted Stock Units

In April 2016, the Company awarded 58,500 restricted stock units ("RSUs") to employees at an average grant date fair value of $ 33.03 per RSU. Each RSU entitles the holder to receive one share of the Company's common stock if and when the RSU vests. The RSUs vest in four substantially equal installments on each of the first four anniversaries of the vesting commencement date, subject to the employee's continued employment on such vesting date. Compensation expense is recognized over the vesting period.

A summary of RSU activity during the six months ended June 30, 2016 is as follows (in thousands, except for per share amounts):

 
RSUs
Weighted-
Average
Grant Date
Fair Value 
(in dollars 
per share)
RSUs Outstanding at December 31, 2015

$

Granted
59

33.03

Vested


Forfeited


RSUs Outstanding at June 30, 2016
59

$
33.03


As of June 30, 2016 , there was approximately $1.8 million of total unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately four  years.
 
10. Net Loss Per Share
 
Basic and diluted net loss per share is calculated as follows (in thousands, except share and per share numbers):
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Numerator:
 

 
 

 
 
 
 
Net loss
$
(43,435
)
 
$
(22,965
)
 
$
(83,898
)
 
$
(40,022
)
Loss attributable to common stockholders - basic and diluted
$
(43,435
)
 
$
(22,965
)
 
$
(83,898
)
 
$
(40,022
)
 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 

 
 

Weighted-average number of common shares used in loss per share - basic and diluted
43,042,883

 
37,895,651

 
43,027,903

 
37,089,642

Loss per share - basic and diluted
$
(1.01
)
 
$
(0.61
)
 
$
(1.95
)
 
$
(1.08
)
 
The following potentially dilutive securities, prior to the use of the treasury stock method, have been excluded from the computation of diluted weighted-average shares outstanding, as they would be anti-dilutive. For the three and six months ended June 30, 2016 and 2015 , all of the Company’s options to purchase common stock, warrants, restricted stock units and performance units outstanding were assumed to be anti-dilutive as earnings attributable to common stockholders was in a loss position.
 

12


 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Options to purchase common stock
5,773,589

 
3,747,303

 
5,373,641

 
3,562,712

Warrants
631,588

 
846,720

 
631,588

 
979,434

Restricted stock units
55,929

 

 
27,964

 

Performance units

 

 

 

 
11. Commitments and Contingencies
 
The Company may be exposed, individually or in the aggregate, to certain claims or assessments in the ordinary course of business. In the opinion of management, the outcome of these matters is not likely to have any material effect on the financial statements of the Company.
Manufacturing Agreements
On June 23, 2016, the Company entered into a Supply Agreement (the “Ypsomed Supply Agreement”) with Ypsomed AG (“Ypsomed”), effective as of September 30, 2015, pursuant to which Ypsomed agreed to supply to the Company a disposable pen injection device customized for injection of abaloparatide, the Company’s drug product candidate (the “Device”) for commercial purposes. The Company has agreed to purchase a minimum number of Devices at prices per Device that decrease with an increase in quantity supplied, subject to adjustment based on actual supply amounts. In addition, the Company has agreed to make milestone payments for Ypsomed’s capital developments in connection with the initialization of the commercial supply of the Device and to pay a one-time capacity fee. All costs and payments under the Ypsomed Supply Agreement are delineated in Swiss Francs. The Ypsomed Supply Agreement has an initial term of three years from the earlier of the date of delivery of the first commercial Devices for regulatory approval and June 1, 2017, after which, it automatically renews for two -year terms until terminated. The Company will purchase the Device subject to minimum annual quantity requirements over a three-year period, as defined in the Ypsomed Supply Agreement. In addition, the Company has agreed to make milestone payments for Ypsomed’s capital developments in connection with the initialization of the commercial supply of the Device and to pay a one-time capacity fee. The Company estimates that it will be obligated to make total minimum payments to Ypsomed of approximately CHF 3.9 million ($ 4.0 million ) in the aggregate, including the milestone payments and one-time capacity fee.
On June 28, 2016, the Company entered into a Commercial Supply Agreement (the “Vetter Supply Agreement”) with Vetter Pharma International, GmbH (“Vetter”), effective as of January 1, 2016, pursuant to which Vetter has agreed to formulate the drug product containing the active pharmaceutical ingredient (“API”) of abaloparatide, to fill cartridges with the drug product, to assemble the pen delivery device, and to package the pen for commercial distribution. Based on forecasts of demand to be provided by the Company, the Company has agreed to purchase the cartridges and pens in specified batch sizes at a price per unit. For labeling and packaging services, the Company has agreed to pay a per unit price dependent upon the number of pens loaded with cartridges that are labeled and packaged. These prices are subject to an annual price adjustment. The Vetter Supply Agreement has an initial term of five years, which began on January 1, 2016, after which, it automatically renews for two -year terms until terminated. The Company will purchase these services subject to minimum annual quantity requirements over a five-year period, as defined in the Vetter Supply Agreement.

12. Stockholders’ Equity
 
On January 28, 2015, the Company completed a public offering of 4,000,000 shares of its common stock at a price of $ 36.75 per share, for aggregate estimated proceeds, net of underwriting discounts, commissions and offering costs, of approximately $ 137.8 million. Also, on January 28, 2015, the underwriters purchased an additional 600,000 shares in the aggregate by exercising an option to purchase additional shares that was granted to them in connection with the offering. As a result of the public offering and subsequent exercise of the underwriters’ option, the Company received aggregate proceeds, net of underwriting discounts, commissions and offering costs of approximately $ 158.4 million.
 
On July 28, 2015, the Company completed a public offering of 4,054,054 shares of its common stock at a price of $ 74.00 per share, for aggregate proceeds, net of underwriting discounts, commissions and offering costs, of approximately $ 281.5  million. Also, on July 28, 2015, the underwriters purchased an additional 608,108 shares by exercising an option to purchase additional shares that was granted to them in connection with the offering. As a result of the public offering and subsequent exercise of the underwriters’ option, the Company received aggregate proceeds, net of underwriting discounts, commissions and estimated offering costs of approximately $ 323.8  million.


13


13. Subsequent Events

On July 13, 2016, the Company entered into a Manufacturing Services Agreement (the “Manufacturing Agreement”) with Lonza Sales Ltd (“Lonza”), effective as of June 28, 2016, pursuant to which Lonza has agreed to manufacture the commercial supply of the API for abaloparatide. In accordance with forecasts provided by the Company, the Company has agreed to purchase the API in batches at a price per gram in euros, subject to an annual increase by Lonza. The Company is also required to purchase a minimum number of batches annually. The Manufacturing Agreement has an initial term of a six years, after which, it automatically renews for three -year terms until terminated.





14


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Cautionary Statement
 
This Quarterly Report on Form 10-Q, including the information incorporated by reference herein, contains, in addition to historical information, forward-looking statements. We may, in some cases, use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “continue,” “should,” “would,” “could,” “potentially,” “will,” “may” or similar words and expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q may include, among other things, statements about:
 
the progress of, timing of and amount of expenses associated with our research, development and commercialization activities;  
the success of our clinical studies for our investigational product candidates;
our ability to obtain U.S. and foreign regulatory approval for our product candidates and the ability of our product candidates to meet existing or future regulatory standards;
our expectations regarding federal, state and foreign regulatory requirements;
the therapeutic benefits and effectiveness of our product candidates;
the safety profile and related adverse events of our product candidates;
our ability to manufacture sufficient amounts of abaloparatide, RAD1901, and RAD140 for commercialization activities with target characteristics following regulatory approvals;
our plans with respect to collaborations and licenses related to the development, manufacture or sale of our product candidates;
our expectations as to future financial performance, expense levels and liquidity sources;
our ability to compete with other companies that are or may be developing or selling products that are competitive with our product candidates;  
anticipated trends and challenges in our potential markets; and
our ability to attract and motivate key personnel.
 
The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include our financial performance, our ability to attract and retain customers, our development activities and those factors we discuss in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on February 25, 2016 under the caption “Risk Factors.” You should read these factors and the other cautionary statements made in this Quarterly Report on Form 10-Q as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report on Form 10-Q. These important factors are not exhaustive and other sections of this Quarterly Report on Form 10-Q may include additional factors which could adversely impact our business and financial performance.
 
You should read the following discussion of our financial condition and results of operations in conjunction with our financial statements and related notes set forth in this report. Unless the context otherwise requires, “we,” “our,” “us” and similar expressions used in this Management’s Discussion and Analysis of Financial Condition and Results of Operations section refer to Radius Health, Inc., a Delaware corporation.
 
Executive Overview
 
We are a science-driven biopharmaceutical company that is committed to developing innovative therapeutics in the areas of osteoporosis, oncology and endocrine diseases. Our lead product candidate, the investigational drug abaloparatide for subcutaneous injection, or abaloparatide-SC, has completed Phase 3 development for potential use in the reduction of fracture risk in postmenopausal women with osteoporosis. Our Marketing Authorisation Application, or MAA, for abaloparatide-SC for the treatment of postmenopausal women with osteoporosis is under regulatory review in Europe and a New Drug Application, or NDA, has been accepted for filing by the U.S. Food and Drug Administration, or FDA, with a Prescription Drug User Fee Act, or PDUFA, date of March 30, 2017. Our clinical pipeline also includes an investigational abaloparatide transdermal patch for potential use in osteoporosis and the investigational drug RAD1901 for potential use in hormone-driven and/or hormone-resistant breast cancer, and vasomotor symptoms in postmenopausal women. Our preclinical pipeline includes RAD140, a non-steroidal, selective androgen receptor modulator under investigation for potential use in multiple applications including cancer.
 
Abaloparatide
 

15

Table of Contents

Abaloparatide is an investigational therapy for the potential treatment of women with postmenopausal osteoporosis who are at an increased risk for a fracture. Abaloparatide is a novel synthetic peptide analog that engages the parathyroid hormone receptor, or PTH1 receptor, and was selected for clinical development based on its favorable bone building activity. Abaloparatide was created to have a unique mechanism of action with the goal of stimulating enhanced bone building activity including bone formation, increasing bone mineral density, restoring bone microarchitecture and augmenting bone strength. We are developing two formulations of abaloparatide:
 
Abaloparatide-SC —Abaloparatide has completed Phase 3 development for potential use as a daily self-administered injection. We hold worldwide commercialization rights to abaloparatide-SC, except for Japan. In December 2014, we announced positive 18-month top-line data from our Phase 3 ACTIVE clinical trial, in which abaloparatide-SC met the primary endpoint with a statistically significant reduction of 86% in new vertebral fractures versus placebo, and a statistically significant 43% reduction in the secondary endpoint of nonvertebral fractures versus placebo. In June 2015, we announced the positive top-line data from the first six months of the ACTIVExtend clinical trial and the 25-month combined fracture data from the ACTIVE and ACTIVExtend clinical trials, which showed a statistically significant 87% reduction in the primary endpoint of new vertebral fractures for abaloparatide-treated patients for 18 months who were then treated with alendronate for 6 months compared to patients treated with placebo for 18 months and then treated with alendronate for 6 months and a statistically significant reduction of 52% in the secondary endpoint of nonvertebral fractures.  Also, in ACTIVExtend, there was a statistically significant reduction in clinical fractures, and major osteoporotic fractures for the patients initially treated with abaloparatide followed by 6 months of alendronate versus patients treated initially with placebo followed by 6 months of alendronate. The combined 25-month fracture data from our Phase 3 clinical trial program for abaloparatide-SC formed the basis of our regulatory submissions. In November 2015, we submitted an MAA to the European Medicines Agency, or EMA, which was validated and is currently undergoing active regulatory assessment by the Committee for Medicinal Products for Human Use of the EMA, or CHMP. The EMA has granted us an additional 3-month extension to the procedural timetable for response in the ongoing MAA assessment. As a result of this extension to the procedural timetable, we now anticipate that the CHMP may adopt an Opinion regarding the MAA in late 2016 or in 2017. In March 2016, we submitted an NDA to the FDA, which has been accepted for filing by the FDA with a PDUFA date of March 30, 2017. We intend to enter into one or more collaborations for the potential commercialization of abaloparatide-SC prior to a commercial launch. Subject to regulatory review and a favorable regulatory outcome, we anticipate the first commercial sales of abaloparatide-SC will take place in 2017.

Abaloparatide-TD —We are also developing abaloparatide-transdermal, which we refer to as abaloparatide-TD, based on 3M’s patented Microstructured Transdermal System technology for potential use as a short wear-time transdermal patch. We hold worldwide commercialization rights to the abaloparatide-TD technology. During 2014, we reported progress toward the development of an optimized transdermal patch that may be capable of demonstrating comparability to abaloparatide-SC. In preliminary, nonhuman primate pharmacokinetic studies, we achieved a desirable pharmacokinetic profile, with comparable AUC, Cmax, Tmax and T1/2 relative to abaloparatide-SC. We believe that these results support continued clinical development of abaloparatide-TD toward future global regulatory submissions as a potential post-approval line extension of the investigational drug abaloparatide-SC. We commenced a human replicative clinical evaluation of the optimized abaloparatide-TD patch in December 2015, with the goal of achieving comparability to abaloparatide-SC. We expect to complete this clinical evaluation of the optimized abaloparatide-TD patch during 2016.
 
RAD1901
 
RAD1901 is a selective estrogen receptor down-regulator/degrader, or SERD, that at high doses has a potential for use as an oral non-steroidal treatment for hormone-driven, or hormone-resistant, breast cancer. RAD1901 is currently being investigated in postmenopausal women with advanced estrogen receptor positive, or ER-positive, HER2-negative breast cancer, the most common form of the disease. The compound has the potential for use as a single agent or in combination with other therapies to overcome endocrine resistance in breast cancer.
 
In September 2015, we announced results from a Phase 1 maximum tolerated dose, or MTD, study of RAD1901 in 52 healthy volunteers. In the study, RAD1901 was administered to healthy postmenopausal women in doses ranging from 200mg to 1000mg, and the data showed that RAD1901 was well-tolerated and the overall safety was supportive of continued development. In addition, a subset of subjects that received 18F estradiol positron emission tomography, or FES-PET, imaging demonstrated suppression of the FES-PET signal to background levels after six days of dosing.
 
In December 2014, we commenced a Phase 1, multicenter, open-label, two-part, dose-escalation study of RAD1901 in postmenopausal women with advanced ER-positive and HER2-negative breast cancer in the United States to determine the

16

Table of Contents

recommended dose for a Phase 2 clinical trial and to make a preliminary evaluation of the potential anti-tumor effect of RAD1901. The Phase 1 study is designed to evaluate escalating doses of RAD1901 in Part A. The Part B expansion cohort was initiated in March 2016 to allow for an evaluation of additional safety, tolerability and preliminary efficacy. As of July 31, 2016, the Phase I Part B expansion cohort has enrolled 19 out of 20 patients at 400 mg daily. To date, no dose limiting toxicities, or DLTs,  have been reported in this study. When the study is completed, the results will be submitted to an appropriate scientific meeting for presentation.
 
In December 2015, we commenced a Phase 1 FES-PET study in patients with metastatic breast cancer in the European Union which includes the use of FES-PET imaging to assess estrogen receptor occupancy in tumor lesions following RAD1901 treatment. We continue to enroll patients in the European Phase I FES-PET trial - the first three patient dosing cohort is enrolled. When the study is completed, the results will be submitted to an appropriate scientific meeting for presentation.
 
In July 2015, we announced that early but promising preclinical data showed that our investigational drug RAD1901, in combination with Pfizer’s palbociclib, a cyclin-dependent kinase, or CDK 4/6 inhibitor, or Novartis’ everolimus, an mTOR inhibitor, was effective in shrinking tumors. In patient-derived xenograft breast cancer models with either wild type or mutant ESR1, treatment with RAD1901 resulted in marked tumor growth inhibition, and the combination of RAD1901 with either agent, palbociclib or everolimus, showed anti-tumor activity that was significantly greater than either agent alone. We believe that this preclinical data suggest that RAD1901 has the potential to overcome endocrine resistance, is well-tolerated, and has a profile that is well suited for use in combination therapy.

In July 2016, the Company entered into a pre-clinical collaboration with Takeda Pharmaceutical Company Limited to evaluate the combination of investigational drug RAD1901 with investigational drug TAK-228, an oral mTORC 1/2 inhibitor in Phase 2b development for the treatment of breast, endometrial and renal cancer, with the goal of potentially exploring such combination in a clinical study. As previously reported, RAD1901 has demonstrated encouraging pre-clinical results in combination with Novartis’ mTOR inhibitor, everolimus. Under the agreement, the Company and Takeda Oncology will each contribute resources and supply compound material necessary for studies to be conducted under the collaboration and will share third party out of pocket research and development expenses.
 
In January 2016 we entered into a worldwide clinical collaboration with Novartis Pharmaceuticals to evaluate the safety and efficacy of combining RAD1901, with Novartis’ investigational agent LEE011 (ribociclib), a CDK 4/6 inhibitor, and BYL719 (alpelisib), an investigational phosphoinositide 3-kinase inhibitor.
 
RAD1901 is also being evaluated at low doses as an estrogen receptor ligand for the potential relief of the frequency and severity of moderate to severe hot flashes in postmenopausal women with vasomotor symptoms. We commenced a Phase 2b clinical study of RAD1901 for the potential treatment of postmenopausal vasomotor symptoms in December 2015. When the study is completed, the results will be submitted to an appropriate scientific meeting for presentation.

RAD140

RAD140 is a nonsteroidal selective androgen receptor modulator. The androgen receptor, or AR, is highly expressed in many ER-positive, ER-negative, and triple-negative receptor breast cancers. Due to its receptor and tissue selectivity, potent activity, oral bioavailability, and long half-life, we believe RAD140 could have clinical potential in the treatment of breast cancer.

In July 2016 we reported that RAD140 in preclinical xenograft models of breast cancer has demonstrated potent tumor growth inhibition when administered alone or in combinations with CDK4/6 inhibitors. It is estimated that 77% of breast cancers show expression of the androgen receptor. Our data suggest that RAD140 activity at the androgen receptor stimulates up-regulation of a tumor suppression pathway. The clinical significance of these initial findings must be investigated in clinical trials, and all the resulting data are subject to regulatory review. We expect to provide an update on the RAD140 program at an upcoming scientific meeting.

Financial Overview
 
Research and Development Expenses
 
Research and development expenses consist primarily of clinical testing costs made to contract research organizations, salaries and related personnel costs, fees paid to consultants and outside service providers for regulatory and quality assurance support, licensing of drug compounds and other expenses relating to the manufacture, development, testing and enhancement of our product candidates. We expense our research and development costs as they are incurred.
 

17

Table of Contents

No significant amount of the research and development expenses in relation to our product candidates are borne by third parties. Our lead product candidate is the investigational drug abaloparatide, and it represents the largest portion of our research and development expenses for our product candidates. We began tracking program expenses for abaloparatide-SC in 2005, and program expenses from inception to June 30, 2016 were approximately $ 208.3 million . We began tracking program expenses for abaloparatide-TD in 2007, and program expenses from inception to June 30, 2016 were approximately $ 37.3 million . We began tracking program expenses for RAD1901 in 2006, and program expenses from inception to June 30, 2016 were approximately $ 40.9 million . We began tracking program expenses for RAD140 in 2008, and program expenses from inception to June 30, 2016 were approximately $ 6.9 million . These expenses relate primarily to external costs associated with manufacturing, preclinical studies and clinical trial costs.
 
Costs related to facilities, depreciation, stock-based compensation and research and development support services are not directly charged to programs as they benefit multiple research programs that share resources.
 
The following table sets forth our research and development expenses that are directly attributable to the programs listed below for the three and six months ended June 30, 2016 and 2015 (in thousands):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Abaloparatide-SC
$
6,612

 
$
5,342

 
$
12,389

 
$
10,476

Abaloparatide-TD
1,544

 
222

 
3,690

 
702

RAD1901
5,142

 
2,641

 
13,259

 
3,441

RAD140
770

 

 
1,127

 


General and Administrative Expenses
 
General and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, professional fees, business insurance, rent, general legal activities, including the cost of maintaining our intellectual property portfolio, and other corporate expenses.
 
Our results also include stock-based compensation expense as a result of the issuance of stock option grants to employees, directors and consultants. The stock-based compensation expense is included in the respective categories of expense in the statement of operations (research and development and general and administrative expenses). We expect to record additional non-cash stock-based compensation expense in the future, which may be significant.
 
Interest Income and Interest Expense
 
Interest income reflects interest earned on our cash, cash equivalents and marketable securities.
 
Interest expense for the three and six months ended June 30, 2015 reflects interest due under our loan and security agreement, entered into on May 30, 2014 and amended on July 10, 2014, February 13, 2015 and April 8, 2015, or the Credit Facility, with Solar Capital Ltd., or Solar, as agent and lender, and Oxford Finance LLC, or Oxford, as lender. Under the Credit Facility, we drew $ 21.0 million under an initial term loan on May 30, 2014 and $ 4.0 million under a second term loan on July 10, 2014. On August, 4, 2015, we paid all amounts owed under the Credit Facility.  After consideration of relevant fees required under the Credit Facility, the total payment amounted to $ 26.5 million .
 
Critical Accounting Policies and Estimates
 
Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, as well as related disclosures. We evaluate our policies and estimates on an ongoing basis, including those related to accrued clinical expenses, research and development expenses, stock-based compensation and fair value measures, which we discussed in our Annual Report on Form 10-K for the year ended December 31, 2015 . Management bases its estimates on historical experience and other various assumptions that are believed to be reasonable under the circumstances.  Actual results may differ from these estimates under different assumptions or conditions.

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We have reviewed our policies and estimates to determine our critical accounting policies for the three and six months ended June 30, 2016 . We have made no material changes to the critical accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2015 .
 
Results of Operations
 
Three Months Ended June 30, 2016 and June 30, 2015 (in thousands, except percentages)
 
 
Three Months Ended
 
 
 
 
 
June 30,
 
Change
 
2016
 
2015
 
$
 
%
Operating expenses:
 

 
 

 
 

 
 

Research and development
$
26,891

 
$
16,278

 
$
10,613

 
65
 %
General and administrative
17,193

 
6,000

 
11,193

 
187
 %
Loss from operations
(44,084
)
 
(22,278
)
 
21,806

 
98
 %
Other (expense) income:
 

 
 

 
 

 
 

Other (expense) income, net
(95
)
 
(78
)
 
17

 
22
 %
Interest income (expense), net
744

 
(609
)
 
1,353

 
(222
)%
Net loss
$
(43,435
)
 
$
(22,965
)
 
20,470

 
89
 %
 
Research and development expenses — For the three months ended June 30, 2016 , research and development expense was $ 26.9 million compared to $ 16.3 million for the three months ended June 30, 2015 , an increase of $ 10.6 million , or 65% . This increase was primarily driven by higher professional contract services costs associated with the development of RAD1901 to support a Phase 1 study in metastatic breast cancer that commenced in late 2014 and a Phase 2b study in postmenopausal vasomotor symptoms that commenced in December 2015. This increase was also a result of an increase in compensation expense, including stock-based compensation, due to an increase in headcount from 30 research and development employees as of June 30, 2015 to 86 research and development employees as of June 30, 2016 .
 
General and administrative expenses — For the three months ended June 30, 2016 , general and administrative expense was $ 17.2 million compared to $ 6.0 million for the three months ended June 30, 2015 , an increase of $ 11.2 million , or 187% . This increase was primarily the result of an increase of approximately $4.2 million in professional support costs and legal fees during the three months ended June 30, 2016 , including the costs associated with increasing headcount and preparing for the potential commercialization of abaloparatide-SC, subject to a favorable regulatory review. This increase was also driven by an increase in compensation expense due to an increase in headcount from 16 general and administrative employees as of June 30, 2015 to 62 general and administrative employees as of June 30, 2016 .
 
Interest income (expense), net —For the three months ended June 30, 2016 , interest income, net of interest expense , was $ 0.7 million  compared to interest expense, net of interest income , of $ 0.6 million for the three months ended June 30, 2015 , a change of $ 1.4 million , or 222% . This change was primarily a result of no interest expense recorded for the three months ended June 30, 2016 due to repayment of our Credit Facility on August 4, 2015.
 

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Six Months Ended June 30, 2016 and June 30, 2015 (in thousands, except percentages)
 
 
Six Months Ended
 
 
 
 
 
June 30,
 
Change
 
2016
 
2015
 
$
 
%
Operating expenses:
 

 
 

 
 

 
 

Research and development
$
54,374

 
$
27,837

 
$
26,537

 
95
 %
General and administrative
30,839

 
10,756

 
20,083

 
187
 %
Loss from operations
(85,213
)
 
(38,593
)
 
46,620

 
121
 %
Other (expense) income:
 

 
 

 
 

 
 
Other (expense) income, net
(96
)
 
(128
)
 
(32
)
 
(25
)%
Interest income (expense), net
1,411

 
(1,301
)
 
2,712

 
(208
)%
Net loss
$
(83,898
)
 
$
(40,022
)
 
43,876

 
110
 %
 
Research and development expenses — For the six months ended June 30, 2016 , research and development expense was $ 54.4 million compared to $ 27.8 million for the six months ended June 30, 2015 , an increase of $26.5 million , or 95% . This increase was primarily driven by higher professional contract services costs associated with the development of RAD1901 to support a Phase 1 study in metastatic breast cancer that commenced in late 2014 and a Phase 2b study in postmenopausal vasomotor symptoms that commenced in December 2015. This increase was also a result of an increase in compensation expense, including stock-based compensation, due to an increase in headcount from 30 research and development employees as of June 30, 2015 to 86 research and development employees as of June 30, 2016 .

General and administrative expenses — For the six months ended June 30, 2016 , general and administrative expense was $ 30.8 million compared to $ 10.8 million for the six months ended June 30, 2015 , an increase of $ 20.1 million , or 187% . This increase was primarily the result of an increase of approximately $9.1 million in professional support costs and legal fees during the six months ended June 30, 2016 , including the costs associated with increasing headcount and preparing for the potential commercialization of abaloparatide-SC, subject to a favorable regulatory review. This increase was also driven by an increase in compensation expense due to an increase in headcount from 16 general and administrative employees as of June 30, 2015 to 62 general and administrative employees as of June 30, 2016 .
 
Interest income (expense), net — For the six months ended June 30, 2016 , interest income, net of interest expense , was $ 1.4 million  compared to interest expense, net of interest income , of $ 1.3 million for the six months ended June 30, 2015 , a change of $ 2.7 million , or 208% . This change was primarily a result of no interest expense recorded for the six months ended June 30, 2016 due to repayment of our Credit Facility on August 4, 2015.

Liquidity and Capital Resources
 
From inception to June 30, 2016 , we have incurred an accumulated deficit of $ 529.7 million , primarily as a result of expenses incurred through a combination of research and development activities related to our various product candidates and expenses supporting those activities. Our total cash, cash equivalents and short-term marketable securities balance as of June 30, 2016 was $ 400.9 million .  We have financed our operations since inception primarily through the public offerings of our common stock, private sales of preferred stock, and borrowings under credit facilities.
 
Based upon our cash, cash equivalents and marketable securities balance, we believe that, prior to the consideration of revenue from the potential future sales of any of our investigational products or proceeds from collaboration activities, we have sufficient capital to fund our development plans, U.S. commercial scale-up and other operational activities into 2018. We expect to finance the future development costs of our clinical product portfolio with our existing cash, cash equivalents and marketable securities, or through strategic financing opportunities, that could include, but are not limited to collaboration agreements, future offerings of equity, or the incurrence of debt.  However, there is no guarantee that any of these strategic financing opportunities will be available to us on favorable terms, and some could be dilutive to existing stockholders. Our future capital requirements will depend on many factors, including the scope and progress made in our research and development and commercialization activities, the results of our clinical trials, and the review and potential approval of our products by the FDA, and the EMA. The successful development of our investigational product candidates is subject to numerous risks and uncertainties associated with developing drugs, which could have a significant impact on the cost and timing associated with the development of our product candidates. If we fail to obtain additional future capital, we may be

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unable to complete our planned preclinical and clinical trials and obtain approval of any investigational product candidates from the FDA and foreign regulatory authorities.
 
Abaloparatide-SC is our only product candidate in late stage development, and our business currently depends heavily on its successful development, regulatory approval and commercialization. Obtaining approval of a product candidate is an extensive, lengthy, expensive and uncertain process, and any approval of abaloparatide-SC may be delayed, limited or denied for many reasons. See “Risk Factors — Risks Related to the Discovery, Development and Commercialization of Our Product Candidates” set forth under Item 1A. in our Annual Report on Form 10-K for the year ended December 31, 2015 , filed with the SEC on February 25, 2016.
 
The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):
 
 
Six Months Ended
 
 
 
 
 
June 30,
 
Change
 
2016
 
2015
 
$
 
%
Net cash (used in) provided by:
 

 
 

 
 

 
 

Operating activities
$
(72,637
)
 
$
(39,199
)
 
$
33,438

 
85
 %
Investing activities
31,841

 
(103,722
)
 
135,563

 
131
 %
Financing activities
1,672

 
158,773

 
157,101

 
(99
)%
Net increase (decrease) in cash and cash equivalents
$
(39,124
)
 
$
15,852

 
 

 
 


Cash Flows from Operating Activities
 
Net cash used in operating activities during the six months ended June 30, 2016 was $ 72.6 million , which was primarily the result of a net loss of $ 83.9 million , partially offset by $ 11.6 million of net non-cash adjustments to reconcile net loss to net cash used in operations and net changes in working capital of $ 0.4 million . The $ 83.9 million net loss was primarily due to abaloparatide-SC and RAD1901 program development expenses along with employee compensation and consulting costs incurred to support regulatory submissions and preparation for the potential commercial launch of abaloparatide-SC. The $ 11.6 million net non-cash adjustments to reconcile net loss to net cash used in operations included stock-based compensation expense of $ 10.6 million and amortization of premiums (discounts) on marketable securities of $ 0.8 million .
 
Net cash used in operating activities during the six months ended June 30, 2015 was $ 39.2 million , which was primarily the result of a net loss of $ 40.0 million and net changes in working capital of $ 5.9 million , partially offset by $ 6.8 million of net non-cash adjustments to reconcile net loss to net cash used in operations. The $ 40.0 million net loss was primarily due to abaloparatide-SC program development expenses, including clinical and manufacturing costs, along with employee compensation and consulting costs incurred to support future regulatory submissions and preparation for the potential commercial launch of abaloparatide-SC. The $ 6.8 million net non-cash adjustments to reconcile net loss to net cash used in operations included stock-based compensation expense of $ 5.9 million and amortization of premiums (discounts) on marketable securities of $ 0.7 million .
 
Cash Flows from Investing Activities
 
Net cash provided by investing activities during the six months ended June 30, 2016 was $ 31.8 million , which was primarily the result of $ 258.3 million of net proceeds received from the sale or maturity of marketable securities, partially offset by $ 225.5 million of purchases of marketable securities.
 
Net cash used in investing activities during the six months ended June 30, 2015 was $ 103.7 million , which was primarily the result of $ 179.3 million of purchases of marketable securities, partially offset by $ 75.8 million of net proceeds received from the sale or maturity of marketable securities.
 
Our investing cash flows will be impacted by the timing of purchases and sales of marketable securities. Because our marketable securities are primarily short-term in duration, we would not expect our operational results or cash flows to be significantly affected by a change in market interest rates.
 
Cash Flows from Financing Activities
 

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Net cash provided by financing activities during the six months ended June 30, 2016 was $ 1.7 million , as compared to $ 158.8 million net cash provided by financing activities during the six months ended June 30, 2015 . Net cash provided by financing activities during the six months ended June 30, 2016 consisted of $ 1.7 million of proceeds received from exercises of stock options.
 
Net cash provided by financing activities during the six months ended June 30, 2015 consisted of $ 158.4 million of net proceeds received from a public offering in January of 2015 and $0.4 million of proceeds received from the exercise of stock options.
 
Contractual Obligations
 
Supply and Manufacturing Agreements

On June 23, 2016, we entered into a Supply Agreement, or the Ypsomed Supply Agreement, with Ypsomed AG, or Ypsomed, effective as of September 30, 2015, pursuant to which Ypsomed agreed to supply a disposable pen injection device customized for injection of abaloparatide, or the Device, for commercial purposes. We agreed to purchase a minimum number of Devices at prices per Device that decrease with an increase in quantity supplied, subject to adjustment based on actual supply amounts. In addition, we agreed to make milestone payments for Ypsomed’s capital developments in connection with the initialization of the commercial supply of the Device and to pay a one-time capacity fee. All costs and payments under the Ypsomed Supply Agreement are delineated in Swiss Francs. The Ypsomed Supply Agreement has an initial term of three years from the earlier of the date of delivery of the first commercial Devices for regulatory approval and June 1, 2017, after which, it automatically renews for two-year terms until terminated. During the initial term of the Ypsomed Supply Agreement, we estimate that we will be obligated to make total minimum payments to Ypsomed of approximately CHF 3.9 million ($ 4.0 million ) in the aggregate, including the milestone payments and one-time capacity fee.
On June 28, 2016, we entered into a Commercial Supply Agreement, or the Vetter Supply Agreement, with Vetter Pharma International, GmbH, or Vetter, effective as of January 1, 2016, pursuant to which Vetter has agreed to formulate the drug product containing the active pharmaceutical ingredient, or API, of abaloparatide, to fill cartridges with the drug product, to assemble the pen delivery device, and to package the pen for commercial distribution. Based on forecasts of demand to be provided by us, we agreed to purchase the cartridges and pens in specified batch sizes at a price per unit. For labeling and packaging services, we agreed to pay a per unit price dependent upon the number of pens loaded with cartridges that are labeled and packaged. These prices are subject to an annual price adjustment. The Vetter Supply Agreement has an initial term of five years, which began on January 1, 2016, after which, it automatically renews for two-year terms until terminated.
On July 13, 2016, we entered into a Manufacturing Services Agreement, or the Manufacturing Agreement, with Lonza Sales Ltd, or LONZA, effective as of June 28, 2016, pursuant to which Lonza has agreed to manufacture the commercial supply of the API for abaloparatide. In accordance with forecasts provided by us, we agreed to purchase the API in batches at a price per gram in euros, subject to an annual increase by Lonza. We are also required to purchase a minimum number of batches annually. The Manufacturing Agreement has an initial term of six years, after which, it automatically renews for three-year terms until terminated.

Research and Development Agreements
 
Abaloparatide-SC Phase 3 Clinical Extension Study
 
We entered into agreements with Nordic Bioscience Clinical Development VII A/S, or Nordic, to conduct our Phase 3 clinical trial of abaloparatide-SC, or the Phase 3 Clinical Trial. On February 21, 2013, we entered into the Work Statement NB-3, as amended on February 28, 2014, March 23, 2015, July 8, 2015, October 21, 2015 and January 15, 2016, or the Work Statement NB-3. Pursuant to the Work Statement NB-3, Nordic performed an extension study to evaluate six months of standard-of-care osteoporosis management following the completion of the Phase 3 Clinical Trial, or the Extension Study, and, upon completion of this initial six months, an additional period of 18 months of standard-of-care osteoporosis management, or the Second Extension Period.

In April 2015, we entered into an amendment to the Work Statement NB-3, or the NB-3 Amendment. The NB-3 Amendment was effective as of March 23, 2015 and provides that Nordic will perform additional services, including monitoring of patients enrolled in the Second Extension Period. Payments in cash to be made to Nordic under the NB-3 Amendment are denominated in euros and total up to approximately € 4.1 million ($ 4.5 million ).
 
Payments in cash to be made to Nordic under the Work Statement NB-3 are denominated in both euros and U.S. dollars and total up to € 11.9 million ($ 13.1 million ) and $ 1.1 million , respectively. In addition, payments were due to Nordic in connection

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with the Work Statement NB-3 pursuant to the Stock Issuance Agreement we entered into with Nordic, as amended and restated on May 16, 2011, and as further amended on February 21, 2013, March 28, 2014, and May 19, 2014. As of June 30, 2016 , services related to the Second Extension Period are ongoing. All obligations due to Nordic in relation to the Extension Study were paid as of September 30, 2015.
 
We recognize research and development expense for the amounts due to Nordic under the Extension Study and the Second Extension Period ratably over the estimated per patient treatment periods beginning upon enrollment or over a nine-month and nineteen-month period, respectively. We recorded $ 0.9 million and $ 1.2 million for the three months ended June 30, 2016 and 2015 , respectively, and $ 1.9  million and $ 2.6  million for the six months ended June 30, 2016 and 2015 , respectively, for per patient costs incurred.
 
As of June 30, 2016 , we had a liability of $ 2.7 million reflected in accrued expenses and other current liabilities on the balance sheet resulting from services provided by Nordic under the Second Extension Period, which are payable in cash.
 
License Agreement Obligations
 
Abaloparatide
 
In September 2005, we exclusively licensed the worldwide rights (except for development and commercial rights in Japan) to abaloparatide and analogs from an affiliate of Ipsen Pharma SAS, or Ipsen.
 
In consideration for the rights to abaloparatide and in recognition of certain milestones having been met to date, we have paid to Ipsen an aggregate amount of $ 4.4 million . The license agreement further requires us to make payments upon the achievement of certain future regulatory and commercial milestones, including upon acceptance of an NDA submission for review by the FDA. The range of milestone payments that could be paid under the agreement is € 10.0 million to € 36.0 million ($ 11.0 million to $ 39.7 million ). Following acceptance of our NDA submission for review by the FDA in the second quarter of 2016, we made a milestone payment of €3.0 million ( $3.3 million ) to Ipsen, which was expensed during the three months ended June 30, 2016. Should abaloparatide be approved and subsequently commercialized, we will be obligated to pay to Ipsen a fixed five percent royalty based on net sales of the product by us or our sublicensees on a country-by-country basis until the later of the last to expire of the licensed patents or for a period of 10 years after the first commercial sale in such country. The date of the last to expire of the abaloparatide patents licensed from or co-owned with Ipsen, barring any extension thereof, is expected to be March 26, 2028. In the event that we sublicense abaloparatide to a third party, we are obligated to pay a percentage of certain payments received from such sublicensee (in lieu of milestone payments not achieved at the time of such sublicense). The applicable percentage is in the low double digit range. In addition, if we or our sublicensees commercialize a product that includes a compound discovered by us based on or derived from confidential Ipsen know-how, we will be obligated to pay to Ipsen a fixed low single digit royalty on net sales of such product on a country-by-country basis until the later of the last to expire of licensed patents that cover such product or for a period of 10 years after the first commercial sale of such product in such country. The license agreement with Ipsen contains other customary clauses and terms as are common in similar agreements in the industry.
 
Prior to executing the license agreement for abaloparatide with us, Ipsen licensed the Japanese rights for abaloparatide to Teijin Limited, or Teijin, a Japanese pharmaceutical company. Teijin has completed a Phase 2 clinical study of abaloparatide in Japan for the treatment of postmenopausal osteoporosis.
 
RAD1901
 
We exclusively licensed the worldwide rights to RAD1901 from Eisai Co. Ltd., or Eisai. Our license with Eisai did not originally include rights for Japan, however, on March 9, 2015, we entered into an amendment to the Eisai Agreement in which Eisai granted us an exclusive right and license to research, develop, manufacture and commercialize RAD1901 in Japan. In consideration for the rights to RAD1901 in Japan, we paid Eisai an initial license fee of $ 0.4 million upon execution of the amendment, which was expensed during the three months ended March 31, 2015.
 
In consideration for the rights to RAD1901 and in recognition of certain milestones having been met to date, we have paid to Eisai an aggregate amount of $1.9 million. The range of milestone payments that could be paid under the agreement is $ 1.0 million to $ 20.0 million . The license agreement further requires us to make payments upon the achievement of certain future clinical and regulatory milestones. Should RAD1901 be approved and subsequently become commercialized, we will be obligated to pay to Eisai a royalty in a variable mid-single digit range based on net sales of the product on a country-by-country basis, subject to reduction based on the expiration or lapse of the licensed patents, no data protection coverage for the commercial product, and sales of generic products. Unless sooner terminated, our license with Eisai expires on a country-by-

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country basis upon (1) the date the last remaining valid claim in the licensed patents expires, lapses or is invalidated in that country, the product is not covered by data protection clauses, and the sales of lawful generic version of the product account for more than a specified percentage of the total sales of all pharmaceutical products containing the licensed compound in that country; or (2) a period of 10 years after the first commercial sale of the licensed products in such country. The latest valid claim is expected to expire, barring any extension thereof, on August 18, 2026. We were also granted the right to grant sublicenses with prior written approval from Eisai. If we sublicense RAD1901 to a third party, we will be obligated to pay Eisai, in addition to the milestones referenced above, a fixed low double digit percentage of certain fees we receive from such sublicensee and royalties in a variable mid-single digit range based on net sales of the sublicensee. The license agreement with Eisai contains other customary clauses and terms as are common in similar agreements in the industry.
 
Net Operating Loss Carryforwards
 
As of December 31, 2015 , we had federal and state net operating loss carryforwards of approximately $ 419.5 million and $ 323.0 million , respectively, subject to limitation, as described below. If not utilized, the net operating loss carryforwards will expire at various dates through 2035.
 
Under Section 382 of the Internal Revenue Code of 1986, or Section 382, substantial changes in our ownership may limit the amount of net operating loss carryforwards that could be used annually in the future to offset taxable income. We have completed studies through December 31, 2015, to determine whether any ownership change has occurred since our formation and have determined that transactions have resulted in two ownership changes, as defined under Section 382. There could be additional ownership changes in the future that could further limit the amount of net operating loss and tax credit carryforwards that we can utilize.

A full valuation allowance has been provided against our net operating loss carryforwards and other deferred tax assets, as the realization of the deferred tax asset is uncertain. As a result, we have not recorded any federal or state income tax benefit in our statement of operations.

 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements or any relationships with unconsolidated entities of financial partnerships, such as entities often referred to as structured finance or special purpose entities.
 
New Accounting Standards
 
See note 2, Basis of Presentation and Significant Accounting Policies — Accounting Standards Updates and Basis of Presentation and Significant Accounting Policies, in “Notes to Condensed Consolidated Financial Statements,” for a discussion of new accounting standards.


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Item 3.    Quantitative and Qualitative Disclosure about Market Risk.
 
We are exposed to market risk related to changes in the dollar/euro exchange rate because a portion of our development costs are denominated in foreign currencies.  We do not hedge our foreign currency exchange rate risk.  However, an immediate 10%     adverse change in the dollar/euro exchange rate would not have a material effect on financial results.
 
We are exposed to market risk related to changes in interest rates. As of June 30, 2016 , we had cash, cash equivalents and short-term marketable securities of $ 400.9 million , consisting of cash, money market funds, domestic corporate debt securities, domestic corporate commercial paper, and asset-backed securities. This exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in marketable securities. Because our marketable securities are short-term in duration, and have a low risk profile, an immediate 10% change in interest rates would not have a material effect on the fair market value of our portfolio. We generally have the ability to hold our investments until maturity, and therefore we would not expect our operating results or cash flows to be affected to any significant degree by a change in market interest rates on our investments. We carry our investments based on publicly available information. As of June 30, 2016 , we do not have any hard-to-value investment securities or securities for which a market is not readily available or active.
 
We are not subject to significant credit risk as this risk does not have the potential to materially impact the value of assets and liabilities.


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Item 4.    Controls and Procedures.
 
Disclosure Controls and Procedures
 
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2016 .
 
Changes in Internal Control over Financial Reporting
 
There have not been any changes in our internal control over financial reporting during the three months ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II— OTHER INFORMATION
 
Item 1.                                                          Legal Proceedings.
 
None.

Item 1A.                                                 Risk Factors.
 
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 , which could materially affect our business, financial condition or future results.
 
There were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2016.


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Item 2.                             Unregistered Sales of Equity Securities and Use of Proceeds.
 
None.

Item 3.                             Defaults Upon Senior Securities.
 
None.

Item 4.                             Mine Safety Disclosures.
 
None.

Item 5.                             Other Information.
 
None.

Item 6.                             Exhibits.
 
A list of exhibits is set forth on the Exhibit Index immediately following the signature page of this Quarterly Report on Form 10-Q, and is incorporated herein by reference.


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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
RADIUS HEALTH, INC.
 
 
 
 
By:
/s/ Robert E. Ward
 
 
Robert E. Ward
 
 
President and Chief Executive Officer
 
 
(Principal Executive Officer)
 
 
 
Date: August 4, 2016
 
 
 
 
 
 
 
 
 
By:
/s/ B. Nicholas Harvey
 
 
B. Nicholas Harvey
 
 
Chief Financial Officer
 
 
(Principal Accounting and Financial Officer)
 
 
 
Date: August 4, 2016
 
 


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EXHIBIT INDEX

 
 
 
 
Incorporated by Reference
 
Filed/
Exhibit
 
 
 
 
 
 
 
 
 
Filing
 
Furnished
Number
 
Exhibit Description
 
Form
 
File No.
 
Exhibit
 
Date
 
Herewith
 
 
 
 
 
 
 
 
 
 
 
 
 
3.1
 
Restated Certificate of Incorporation, filed on June 11, 2014
 
8-K
 
001-35726
 
3.1
 
6/13/2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.2
 
Amended and Restated By-Laws
 
8-K
 
001-35726
 
3.2
 
6/13/2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.1
 
Supply Agreement, dated June 23, 2016 and effective as of September 30, 2015, by and between the Company and Ypsomed AG
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.2
 
Commercial Supply Agreement, dated June 28, 2016 and effective as of January 1, 2016, by and between the Company and Vetter Pharma International GmbH
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.2(a)
 
Quality Agreement, dated July 28, 2016, by and between the Company and Vetter Pharma-Fertigung GMBH & Co. KG
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.3
 
Change Order Form #29, dated June 24, 2016, to Fifth Amendment to Development and Clinical Supplies Agreement, dated December 14, 2012 and effective as of November 30, 2012, by and among the Company and 3M Co. and 3M Innovative Properties Co., as amended
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.4
 
Change Order Form #30, dated June 24, 2016, to Fifth Amendment to Development and Clinical Supplies Agreement, dated December 14, 2012 and effective as of November 30, 2012, by and among the Company and 3M Co. and 3M Innovative Properties Co., as amended
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.5
 
Change Order Form #31, dated June 24, 2016, to Fifth Amendment to Development and Clinical Supplies Agreement, dated December 14, 2012 and effective as of November 30, 2012, by and among the Company and 3M Co. and 3M Innovative Properties Co., as amended
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
10.6
 
Change Order Form #32, dated July 22, 2016, to Fifth Amendment to Development and Clinical Supplies Agreement, dated December 14, 2012 and effective as of November 30, 2012, by and among the Company and 3M Co. and 3M Innovative Properties Co., as amended
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
31.1
 
Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
31.2
 
Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
32.1
 
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
 
 
**
 
 
 
 
 
 
 
 
 
 
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
 
 
 
 
 
 
*

30

Table of Contents

 
 
 
 
 
 
 
 
 
 
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
 
 
 
 
 
*
 
 
 
 
 
 
 
 
 
 
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
 
 
 
 
*

 
 
 
 
 
*                                          Filed herewith.
**                                   Furnished herewith.
                                         Confidential treatment has been requested with respect to certain portions of this exhibit, which portions have been filed separately with the Securities and Exchange Commission.

31
Exhibit 10.1

Confidential Treatment Requested Under 17 C.F.R. §§ 200.80(b)(4) and 240-24b-2


SUPPLY AGREEMENT

effective as of September 30, 2015 (" Effective Date ")
between
Radius Health, Inc. , a Delaware corporation having an address of 950 Winter Street, Waltham, MA 02451 USA

- " Radius " -
and
Ypsomed AG, Brunnmattstrasse 6, CH-3401 Burgdorf, Switzerland
- " Ypsomed " –


For Disposable Injection Pens for the Administration of Radius’s Abaloparatide
Preamble
a)
Radius and Ypsomed have entered into a Mutual Confidentiality Agreement effective date as of January 18, 2013 (hereinafter “ Confidentiality Agreement ”) and, under such Confidentiality Agreement, have discussed the potential use of Ypsomed's injection systems for use with Radius’ drugs; and
b)
Radius develops and manufactures a novel synthetic peptide analog of human parathyroid hormone-related protein , a naturally-occurring bone building hormone known as abaloparatide or BA058 for its drug development programmes as well as for commercial supply;

c)
Radius and Ypsomed have entered into a Development & Clinical Supply Agreement effective as of July 1, 2014, under which Ypsomed has customized a specific version of Ypsomed’s UnoPen TM injection device for Radius’ abaloparatide cartridges (“ Development & Clinical Supply Agreement ”) , and

d)
The Parties now wish to agree on the terms and conditions of the industrialization and the commercial supply of the customized UnoPen TM injection device.
Now, therefore, in consideration of the above, the Parties agree as follows:


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Supply Agreement between Radius Health, Inc. and Ypsomed AG



1.      Definitions
"Affiliate"
shall mean any corporation or other entity that directly or indirectly controls, is controlled by, or is under common control of Radius or Ypsomed. For the purpose of this Agreement, "control" shall mean the direct or indirect ownership of fifty percent (50%) or more of the outstanding shares or other voting rights of the subject entity for the election of directors (or such lesser percentage that is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction), and (b) in the case of non-corporate entities, the direct or indirect power to manage, direct or cause the direction of the management and policies of the non-corporate entity or the power to elect more than fifty percent (50%) of the members of the governing body of such non-corporate entity.
"Agreement"
shall mean this Supply Agreement, together with all Appendices, as amended or modified from time to time in accordance with the terms hereof.
"Appendix",
"Appendices"
shall mean the addenda, exhibits, schedules and/or supplements to this Agreement, as amended or modified from time to time in accordance with the terms hereof.
"Applicable Laws"
shall mean applicable statutes, laws and regulations relevant to the Parties’ business or to the development services and the manufacture of the Component Sets for use within the Territory, including without limitation cGMP; FDA 21 CFR Part 820; European Council Directive 93/42/EEC; ISO 13485:2003; ISO 14971:2007, those relating to anti-corruption and anti-bribery, and any additional, successor or replacement statutes, laws and regulations thereto, which come into effect during the term of this Agreement.
"Authority"
shall mean the Food and Drug Administration (“FDA”) in the United States, the European Medicines Agency EMEA in Europe, and/or the applicable equivalent regulatory agency or entity, governmental or non-governmental, having the responsibility, jurisdiction and authority for the grant of Authorizations in any jurisdiction in the Territory.
"Authorizations"
shall mean the authorizations for the manufacture, labeling, packaging, importation, promotion, marketing, offer to sell, sale, distribution and use of the Pens or the BA058 Devices respectively in the Territory, and any amendments or modifications thereto.
"BA058"
shall mean the active pharmaceutical ingredient known as abaloparatide or BA058, a novel synthetic peptide analog of human parathyroid hormone-related protein, a naturally-occurring bone building hormone intended to treat osteoporosis.
"BA058 Device"
shall mean the customized UnoPen TM  for the injection of a drug product solution containing BA058 consisting of the Components, a cartridge of BA058 and accessories, if any, as such BA058 Device is further defined in the Specifications.
"Business Year"
shall mean the 12-month period starting with Delivery Start Date (as defined hereunder) and each successive 12-month period.



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Supply Agreement between Radius Health, Inc. and Ypsomed AG


"cGMP"
shall mean current good manufacturing practices and regulations applicable to the services provided by Ypsomed, including those methods to be used in and the facilities or controls to be used for the development, customization, manufacture, testing, processing, packaging, labeling and storage of Components as specified in the Medical Device Directive 93/42/EEC, ISO 13485, as amended or modified from time to time.
"Components"
shall mean the individual parts and subassemblies of Ypsomed’s customized UnoPen TM , as they are described in the Specifications and manufactured and supplied by Ypsomed hereunder.
"Component Set"
shall mean a complete package of all Components for use by Radius or its designee to assemble the BA058 Device.
"Confidentiality Agreement"
shall mean the Confidentiality and Non-Use Agreement between Radius and Ypsomed with an effective date of 18 January 2013.
Defect
shall mean any Component’s or Component Set's failure (i) to have been manufactured in accordance with this Agreement, including, without limitation, cGMP in effect at the time of manufacture, or (ii) to conform to the Specifications in effect at the time of manufacture.
"Delivery"
shall mean the delivery of Component Sets to Radius’ designated carrier, according to the terms of this Agreement FCA Ypsomed’s manufacturing site in Switzerland (Incoterms 2010).
"Delivery Start Date"
shall mean the date of Delivery of the first commercial batch of Component Sets after obtainment of Radius’ first Authorization for the Pen or the BA058 Device respectively in one country belonging to the Territory. However, regardless of the first sentence of this paragraph, the Delivery Start Date shall be deemed to be set at latest on [*].
"Effective Date"
shall mean the date first above written.
"Hidden Defect"
shall mean any Defect which has not been or could not have been identified through reasonably diligent and adequate inspection and testing according to Section 10.1.
"Industrialization Project"
shall mean the project work to be carried out by Ypsomed with the support of Radius for the industrialization in order to initialize the commercial supply of the Component Sets as set forth in this Agreement, including Appendix 1 , up to and including the Delivery of the first commercial batch of Component Sets to Radius.
"Initial Term"
shall have the meaning set out in Section 23.1.
"Intellectual Property Rights "
shall mean any and all rights in intellectual property, including, without limitation, any inventions, discoveries, know-how, trade secrets, trade names (registered or not) and works of authorship reduced to a tangible medium of expression, including, without limitation, technical data and software, industrial and other design rights, patents, trademarks, copyrights, database rights, and/or any other intangible value protectable pursuant to any jurisdiction and/or applicable laws whatsoever in all territories of the world, including any and all applications or registrations for any of the foregoing.
"Party", "Parties"
shall mean Radius and/or Ypsomed.
"Pen", "Pens"
shall mean a customized version of the UnoPen TM , as described in the Specifications and manufactured and supplied by Ypsomed hereunder, to be final assembled and marketed by Radius, including pre-commercial models thereof.
"Purchase Price"
shall mean the prices for Component Sets set out in Appendix 3 .


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Supply Agreement between Radius Health, Inc. and Ypsomed AG


"Quality Agreement"
shall mean the separate quality agreement established between the Parties as amended or modified from time to time in accordance with the terms hereof.
"UnoPen TM "
shall mean the technical platform of a disposable pen injection system developed by Ypsomed for the injection of the content of a prefilled cartridge.
"Subsequent Term"
shall have the meaning set out in Section 23.1.
"Specifications"
shall mean the requirements with which the Components and Component Sets must conform, as well as relevant requirements regarding the assembled BA058 Device, all as further described in Appendix 2 .
"Territory"
shall mean shall mean the USA, the European Union and Switzerland. Further countries may be included upon mutual agreement and in accordance with Section 4.8.


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Confidential Treatment Requested Under 17 C.F.R. §§ 200.80(b)(4) and 240-24b-2


Supply Agreement between Radius Health, Inc. and Ypsomed AG


2.
Appendices
2.1
The following Appendices are incorporated into this Agreement by this reference:

No.....
Appendix
Subject/Content (inter alia)
1
Industrialization Project
Deliverables, due dates, costs, payment milestones
 
2
Specifications
Specifications for Components and/or Component Sets
3
Commercial Terms
Capacity reservation, forecast and ordering procedure, Purchase Prices, minimum purchase quantities
2.2
Order of Precedence. In the event of a conflict between this Agreement, the attached Appendices and/or the Quality Agreement, the following interpretation rule shall apply: in matters relating to the business, financial and legal obligations of the Parties the Supply Agreement shall prevail. In matters relating to quality management and reporting obligations, the Quality Agreement shall prevail.
3.    Amendments and/or Modifications
3.1
Either Party may at any time recommend an amendment and/or modification to this Agreement or the Appendices. Amendments and/or modifications to this Agreement or the Appendices shall only be effective upon a signed written agreement between the Parties. The Appendices shall be subject to version control to document any changes to them, but amendments to Appendix 2 and Appendix 3 shall not require an amendment to this Agreement.
3.2
Ypsomed shall not make any changes to the Specifications ( Appendix 2 ) without the prior written consent of Radius, which agreement shall not be unreasonably withheld. It shall not be unreasonable for Radius to withhold consent if such change would significantly impact regulatory approvals for the BA058 Device in the Territory. Radius shall not reject changes to the Specifications proposed in order to comply with this Agreement, with Applicable Laws or with any other documented requirement of an Authority or which are due to a modification of the UnoPen TM demonstrated to Radius’ reasonable satisfaction to be necessary. The requirements and the procedure for change control are set out in the Quality Agreement.
3.3
The Specifications are not physically attached to this Agreement, since they are kept in the Design History File (DHF), which is maintained at Ypsomed's premises. Ypsomed shall provide Radius with a copy of current Specifications.
4.    Industrialization Project and Commercial Supply
4.1
The services and deliverables required under the Industrialization Project in order to initialize the Commercial Supply are set out in Appendix 1 together with due dates for their performance or Delivery. The Parties shall perform and deliver according to the terms of this Agreement.
4.2
The costs for the services to be performed and the deliverables to be provided by Ypsomed under the Industrialization Project are set out in Appendix 1 .
4.3
Subject to the terms of this Agreement, Radius shall purchase Component Sets from Ypsomed and Ypsomed shall supply Radius with Component Sets. Radius


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Supply Agreement between Radius Health, Inc. and Ypsomed AG


undertakes to use commercially reasonable efforts to obtain regulatory approval for, promote, import, advertise, distribute, offer for sale and sell the BA058 Device in the Territory.
4.4
Ypsomed retains all rights to promotion, import, advertisement, distribution, offering for sale and sale in the Territory of the UnoPen TM and/or customized variations thereof as well as other disposable injection systems to itself, its customers or distributors; provided, however, that during the Term, Ypsomed shall not promote, import, advertise, distribute, offer for sale and sell in the Territory the Pen to any party other than Radius or, upon Radius’ prior written approval, to Radius’ designees.
4.5
The commercial terms for the supply of Component Sets are set out in Appendix 3 .
4.6
During the term of this Agreement, Radius shall purchase the Component Sets [*] at the Purchase Price set out in Appendix 3 . Commencing on January 1, 2017and not more frequently than once per year, the Purchase Prices shall be subject to adjustments according to [*], provided however that adjustments (whether an increase or decrease) shall not exceed [*] in any given twelve (12) month periods.
4.7
During the term of this Agreement, other than in the event of a failure to supply imputable to Ypsomed, Radius shall order at least the minimum purchase quantities of Component Sets set out in Appendix 3 . If Radius does not order the minimum purchase quantities pursuant to the terms and conditions of this Agreement, Radius shall pay Ypsomed at the end of each Business Year the difference between the amounts that would be due to Ypsomed if the minimum purchase quantities for Component Sets for the relevant Business Year had been ordered and the amounts actually paid for Component Sets ordered in such Business Year.
4.8
The Parties - each for its obligations under this Agreement - shall comply with all Applicable Laws in the Territory. Radius has the right to reasonably request Ypsomed to comply with any applicable laws other than those of the Territory as such laws are identified and deviate from the laws in the Territory and their requirements communicated in writing by Radius to Ypsomed. In the event of any additional, successor or replacement applicable laws affecting Ypsomed's performance under this Agreement (including, without limitation, in respect of costs, timelines, facilities, equipment, processes, materials or systems), Ypsomed shall have the right to request and the Parties shall negotiate an amendment and/or modification pursuant to Section 3.
5.    Engagement of Subcontractors and Designees & Final Assembly Packaging
5.1
Ypsomed shall be entitled to engage subcontractors, provided that Ypsomed shall not be relieved from its obligations hereunder and that it assumes full liability for the performance and all acts and/or omissions of its subcontractors as if they were its own performance and acts and/or omissions. Ypsomed shall ensure that each subcontractor is bound by agreements that are consistent with the applicable provisions of this Agreement.
5.2
Ypsomed shall deliver the Component Sets in bulk packaging as set out in Appendix 2 . Radius shall be responsible for the final assembly and packaging of the BA058 Device. Radius shall be entitled to engage designees for final assembly, provided that Radius shall not be relieved from its obligations hereunder and that it assumes full liability for the performance and all acts and/or omissions of its designees as if they


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Supply Agreement between Radius Health, Inc. and Ypsomed AG


were its own performance and acts and/or omissions. Radius shall ensure that each designee is bound by agreements that are consistent with the applicable provisions of this Agreement.
5.3
The Parties agree that the course of the Industrialization Project may require Ypsomed and its subcontractors, respectively and Radius' designees to discuss aspects of the Industrialization Project with each other, e.g., in respect of designee's final assembly of the Component Set into the BA058 Device. For such purpose, Ypsomed and its subcontractors, respectively and Radius' designee may directly disclose and receive Ypsomed's or Radius' Confidential Information to and from each other pursuant to the terms of this Agreement in each case solely to the extent necessary to meet its obligations under this Agreement. Each Party shall ensure that its designee or its subcontractors respectively are bound by appropriate confidentiality obligations no less stringent than the ones set out in this Agreement. For clarity, no Confidential Information of Vetter Pharma International GmbH (“ Vetter ”) may be disclosed to any third party except as consistent with the terms of the Confidentiality Agreement between Ypsomed, Vetter and Radius dated 18 June 2014.
6.    Final Assembly & Packaging
6.1
Ypsomed shall deliver the Pens in bulk packaging as set out in Appendix 2 . Radius and/or Radius' designees shall be responsible for the final assembly of the Pen with a prefilled cartridge of Radius’ BA058 as well as for the packaging of the BA058 Devices. Ypsomed will provide reasonable technical assistance for the final assembly process to Radius or its designees to the extent mutually agreed. For that purpose, Ypsomed may send specialized technical personnel to Radius or its designee and allow Radius or its designee to visit Ypsomed's facilities. Radius will reimburse Ypsomed for reasonable and actual documented costs and expenses incurred by Ypsomed in providing such technical assistance, as agreed upon in writing beforehand.
7.    Payment
7.1
All costs and prices invoiced under this Agreement are specified in Swiss Francs (CHF). All payments due to Ypsomed by Radius under this Agreement are expressed as net amounts and Radius shall be liable to pay any taxes and duties, if any (other than taxes based upon the income of Ypsomed).
7.2
Unless otherwise indicated in Appendix 1 or Appendix 3, Radius shall make payments to Ypsomed under this Agreement in immediately available funds to the bank account designated by Ypsomed from time to time, within 30 days from date of invoice, provided no invoice may be dated prior to the date on which it is delivered to Radius. In the event the date of invoice is a date prior to the date on which the invoice is delivered to Radius, Radius shall have 30 days from the date of receipt to make payment.
7.3
Any payments due hereunder which are not made within ten (10) working days of the due date that such payments are due shall be subject to default interest of one per cent (1%) per thirty (30) day period on the unpaid amount until paid in full, provided that no interest shall be payable on any amount due which Radius in good faith disputes. Notwithstanding any right to terminate this Agreement for Radius's material breach as set out in Section 22.2, Ypsomed shall be entitled to withhold all further


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Supply Agreement between Radius Health, Inc. and Ypsomed AG


deliveries of Pens until payment of all outstanding and past due amounts, not disputed by Radius in good faith, is made in full.
8.    Forecasts and Purchase Orders
8.1
It is understood that Radius’s requirements for Component Sets have an influence on the continuity and stability of the production, Ypsomed's manufacturing schedule and resource planning. During the term of this Agreement, Radius shall therefore regularly inform Ypsomed about its estimated requirements for Component Sets and provide Ypsomed with forecasts. Details of such forecasts and the quantities to be manufactured and supplied by Ypsomed based on these forecasts are set out in Appendix 3 .
8.2
Radius shall submit its purchase orders to Ypsomed according to the procedure and within the lead times set out in Appendix 3 .
8.3
In the event of any conflict between purchase orders submitted by Radius and this Agreement, this Agreement shall prevail, unless Ypsomed expressly approves such conflict in writing.
8.4
Ypsomed shall confirm each purchase order in writing within ten (10) working days of receipt, provided that Radius has submitted the purchase order in accordance with the terms of this Agreement. If Ypsomed is unable to meet the requested date of Delivery Ypsomed shall so notify Radius and provide to Radius an alternative date of Delivery; provided that such alternative date of Delivery shall be timely as close as possible to Radius’ requested date of Delivery.
9.    Delivery
9.1
Ypsomed shall deliver the number of Component Sets set out in Ypsomed’s order confirmation, provided that overdelivery or underdelivery of five percent (5%) shall be allowed. Component Sets shall be delivered to the agreed place of Delivery set out in Appendix 3. Unless otherwise indicated in Appendix 3 , Component Sets shall be delivered FCA Ypsomed's manufacturing facility in Switzerland (Incoterms 2010).
9.2
Ypsomed shall notify Radius of any expected delay in Delivery and will use commercially reasonable efforts to effect Delivery as quickly as possible. The Parties shall, if reasonably requested by a Party, renegotiate the date(s) of Delivery of all placed purchase orders following the delayed purchase order. Subject to Radius’ prior written consent in each instance, not to be unreasonably withheld, Ypsomed may send partial deliveries to maintain continuous supply.
9.3
Subject to receipt of payment in accordance with Appendix 3, Ypsomed will deliver and convey good title to such Component Sets to Radius on the date of Delivery, free and clear of any lien or encumbrance. For avoidance of doubt, at no time will Ypsomed allow the Component Sets to be subject to any third party lien or encumbrance.
10.    Inspection, Notification of Defects
10.1
Upon receipt of a lot of Component Sets, Radius shall ensure that prompt inspections are carried out of the lot of Component Sets for conformity to the Specifications, including, without limitation, inspections relating to identity, quantity, transport damage and accompanying Delivery documents. Any Component Sets not rejected within thirty (30) days from their arrival at Radius's designated premises shall be deemed


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Supply Agreement between Radius Health, Inc. and Ypsomed AG


accepted by Radius. In the event Radius rejects any Component Sets, Radius shall identify such Component Sets thereof and their date of Delivery and provide Ypsomed with a report (including photos) on the nature of the alleged Defect. Radius shall hold any such Component Sets for inspection by Ypsomed or, at Ypsomed’s request, shall return such Component Sets and/or BA058 Device to Ypsomed.
10.2
If at any time within a period of the sooner of twelve (12) months from the date of first use of the BA058 Device by the patient, but in no event later than twenty-four (24) months after Delivery of the Component Set to Radius, an alleged Hidden Defect is discovered, Radius shall promptly, no later than within fifteen (15) days from its discovery, notify Ypsomed of its discovery. Radius shall identify such Component Sets and their date of Delivery and provide Ypsomed with a report (including photos when applicable) on the nature of the alleged Hidden Defect. Radius shall hold any such Component Set or BA058 Device retrieved for inspection by Ypsomed or, at Ypsomed’s request, shall return such Component Set and/or BA058 Device to Ypsomed.
11.    Remedy and Liability for Defects
11.1
In the event of a Defect or Hidden Defect, notified to Ypsomed within the agreed time period under Section 10.1 or Section 10.2 and accepted by Ypsomed or confirmed by an independent laboratory pursuant to Section 11.3, and subject to Section 12.2, at Radius’ election, Ypsomed shall either replace such Component Sets free of charge or, credit or refund to Radius the net amount actually paid for any such Component Sets.
11.2
The product warranty provided in Section 12.1 and the remedy provided in Section 11.1 shall be the sole and exclusive warranty of Ypsomed and remedy of Radius, and, to the extent permitted by law, Ypsomed excludes all other warranties and remedies, express or implied, whether by law, in any communication with Radius, or otherwise, regarding the Component Sets.
11.3
In the event the Parties should not agree as to whether or not a Component Set and/or BA058 Device has a Defect or Hidden Defect respectively, the Parties shall select an independent laboratory which shall test such Component Sets, BA058 Device or Component Set lot. The Party whose position does not prevail upon such laboratory testing shall pay the costs invoiced by such laboratory.
12.    Warranties by Ypsomed
12.1
Product Warranty . Subject to Section 12.2, Ypsomed hereby represents and warrants to Radius that the Component Sets delivered by Ypsomed to Radius hereunder will have been manufactured in accordance with this Agreement, including, without limitation, cGMP in effect at the time of manufacture, and will, as of the date of Delivery, conform to the Specifications in effect at the time of manufacture.
12.2
Warranty Limitation. The warranty under Section 12.1 and Radius's remedy under Section 11.1 shall not apply to, and shall be void in respect of, Component Sets that have been modified or altered in any manner by anyone other than Ypsomed or not authorized by Ypsomed, or to Defects or Hidden Defects caused (i) by the use or operation of the Component Sets in an application or environment other than that intended hereunder or recommended by Ypsomed; (ii) by Radius’ or a third party’s accident, negligence, misuse or other causes other than normal use; or (iii) by final assembly and packaging, transport, warehousing, storage, use or handling of the


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Supply Agreement between Radius Health, Inc. and Ypsomed AG


Component Sets in any manner inconsistent with this Agreement, including, without limitation, the Specifications.
12.3
[*].
[*]
13.    Warranties by Radius
13.1
Radius warrants that all Component Sets shall be transported, warehoused, stored, processed, handled and marketed by Radius and its distributors in accordance with this Agreement, including, without limitation, the Specifications, and all Applicable Laws. Radius further warrants that it will not put on the market any Component Sets or BA058 Device respectively that , to its knowledge, has known or assumed defects nor shall Radius put on the market any Component Sets or BA058 Device that, to its knowledge, does not conform to the various applicable specifications or Applicable Laws covering the Component Sets.
13.2
Radius warrants that all advertising and promotional materials as well as user manuals and other information, instructions and directions of use provided by Radius and relating to safety and risk issues, use, transport, handling, and storage of the Component Sets shall comply with this Agreement, including, without limitation, the Specifications, and all Applicable Laws.
13.3
Radius warrants that before manufacture, packaging, promotion, labeling, marketing, supply, import, offer to sell, sale, distribution or use of the Component Sets or BA058 Device respectively, Radius will perform any risk analyses required by Applicable Laws related to BA058 and the Component Sets and will continue to perform such analyses as long as required by Applicable Laws. Ypsomed will support Radius as set out in the Quality Agreement.
14.
Mutual Warranties
14.1
Each Party further represents and warrants to the other Party that:
(i) it has the full power and right to enter into this Agreement and that there are no outstanding agreements, assignments, licenses, encumbrances or rights of any kind held by other parties, private or public, that impede each Party to enter into this Agreement,
(ii) the execution and delivery of this Agreement by it has been authorized by all requisite corporate or company action and this Agreement is and will remain a valid and binding obligation of Ypsomed, enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors,
(iii) to the best of its knowledge it, its Affiliates, approved subcontractors, and each of their respective officers and directors, as applicable, and any person used by it, its Affiliates or approved subcontractors to perform services under this Agreement have not been debarred and are not subject to a pending debarment pursuant to section 306 of the United States Food, Drug and Cosmetic Act, 21 U.S.C. § 335a. Each Party will notify the other Party immediately if it, its Affiliates, or approved subcontractors, or any person used to perform services under this Agreement, or any of their respective officers or directors, as applicable, is subject to the foregoing;


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Supply Agreement between Radius Health, Inc. and Ypsomed AG


14.2
Each Party further represents and warrants to the other Party that it will conduct the business contemplated herein in a manner which is consistent with both Applicable Laws and good business ethics and in accordance with its respective Code of Conduct. In performing under this Agreement, each Party and its employees and agents (a) will not offer to make, make, promise, authorize or accept any payment or giving anything of value, including, without limitation, bribes, either directly or indirectly to any public official, regulatory authority or anyone else for the purpose of influencing, inducing or rewarding any act, omission or decision in order to secure an improper advantage, or obtain or retain business and (b) will comply with all anti-corruption and anti-bribery laws and regulations applicable in the countries where the Parties and their Affiliates have their principal places of business. Each Party warrants that none of its or its Affiliates’ officers, directors, partners, owners, principals, employees or agents is an official or employee of a governmental agency or instrumentality or a government owned company in a position to influence action or a decision regarding its activities contemplated in this Agreement.
In the event that Radius has reason to believe based on good grounds and assessed in good faith that a breach of this Section 14.2 by Ypsomed or its Affiliates has occurred or may occur, Radius is entitled to audit Ypsomed and its Affiliates, which will fully cooperate in connection with any such audit. Ypsomed will promptly notify Radius in the event of any government investigation or inquiry related to compliance with anti-corruption or anti-bribery laws and will allow Radius to participate in the event it relates to services under this Agreement.
Each Party will notify the other Party immediately upon becoming aware of any breach of its obligations under this Section 14.2. Breach of this Section 14.2 shall be deemed a material breach and shall allow the non-breaching Party to terminate this Agreement pursuant to Section 23.2.
15.    Quality Management System
15.1
Ypsomed shall (i) maintain a quality management system, (ii) develop the Component Sets and (iii) generate and maintain the compilation of records of the manufacture, testing, processing, packaging, labeling, and storage of the Component Sets in accordance with the Quality Agreement. Reference is made to Section 26.7 for the language of such records.
15.2
Ypsomed will participate in and support Radius in all required actions in respect of Radius’s medical device vigilance systems, including, without limitation, support in respect of initial reporting and corrective action, as set out in the Quality Agreement or required by law.
15.3
Ypsomed shall allow Radius (and, if requested by Radius, its notified body) to audit Ypsomed’s manufacturing facilities to assure compliance with this Agreement, including the Quality Agreement. In the event of a routine audit, the notice period shall be minimum sixty (60) days. The Parties shall agree upon the subjects and procedures in a timely manner before the audit. Further details of such audits are set out in the Quality Agreement. Audits may take place every two (2) years after market launch at most. In case Radius wishes to conduct more routine audits than those permitted under the prior sentence, Radius shall pay the reasonable costs incurred by Ypsomed for any such additional routine audit. Ypsomed shall permit Radius to conduct additional for-cause audits, as necessary, i.e., audits that focus on the cause(s) of a specific problem regarding Ypsomed's performance under this Agreement. Ypsomed agrees to cooperate with any inspection of Radius's facilities by Authorities,


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as far as such regulatory inspection is required to apply for and/or maintain Authorizations.
15.4
Any costs and expenses incurred by Radius in respect of audits pursuant to Section 15.3 shall be borne by Radius itself. Subject to Section 15.3, Ypsomed shall bear its own costs and expenses in respect of such audits. All information obtained by Radius in any audit (including, without limitation, the findings and results related thereto but excluding all Confidential Information of Radius) shall be deemed to be Ypsomed’s Confidential Information that may not be shared with any third parties, except as required by law or by an Authority or court of competent jurisdiction or as otherwise permitted under this Agreement (which permitted uses include, for clarity, use in regulatory filings for Authorizations, provided however that Radius shall not be authorized to [*]).
16.    Authorizations
16.1
Radius shall be solely responsible for applying for Authorizations for the BA058 Device and shall be the sole owner of such Authorizations in the Territory. The costs for such applications and Authorizations shall be borne by Radius. Radius shall be responsible for all communications with Authorities.
16.2
For the purposes of Sections 16.3 and 16.4, Radius shall use reasonable efforts to notify Ypsomed in a timely manner about its application schedule for Authorizations and any updates thereto. Radius shall use reasonable efforts to regularly inform Ypsomed about the expected times for obtaining the Authorizations and notify Ypsomed in writing about any Authorizations obtained.
16.3
Ypsomed shall use reasonable efforts to provide Radius or, at Radius' request, Authorities in the Territory with any data and information (in English, at no additional cost to Radius) relating to Ypsomed's performance under this Agreement, which is necessary to apply for and/or maintain Authorizations in the Territory.
16.4
Ypsomed agrees to cooperate with any inspection of Ypsomed's facilities by Authorities, as far as such regulatory inspection is required to apply for and/or maintain Authorizations.
16.5
Any provision in this Agreement, including, without limitation, in the Quality Agreement ( Appendix 3 ), giving Radius the right to access, control, check or receive documents from Ypsomed or to visit or audit Ypsomed’s premises, shall be interpreted as covering all necessary documents and information relevant to the Components but excluding trade, operating and/or business secrets of Ypsomed and/or its subcontractors. If documents or information containing such trade, operating and business secrets are required for (i) Radius' certification by an Authority, (ii) applying for and/or maintaining Authorizations in the Territory, (iii) risk evaluation by an Authority or (iv) market surveillance by an Authority, the document or information will be disclosed only to the relevant Authority. Ypsomed shall inform Radius of any information directly submitted to Authorities, and Ypsomed shall be responsible for any updates and annual reports required by such Authorities in respect of such information.
16.6
Ypsomed shall bear all Ypsomed's costs in respect of Ypsomed's activities of providing data and information as set out in Section 16.3, Section 16.4 and Section 16.5, provided such costs are administrative costs of Ypsomed. To the extent such costs are not administrative costs (e.g., costs for the undertaking of further technical studies, tests or experiments, costs for translation of or costs for compiling additional


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documents), Radius shall pay the respective costs, except as otherwise agreed upon in writing. For one (1) regulatory inspection every two years pursuant to Section 16.4, Ypsomed shall bear its own costs. Radius shall pay the reasonable costs incurred by Ypsomed for regulatory inspections under Section 16.4 in excess of one (1) every two years, except if such inspection is for-cause.
17.    Patient Complaints and Recalls
17.1
As between the Parties, Radius shall have the sole responsibility for resolving patient complaints and for handling incidents and recalls in respect of the BA058 Device.
17.2
All patient complaints in respect of the BA058 Device will be evaluated initially by Radius. In case of any complaint requiring a technical investigation, Radius shall forward the complaint and the BA058 Device to Ypsomed. Ypsomed shall use best efforts to analyse the cause of any failure.
17.3
Ypsomed shall provide Radius with a report on any analysis under Section 17.2 in a timely manner, wherever practicable within twenty (20) working days from receipt of the complaint and the BA058 Device, if available. If the nature of the complaint is a potentially critical failure, Ypsomed shall provide an interim report as soon as reasonably possible and inform Radius regularly with an update of its progress in respect of the analysis.
17.4
In the event Radius intends to submit documents or information to any Authority with respect to specific processes performed solely at Ypsomed, when practicable, Radius shall inform Ypsomed about such intention in advance. If possible with respect to the timing, Ypsomed shall have a right to approve the submission in writing, such approval not to be withheld, delayed or conditioned unreasonably.
17.5
If Ypsomed is contacted by a patient or becomes aware of a complaint in respect of the Components through other means, Ypsomed shall forward the information without delay to Radius for Radius' evaluation and response.
17.6
If Radius plans a recall in respect of the BA058 Device, Radius shall notify Ypsomed promptly of the details regarding such recall, including, without limitation, providing copies of all relevant documentation concerning such recall in respect to the Components. As far as the Components are concerned, Ypsomed shall cooperate with Radius in any such recall, and provide relevant information in respect of Ypsomed's performance under this Agreement. All regulatory contacts that are made and all activities concerning such recall will be initiated and coordinated by Radius with Ypsomed’s involvement and assistance, as such assistance is reasonably requested by Radius.
18.    Intellectual Property Rights
18.1
Any and all Intellectual Property Rights in existence prior to the Effective Date or developed during the period of this Agreement but otherwise than in the course of performance of the Industrialization Project shall, as between the Parties, remain the sole and exclusive property of the Party that brings such rights to this Agreement.
18.2
Ypsomed shall be the sole and exclusive owner of any Intellectual Property Rights created or developed by or on behalf of either Party in conducting its activities under the Industrialization Project to the extent they relate to [*] including, without limitation, [*]. Ypsomed shall be solely entitled to legally protect these intangible rights and shall bear all related costs.


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18.3
Radius shall be the sole and exclusive owner of any Intellectual Property Rights created or developed by or on behalf of either Party in conducting its activities under the Industrialization Project to the extent they relate to BA058. Radius shall be solely entitled to legally protect these intangible rights and shall bear all related costs.
18.4
Ypsomed grants to Radius a royalty-free and non-exclusive license in respect of the Ypsomed Intellectual Property Rights to the extent required for Radius to fulfil its rights and obligations under this Agreement, including use of the Components Sets for final assembly, and the use of BA058 Device for its promotion, marketing, offer to sell and/or distribution in the Territory, and for no other purpose whatsoever. The license shall not include the right to manufacture or have manufactured the Components nor any right to sub-license except to designees of Radius, as far as such license is required to conduct the assembly of the Component Set respectively into the BA058 Device, or for promotion, marketing, offer to sell and/or distribution activities in respect to the BA058 Device that will be conducted by such designees. The license shall not survive any expiration or termination of this Agreement, provided however that in case a permitted use set out hereunder outlasts the expiration or termination of this Agreements the license shall continue to be effective upon the expiration or termination of this Agreement for such particular use only. For avoidance of doubt, the license shall survive expiration or termination of this Agreement with respect to any and all Component Sets purchased as of the date of expiration or termination until such time as the resulting BA058 Devices have been sold or have expired.
18.5
Ypsomed has established a continuous standard patent surveillance in the Territory concerning the Components and the UnoPen TM . Under this Agreement Ypsomed shall continue to undertake its continuous standard patent surveillance in the Territory concerning the Components and the UnoPen TM . Ypsomed shall notify Radius in writing of patents of third parties it becomes aware of pursuant to its standard patent surveillance undertaken following the Effective Date of this Agreement that may reasonably adversely impact Radius’ use of the Components or Component Sets in the BA058 Device in accordance with this Agreement. According to Ypsomed’s assessment (of coverage and validity) and reasonable belief, as of the Effective Date, the use of the Components or Component Sets in the BA058 Device in accordance with this Agreement does not infringe the claims of any valid, enforceable third party patents with respect to the UnoPen TM .
18.6
In the event it is established that the Components or Component Sets in BA058 Device infringe such third party’s Intellectual Property Rights, the Parties shall mutually agree on the strategy to be followed which may contain one of the following actions: (i) Ypsomed shall redesign to avoid the infringement, at its own cost or (ii) Ypsomed shall procure to obtain a license from such third party for Radius at its own cost. If either of such actions turns out to be commercially impractical due to being a too heavy financial burden on Ypsomed, the Parties agree to discuss in good faith alternative solutions, [*].
19.    Disclaimer
19.1
Except as expressly set out in this Agreement in Sections 12 to 14 , neither Party makes any warranties in respect of its activities under this Agreement, express or implied, including, without limitation, any implied warranty of merchantability or fitness for a particular purpose.
20.    Indemnity and Insurance


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