A. Basis of Presentation

        The accompanying condensed consolidated financial statements are unaudited and have been prepared by Vertex Pharmaceuticals Incorporated ("Vertex" or the "Company") in accordance with accounting principles generally accepted in the United States of America.

        The condensed consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

        Certain information and footnote disclosures normally included in the Company's annual financial statements have been condensed or omitted. The interim financial statements, in the opinion of management, reflect all normal recurring adjustments (including accruals) necessary for a fair presentation of the financial position and results of operations for the interim periods ended September 30, 2010 and 2009.

        The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the fiscal year, although the Company expects to incur a substantial loss for the year ending December 31, 2010. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2009, which are contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2009 that was filed with the Securities and Exchange Commission on February 19, 2010.

B. Accounting Policies

Basic and Diluted Net Loss per Common Share

        Basic net loss per common share is based upon the weighted-average number of common shares outstanding during the period, excluding restricted stock and restricted stock units that have been issued but are not yet vested. Diluted net loss per common share is based upon the weighted-average number of common shares outstanding during the period plus additional weighted-average common equivalent shares outstanding during the period when the effect is dilutive. Common equivalent shares result from the assumed exercise of outstanding stock options (the proceeds of which are then assumed to have been used to repurchase outstanding stock using the treasury stock method), the assumed conversion of convertible notes and vesting of unvested restricted stock and restricted stock units. Common equivalent shares have not been included in the net loss per common share calculations becaus e the effect would have been anti-dilutive. Total potential gross common equivalent shares consisted of the following:

Stock-based Compensation Expense

        The Company expenses the fair value of employee stock options and other forms of stock-based employee compensation over the associated employee service period or, for awards with market conditions, the derived service period. For awards with performance conditions, the Company makes estimates regarding the likelihood of satisfaction of the performance conditions that affect the period over which the expense is recognized. Compensation expense is determined based on the fair value of the award at the grant date, including estimated forfeitures, and is adjusted to reflect actual forfeitures and the outcomes of certain market and performance conditions. Please refer to Note C, "Stock-based Compensation Expense," for further information.

Research and Development Expenses

        All research and development expenses, including amounts funded by research and development collaborations, are expensed as incurred. The Company defers and capitalizes nonrefundable advance payments made by the Company for research and development activities until the related goods are delivered or the related services are performed.

        Research and development expenses are comprised of costs incurred by the Company in performing research and development activities, including salary and benefits; stock-based compensation expense; laboratory supplies and other direct expenses; contractual services, including clinical trial and pharmaceutical development costs; commercial supply investment in its drug candidates; and infrastructure costs, including facilities costs and depreciation expense. The Company evaluates periodically whether a portion of its commercial supply investment may be capitalized as inventory. Generally, inventory may be capitalized if it is probable that future revenues will be generated from the sale of the inventory and that these revenues will exceed the cost of the inventory. The Company is continuing to expense all of its commercial supply investment due to the high risk inherent in dr ug development.

        The Company's collaborators funded portions of the Company's research and development programs related to specific drug candidates and research targets, including telaprevir, in the three and nine months ended September 30, 2010 and 2009. The Company's collaborative revenues, including amortization of up-front license fees received in prior periods, were $15.6 million and $17.1 million, respectively, for the three months ended September 30, 2010 and 2009 and $56.0 million and $48.1 million, respectively, for the nine months ended September 30, 2010 and 2009. The Company's research and development expenses allocated to programs in which a collaborator funded at least a portion of the research and development expenses were approximately $42 million and approximately $33 million, respectively, for the three months ended September 30, 2010 and 2009 and approximately $119 million in each of the nine month periods ended September 30, 2010 and 2009.

Restructuring Expense

        The Company records costs and liabilities associated with exit and disposal activities based on estimates of fair value in the period the liabilities are incurred. In periods subsequent to initial measurement, changes to the liability are measured using the credit-adjusted risk-free discount rate applied in the initial period. Liabilities are evaluated and adjusted as appropriate for changes in circumstances at least on a quarterly basis. Please refer to Note H, "Restructuring Expense," for further information.

Revenue Recognition

• Collaborative Revenues

        The Company's revenues are generated primarily through collaborative research, development and/or commercialization agreements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, up-front license fees; funding of research and/or development activities; payments for services the Company provides through its third-party manufacturing network; milestone payments; and royalties on product sales. Each of these types of payments results in collaborative revenues, except for revenues from royalties on product sales, which are classified as royalty revenues.

        Agreements containing multiple elements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the collaborator and whether there is objective and reliable evidence of the fair value of the undelivered obligation(s). The consideration received is allocated among the separate units either on the basis of each unit's fair value or using the residual method, and the applicable revenue recognition criteria are applied to each of the separate units.

• Up-front Fees

        The Company recognizes revenues from nonrefundable, up-front license fees on a straight-line basis over the contracted or estimated period of performance, which is typically the period over which the research and development is expected to occur or manufacturing services are expected to be provided. In order to estimate the period of performance, the Company is required to make estimates regarding the drug development and commercialization timelines for compounds being developed pursuant to the applicable agreement. The Company's estimates regarding the period of performance under certain of its collaboration agreements have changed in the past and may change in the future.

• Milestones

        At the inception of each agreement that includes milestone payments, the Company evaluates whether each milestone is substantive on the basis of the contingent nature of the milestone, specifically reviewing factors such as the scientific and other risks that must be overcome to achieve the milestone, as well as the level of effort and investment required. The Company recognizes revenues related to substantive milestones in full in the period in which the substantive milestone is achieved, if payment is reasonably assured and the Company's performance obligations are fully satisfied. If the Company has obligations remaining after the achievement of the milestone, the Company considers whether it has sufficient evidence of the fair value of its remaining obligations. If (A) a milestone is not considered substantive or (B) the Company has remaining obligatio ns after the achievement of a substantive milestone and does not have sufficient evidence of the fair value of those obligations, the Company recognizes the applicable milestone over the remaining period of performance.

• Research and Development Activities/Manufacturing Services

        Under certain of its collaboration agreements, the Company is entitled to reimbursement from its collaborators for specified research and development expenses and/or payments for specified manufacturing services that the Company provides through its third-party manufacturing network. The Company considers the nature and contractual terms of the arrangement and the nature of the Company's business operations in order to determine whether research and development funding will result in collaborative revenues or an offset to research and development expenses. The Company typically recognizes the revenues related to these reimbursable expenses and manufacturing services in the period in which the reimbursable expenses are incurred or the manufacturing services are provided.

• Royalty Revenues

        Royalty revenues typically are recognized based upon actual and estimated net sales of licensed products in licensed territories, as provided by the licensee, and generally are recognized in the period the sales occur. The Company reconciles and adjusts for differences between actual royalty revenues and estimated royalty revenues in the quarter they become known. These differences historically have not been significant.

        The Company has sold its rights to certain royalties on sales of HIV protease inhibitors and recognizes the revenues related to this sale as royalty revenues. In the circumstance where the Company has sold its rights to future royalties under a license agreement and also maintains continuing involvement in the royalty arrangement (but not significant continuing involvement in the generation of the cash flows due to the purchaser of the future royalty rights), the Company defers recognition of the proceeds it receives for the royalty stream and recognizes these deferred revenues over the life of the license agreement. The Company recognizes these deferred revenues pursuant to the units-of-revenue method. Under this method, the amount of deferred revenues to be recognized as royalty revenues in each period is calculated by multiplying the following: (1) the royalty p ayments due to the purchaser for the period by (2) the ratio of the remaining deferred revenue amount to the total estimated remaining royalty payments due to the purchaser over the term of the agreement. The Company's estimates regarding the estimated remaining royalty payments due to the purchaser have changed in the past and may change in the future.

Financial Transaction Expenses

        Issuance costs incurred to complete the Company's convertible senior subordinated note offerings and the financial transactions that the Company entered into in September 2009 are deferred and included in other assets on the Company's condensed consolidated balance sheets. The issuance costs are amortized using the effective interest rate method over the term of the related debt or financial instrument. The amortization expense related to the issuance costs is included in interest expense on the condensed consolidated statements of operations.

        The Company defers direct and incremental costs associated with the sale of its rights to future royalties. These costs are included in other assets on the Company's condensed consolidated balance sheets and are amortized in the same manner and over the same period during which the related deferred revenues are recognized as royalty revenues. The amortization expense related to these transaction expenses is included in royalty expenses on the condensed consolidated statements of operations.

        Expenses incurred in connection with common stock issuances are recorded as an offset to additional paid-in capital on the condensed consolidated balance sheets.

Business Combinations

        The Company assigns the value of the consideration transferred to acquire a business to the tangible assets and identifiable intangible assets acquired and liabilities assumed on the basis of their fair values at the date of acquisition. The Company assesses the fair value of assets, including intangible assets such as in-process research and development assets, using a variety of methods. Each asset is measured at fair value from the perspective of a market participant. The present-value models used to estimate the fair values of in-process research and development assets incorporate significant assumptions regarding the estimates market participants would make in order to evaluate an asset: including market participants' assumptions regarding the probability of completing in-process research and development projects, which would require obtaining regulatory approval for m arketing of the associated drug candidate; market participants' estimates regarding the timing of and the expected costs to complete in-process research and development projects; market participants' estimates of future cash flows from potential product sales; and the appropriate discount rates for market participants. Transaction costs and restructuring costs associated with the transaction are expensed as incurred.

In-process Research and Development Assets

        In-process research and development assets acquired in a business combination are recorded as of the acquisition date at fair value and accounted for as indefinite-lived intangible assets. These assets are maintained on the Company's condensed consolidated balance sheets until either the project underlying them is completed or the assets become impaired. If a project is completed, the carrying value of the related intangible asset is amortized over the remaining estimated life of the asset beginning in the period in which the project is completed. If a project becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value and an impairment charge is taken in the period in which the impairment occurs. In-process research and development assets are tested for impairment on an annual basis as of October 1, or ear lier if impairment indicators are present.

Goodwill

        The difference between the purchase price and the fair value of assets acquired and liabilities assumed in a business combination is allocated to goodwill. Goodwill is evaluated for impairment on an annual basis as of October 1, or earlier if impairment indicators are present.

Derivative Instruments and Embedded Derivatives

        The Company has entered into financial transactions involving a free-standing derivative instrument and embedded derivatives. These financial transactions include arrangements involving secured notes, the sale of potential future milestone payments and convertible notes. The embedded derivatives are required to be bifurcated from the host instruments because the derivatives are not clearly and closely related to the host instruments. The Company determines the fair value of each derivative instrument or embedded derivative on the date of issuance. The estimates of the fair value of these derivatives, particularly with respect to derivatives related to the achievement of milestones in the development of specific drug candidates, include significant assumptions regarding the estimates market participants would make in order to evaluate the derivative. Changes in the fair valu e of these derivatives are evaluated on a quarterly basis. Please refer to Note L, "September 2009 Financial Transactions," for further information.

C. Stock-based Compensation Expense

        The Company issues stock options, restricted stock and restricted stock units with service conditions, which are generally the vesting periods of the awards. The Company also issues, to certain members of senior management, restricted stock and restricted stock units that vest upon the earlier of the satisfaction of (i) market or performance conditions or (ii) a service condition, and stock options that vest upon the earlier of the satisfaction of (1) performance conditions or (2) a service condition. In the second and third quarters of 2010, based on the advancement of the Company's telaprevir registration program and the completion of the Company's September 2010 convertible debt offering, the Company recognized a portion of the stock-based compensation expense related to certain grants that contain performance conditions and a service condition over an implicit service period that is shorter than the service period over which the Company had been recognizing the expense. The implicit service period is the period that will be required to meet the performance condition based on the Company's estimates.

        The stock options, restricted stock and restricted stock units issued by the Company are granted under the Company's stock and option plans. In addition, the Company issues shares pursuant to an employee stock purchase plan ("ESPP"). On May 13, 2010, the Company's shareholders approved an increase in the number of shares of common stock authorized for issuance under the Company's Amended and Restated 2006 Stock and Option Plan by 12,000,000 shares, from 21,602,380 shares to 33,602,380 shares.

        The effect of stock-based compensation expense during the three and nine months ended September 30, 2010 and 2009 was as follows:

        The stock-based compensation expense by type of award during the three and nine months ended September 30, 2010 and 2009 was as follows:

        The stock-based compensation expense for the nine months ended September 30, 2009 included $9.2 million related to accelerated vesting and the modification of stock options and $1.3 million related to accelerated vesting of restricted stock awards, in each case in connection with Dr. Joshua Boger's transition arrangement. The stock-based compensation expense for the three and nine months ended September 30, 2009 also included $2.0 million and $3.5 million, respectively, related to accelerated vesting of stock options and $0.6 million and $0.9 million, respectively, related to accelerated vesting of restricted stock awards, in each case in connection with certain other executive officers' severance arrangements. The following table sets forth the unrecognized stock-based compensation expense, ne t of estimated forfeitures, as of September 30, 2010 by type of award and the weighted-average period over which that expense is expected to be recognized for the Company's stock options, restricted stock and restricted stock units, and ESPP share issuances:

D. Marketable Securities

        A summary of cash, cash equivalents and marketable securities is shown below:

        The Company reviews investments in marketable securities for other-than-temporary impairment whenever the fair value of an investment is less than amortized cost and evidence indicates that an investment's carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers the intent to sell, or whether it is more likely than not that the Company will be required to sell, the investment before recovery of the investment's amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with the Company's investment policy, the severity and the duration of the impairment and changes in value subsequent to period end.

        As of September 30, 2010, the Company had five government-sponsored enterprise securities that were in a gross unrealized loss position and no marketable securities in any other category that were in a gross unrealized loss position. The following table summarizes the fair value and gross unrealized losses related to marketable securities, aggregated by investment category and length of time that individual securities have been in a continuous gross unrealized loss position as of September 30, 2010:

        The following table summarizes the fair value and gross unrealized losses related to marketable securities, aggregated by investment category and length of time that individual securities have been in a continuous gross unrealized loss position as of December 31, 2009:

        In the three months ended September 30, 2010 and 2009, the Company had proceeds of $461.7 million and $171.8 million, respectively, from sales and maturities of available-for-sale securities. In the nine months ended September 30, 2010 and 2009, the Company had proceeds of $979.8 million and $517.2 million, respectively, from sales and maturities of available-for-sale securities.

        Realized gains and losses are determined using the specific identification method and are included in interest income on the condensed consolidated statements of operations. There were no gross realized gains and losses for the three and nine months ended September 30, 2010 and 2009.

E. Fair Value of Financial Instruments

        The fair value of the Company's financial assets and liabilities reflects the Company's estimate of amounts that it would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from sources independent from the Company) and to minimize the use of unobservable inputs (the Company's assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

        The Company's investment strategy is focused on capital preservation. The Company invests in instruments that meet credit quality standards as outlined in the Company's investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issue or type of instrument. Beginning in the fourth quarter of 2007, the Company began to shift its investments to instruments that carry less exposure to market volatility and liquidity pressures. As of September 30, 2010, the Company's investments are in money market funds and short-term government guaranteed or supported securities.

        As of September 30, 2010, all of the Company's financial assets that were subject to fair value measurements were valued using observable inputs. The Company's financial assets that were valued based on Level 1 inputs consist of a money market fund, U.S. Treasuries and government-sponsored enterprise securities, which are government-supported. The money market fund in which the Company invests also holds government-sponsored enterprise securities. During the three and nine months ended September 30, 2010 and 2009, the Company did not record an other-than-temporary impairment charge related to its financial assets. The Company's financial liabilities that were subject to fair value measurement relate to the financial transactions that the Company entered into in September 2009 and are valued based on Level 3 inputs. Please refer to Note p;nbsp;L, "September 2009 Financial Transactions." /font/p p style="FONT-FAMILY: times"font size="2"nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;The following table sets forth the Company's financial assets and liabilities subject to fair value measurements as of Septembernbsp;30, 2010: /font/p div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 10%; WIDTH: 80%; PADDING-TOP: 0pt; POSITION: relative" p style="FONT-FAMILY: times"font size="2"!-- COMMAND=ADD_TABLEWIDTH,"100%" --/font/p !-- User-specified TAGGED TABLE -- div align="center" table cellspacing="0" cellpadding="0" width="100%" border="0" tr style="HEIGHT: 0px"!-- TABLE COLUMN WIDTHS SET -- td style="FONT-FAMILY: times" align="left" width="10"/td td style="FONT-FAMILY: times" align="left" width="10"/td td style="FONT-FAMILY: times" align="left"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="7"/td td style="FONT-FAMILY: times" width="61"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="7"/td td style="FONT-FAMILY: times" width="61"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="7"/td td style="FONT-FAMILY: times" width="36"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="7"/td td style="FONT-FAMILY: times" width="45"/td td style="FONT-FAMILY: times" width="12"/td!-- TABLE COLUMN WIDTHS END --/tr tr style="HEIGHT: 0px" valign="bottom" th style="FONT-FAMILY: times" align="left" colspan="3"font size="2"nbsp;/fontbr //th th style="FONT-FAMILY: times"font size="1"nbsp;/font/th th style="BORDER-BOTTOM: #000000 1pt solid; 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TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Government-sponsored enterprise securities/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"2,900/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"2,900/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="white" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" colspan="2" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Marketable securities:/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"U.S. Treasury securities/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"28,097/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"28,097/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="white" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Government-sponsored enterprise securities/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"605,013/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"605,013/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" colspan="2" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Restricted cash/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"34,090/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"34,090/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="FONT-FAMILY: times" valign="bottom" colspan="3"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="white" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Total/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"1,202,260/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"1,202,260/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="FONT-FAMILY: times" valign="bottom" colspan="3"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF" td style="FONT-FAMILY: times" colspan="3" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Financial liabilities carried at fair value:/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="white" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" colspan="2" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Embedded derivative related to 2012 Notes/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"11,170/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"11,170/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" colspan="2" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Liability related to sale of potential future milestone payments/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"72,123/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"72,123/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="FONT-FAMILY: times" valign="bottom" colspan="3"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="white" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Total/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"83,293/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"#151;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"83,293/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="FONT-FAMILY: times" valign="bottom" colspan="3"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr/table/div !-- end of user-specified TAGGED TABLE --/div p style="FONT-FAMILY: times"font size="2"nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;The following table is a reconciliation of financial liabilities measured at fair value using significant unobservable inputs (Levelnbsp;3): /font/p div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative" p style="FONT-FAMILY: times"font size="2"!-- COMMAND=ADD_TABLEWIDTH,"100%" --/font/p !-- User-specified TAGGED TABLE -- div align="center" table cellspacing="0" cellpadding="0" width="100%" border="0" tr style="HEIGHT: 0px"!-- TABLE COLUMN WIDTHS SET -- td style="FONT-FAMILY: times" align="left"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="7"/td td style="FONT-FAMILY: times" width="93"/td td style="FONT-FAMILY: times" width="12"/td!-- TABLE COLUMN WIDTHS END --/tr tr style="HEIGHT: 0px" valign="bottom" th style="FONT-FAMILY: times" align="left"font size="2"nbsp;/fontbr //th th style="FONT-FAMILY: times"font size="1"nbsp;/font/th th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="2"font size="1"bNine Months Endedbr / Septembernbsp;30, 2010/b/font/th th style="FONT-FAMILY: times"font size="1"nbsp;/font/th/tr tr style="HEIGHT: 0px" valign="bottom" th style="FONT-FAMILY: times" align="left"font size="1"nbsp;/fontbr //th th style="FONT-FAMILY: times"font size="1"nbsp;/font/th th style="FONT-FAMILY: times" align="center" colspan="2"font size="1"bi(in thousands)/i/b/fontbr //th th style="FONT-FAMILY: times"font size="1"nbsp;/font/th/tr tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF" td style="FONT-FAMILY: times" valign="bottom" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Balance, Decembernbsp;31, 2009/font/p/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"48,659/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="top" bgcolor="white" td style="FONT-FAMILY: times" valign="bottom" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Change in fair value of derivative instruments/font/p/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"34,634/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF" td style="FONT-FAMILY: times" valign="bottom" p style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"font size="2"Balance, Septembernbsp;30, 2010/font/p/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"83,293/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td td style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times" valign="bottom" align="right" colspan="2"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr/table/div !-- end of user-specified TAGGED TABLE --/div p style="FONT-FAMILY: times"font size="2"nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;nbsp;As of Septembernbsp;30, 2010, the Company had $400.0nbsp;million outstanding in aggregate principal amount of 3.35% convertible senior subordinated notes due 2015 (the "2015 Notes") on its condensed consolidated balance sheet. At Septembernbsp;30, 2010, these 2015 Notes had a fair value of approximately $404nbsp;million as obtained from a quoted market source. /font/p/td/tr/table