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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K/A(Amendment No. 1)



ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                    to


Commission File Number: 001-34154

GRAPHIC



Facet Biotech Corporation(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of incorporation or organization)

26-3070657(I.R.S. Employer Identification No.)1500 Seaport Boulevard
Redwood City, CA 94063(Address of principal executive offices)Registrant's telephone number, including area code (650) 454-1000Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 per share
Preferred Stock Purchase Rights, no par valueSecurities registered pursuant to Section 12(g) of the Act: None(Title of Class)


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

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

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 ý    No o

Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes o    No o

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

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

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a smaller
reporting company)

Smaller reporting company o


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

The aggregate market value of shares of common stock held by non-affiliates of the registrant, based upon the closing sale price of a share of common
stock on June 30, 2009 (the last business day of the registrant's most recently completed second fiscal quarter), as reported on the NASDAQ Global Select Market, was $225,906,370.

As
of February 15, 2010, the registrant had outstanding 25,093,117 shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

None.



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FACET BIOTECH CORPORATION        FORM 10-K/A        TABLE OF CONTENTS



PagePART IIIItem 10. Directors, Executive Officers and Corporate
Governance

1Item 11. Executive Compensation

11Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters

38Item 13. Certain Relationships and Related Transactions,
and Director Independence

42Item 14. Principal Accountant Fees and
Services

44PART IVItem 15. Exhibits and Financial Statement
Schedules

45Signatures

46


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EXPLANATORY NOTE

We are filing this Amendment No. 1 on Form 10-K/A (this "Amendment") to amend our Annual Report on
Form 10-K for the fiscal year ended December 31, 2009, as filed with the Securities and Exchange Commission (the "SEC") on February 24, 2010 (the "10-K").
The principal purpose of this Amendment is to include in Part III the information that was to be incorporated by reference to the Proxy Statement for our 2010 Annual Meeting of Stockholders.
This Amendment hereby amends Part III, Items 10 through 14.

Except
as otherwise expressly stated herein, this Amendment does not reflect events occurring after the date of the 10-K, nor does it modify or update the disclosure
contained in the 10-K in any way other than as required to reflect the amendments discussed above and reflected below. Accordingly, this Amendment should be read in conjunction with the
10-K and our other filings made with the SEC on or subsequent to February 24, 2010.

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PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

DIRECTORS

The names of the members of our Board of Directors, their ages and certain information about them as of March 23, 2010, are set
forth below. The Board is presently composed of six members. The terms of each director will expire upon the election and qualification of the directors to be nominated at the next annual meeting of
the stockholders.

Director

Other Positions with the Company

Age

Director
SinceBrad Goodwin

Chairperson of the Board

55

2008Faheem Hasnain

President and Chief Executive Officer

51

2008Hoyoung Huh, M.D., Ph.D.



40

2009Gary Lyons



58

2008David R. Parkinson, M.D.



59

2008Kurt von Emster



42

2009


The
following are brief biographies of each current member of the Board.

Brad Goodwinwas elected to serve on the Board in November 2008. Mr. Goodwin is currently the President and Chief Executive Officer
of Keren Pharmaceutical, Inc., a private company developing external guide sequences (EGSs) as a method of silencing RNA. From 2001 to 2006, Mr. Goodwin served as Chief Executive Officer
and a member of the Board of Directors of Novacea, Inc. ("Novacea"), a publicly held biopharmaceutical company focused on
in-licensing, developing and commercializing novel therapies for the treatment of cancer. From 2000 to 2001, Mr. Goodwin served as President, Chief Operating Officer and Founder of
Collabra Pharma, a privately
held company offering pharmaceutical product licensing and development. From 1987 to 2000, Mr. Goodwin held various positions at Genentech, Inc., including most recently Vice President
of Finance. While at Genentech, in addition to his finance responsibilities, he helped structure and negotiate significant product licenses, including the license of Rituxan®, and developed
long-range strategic plans. Mr. Goodwin is currently a member of the Board of Directors of Rigel
Pharmaceuticals, Inc. ("Rigel") and NeurogesX Inc., both of which are publicly held biotechnology companies. In the past five years,
Mr. Goodwin also served on the board of directors of: PDL BioPharma, Inc. ("PDL") (April 2006 to December 2008), CoTherix, Inc.
(January 2004 to January 2007) and Novacea, Inc. (February 2002 to December 2006). Mr. Goodwin received his B.S. degree in accounting and finance from the University of California at
Berkeley.

Faheem Hasnainwas elected to serve on the Board in November 2008. He currently serves as President and Chief Executive Officer of the
Company. Mr. Hasnain was the President and Chief Executive Officer of PDL, having joined PDL in October 2008. From October 2004 to September 2008, Mr. Hasnain served at Biogen
Idec Inc. ("Biogen"), most recently as its Executive Vice President, Oncology/Rheumatology Strategic Business Unit. From March 2002 to September
2004, Mr. Hasnain served as President, Oncology Therapeutics Network, at Bristol-Myers Squibb Company ("BMS"). From 2000 to 2002,
Mr. Hasnain served as Vice President, Global eBusiness, at GlaxoSmithKline and, from 1988 to 2000, he served in key commercial and entrepreneurial roles within GlaxoSmithKline and its
predecessor organizations, spanning global eBusiness, international commercial operations, sales and marketing. In the past five years, Mr. Hasnain also served on the board of directors of: PDL
(October 2008 to December 2008) and Tercica, Inc. (February 2008 to October 2008). Mr. Hasnain received a B.H.K. and B.Ed. from the University of Windsor Ontario in Canada.

Hoyoung Huh, M.D, Ph.D.was elected to serve on the Board in September 2009. Dr. Huh is currently Chairman of the Board of BiPar
Sciences, Inc. ("BiPar"), a leading oncology therapeutics

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company
and pioneer in the novel mechanism of DNA-repair inhibition. He served as President and Chief Executive Officer of BiPar from March 2008 to November 2009. BiPar was acquired by the
global pharmaceutical company, sanofi-aventis, in April of 2009, and remains as a center of innovation within sanofi-aventis. From March 2005 to February 2008, Dr. Huh served at Nektar
Therapeutics, Inc., as a member of its board of directors, Chief Operating Officer and head of the PEGylation Business Unit. Dr. Huh has led multiple partnerships with major
pharmaceutical companies, including Bayer AG, Baxter International Inc., BMS, Novartis AG, Pfizer, Inc and Roche Holding Ltd. Dr. Huh is a thought leader and frequent speaker on
topics including technology licensing, mergers and acquisitions, and innovative product launches. From September 1997 to February 2005, Dr. Huh served at McKinsey & Company, a global
management consulting firm, where he served most recently as a partner and a leader in the healthcare and biotechnology practice across U.S., Europe and Asia. He currently serves on the board of
directors at BayBio, a biotechnology industry association, and Interplast, Inc. SciDose LLC, Epizyme, Inc. and Jennerex Biotherapeutics, Inc., each of which is a private
entity. In the past five years, Dr. Huh also served on the board of directors of Nektar Therapeutics, Inc. from February 2008 to June 2009. Dr. Huh received his M.D. degree from
Cornell University, Ph.D. in Genetics/Cell Biology from Cornell University/Sloan-Kettering Institute, and his A.B. in Biochemistry from Dartmouth College.

Gary Lyonswas elected to serve on the Board in November 2008. Mr. Lyons served as the President and Chief Executive Officer of
Neurocrine Biosciences, Inc. ("Neurocrine") from February 1993 to January 2008. Prior to joining Neurocrine, Mr. Lyons held a number of
senior management positions at Genentech, including Vice President of Business Development and Vice President of Sales. Mr. Lyons also serves on the Boards of Directors of Rigel, Vical
Incorporated, Poniard Pharmaceuticals, Inc. and Neurocrine, each of which is a publicly traded biotechnology company. In the past five years, Mr. Lyons also served on the board of
directors of PDL from July 2008 to December 2008. Mr. Lyons received his B.S. in marine biology from the University of New Hampshire and his M.M. from Northwestern University's J.L. Kellogg
Graduate School of Management.

David R. Parkinson, M.D.was elected to serve on the Board in November 2008. Since September 2007, Dr. Parkinson has served as
President and Chief Executive Officer of Nodality, Inc., a South San Francisco, California-based biotechnology company focused on the biological characterization of signaling pathways in
patients with malignancy to enable more effective therapeutics development and clinical decision-making. From March 2006 to September 2007, Dr. Parkinson served as Senior Vice President,
Oncology Research and Development, at Biogen where he oversaw all of Biogen's oncology discovery research efforts and the development of its oncology pipeline. From May 2003 to March 2006,
Dr. Parkinson served as Vice President, Oncology Development, at Amgen Inc. From January 1997 to May 2003, Dr. Parkinson served as Vice President, Global Oncology Clinical
Development, at Novartis. During his tenures at Amgen and Novartis, Dr. Parkinson was responsible for clinical development activities leading to a series of successful global drug registrations
for important cancer therapeutics, including Gleevec®, Femara®, Zometa®, Kepivance®, and Vectibix®. Dr. Parkinson worked at the
National Cancer Institute from 1990 to 1997, serving as Chief of the Investigational Drug Branch, then as Acting Associate Director of the Cancer Therapy Evaluation Program, before leaving for
Novartis. Prior to the NCI, Dr. Parkinson held academic positions at the M.D. Anderson Cancer Center, University of Texas and New England Medical Center of Tufts University School of Medicine.
Dr. Parkinson is a past Chairman of the Food & Drug Administration (FDA) Biologics Advisory Committee and is a recipient of the FDA's Cody Medal. He currently serves on the National
Cancer Policy Forum of the Institute of Medicine and is a member of the FDA's Science Board. Dr. Parkinson received his M.D. degree from the University of Toronto Faculty of Medicine and
Hematology/Oncology training at McGill University and New England Medical Center.

Kurt von Emsterwas elected to serve on the Board in February 2009. Since March 2009, Mr. von Emster has served as a Managing
Director of venBio LLC, a life sciences advisory group. From November 2000 to February 2009, Mr. von Emster was with MPM Capital serving most recently as a

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Managing
Director of MPM BioEquities and as Portfolio Manager for the MPM BioEquities Fund. From July 1989 to November 2000, he was with the Franklin Templeton Group, most recently as a Vice President
and Portfolio Manager. He is currently a member of the board of directors at Somaxon Pharmaceuticals, Inc., a public biotechnology company, and Metabolex Inc., a privately held drug
development company. He is a Chartered Financial Analyst (CFA) and a member of the Association for Investment Management and Research and of the Security Analysts of San Francisco. Mr. von
Emster received his B.S. from the University of California at Santa Barbara.

Committees of the Board

We are managed under the direction of the Board. The Board has established five standing committees: an audit committee, a compensation
committee, a nominating and governance committee, a scientific review committee and an equity grant committee. The table below lists the members of each of the five committees of the Board as of
March 23, 2010.

Committee

MembersAudit

Brad Goodwin (Chairperson)
Hoyoung Huh, M.D., Ph.D.
Gary Lyons
Kurt von EmsterCompensation

Brad Goodwin
Hoyoung Huh, M.D., Ph.D.
Gary Lyons (Chairperson)
Kurt von EmsterNominating and Governance

Brad Goodwin
Gary Lyons
David R. Parkinson, M.D.
Kurt von Emster (Chairperson)Scientific Review

David R. Parkinson, M.D.
Hoyoung Huh, M.D., Ph.D.Equity Grant

Faheem Hasnain


Attendance at Meetings

The table below lists the number of meetings that occurred and actions taken by written consent during 2009 of the Board and each of
the committees of the Board. Each director currently serving attended more than 75% of the aggregate number of the meetings of the Board and the Board committees on which each director sits.

Meetings

Written ConsentsBoard


24


5Nominating and Governance Committee


7


Audit Committee


9


Compensation Committee


8


4Scientific Review Committee





Equity Grant Committee





12


We
have no formal policy requiring our directors to attend annual meetings. We believe that annual meetings provide an opportunity for stockholders to communicate with directors and
therefore

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request
that each of our directors make a reasonable effort to attend the annual meeting. Four of our five then-serving directors attended our 2009 Annual Meeting of Stockholders.

EXECUTIVE OFFICERS

Biographical information regarding our executive officers as of March 23, 2010 is set forth below. Under our bylaws, each
executive officer is appointed annually by the Board, and each holds office until such officer resigns, is removed, is otherwise disqualified to serve, or such officer's successor is elected and
qualified.

Name

Age

PositionHerb Cross(1)


38

Vice President, FinanceAndrew Guggenhime


41

Senior Vice President and Chief Financial OfficerFaheem Hasnain(2)


51

President and Chief Executive OfficerManinder Hora, Ph.D.


56

Vice President, Product and Quality OperationsTed Llana, Ph.D.


46

Senior Vice President, Commercial and Corporate DevelopmentMark Rolfe


50

Senior Vice President and Chief Scientific OfficerFrancis Sarena


39

Vice President, General Counsel and Secretary


(1)Mr. Cross
is identified in this section as an executive officer of the Company because he is an "officer" for purposes of Section 16 of the
Securities Exchange Act of 1934 because Mr. Cross is our principal accounting officer.(2)Biographical
information for Mr. Hasnain is included in the section above titled "Board of Directors".


Herb Cross, our Vice President, Finance, and principal accounting officer, joined us in December 2008. Prior to joining
the Company, Mr. Cross served as the Corporate Controller and principal accounting officer of PDL, having joined PDL in November 2006. From November 1999 to June 2006, Mr. Cross held
positions of increasing responsibility at Neoforma, Inc. ("Neoforma"), most recently as Vice President of Finance, a position he held since
February 2001. Neoforma was a provider of supply chain management solutions for the healthcare industry before it was acquired by Global Healthcare Exchange, LLC in March 2006. From August 1994
to November 1999, Mr. Cross was employed by Arthur Andersen LLP, an independent public accounting firm, most recently as a Manager in the Assurance and Business Advisory Services group,
during which time Mr. Cross managed the audits of both public and private corporations in the software, technology, retail and manufacturing industries. Mr. Cross is a Certified Public
Accountant and received his B.S. in Business Administration, with a dual emphasis in Finance and Accounting, from the Haas School of Business at the University of California at Berkeley.

Andrew Guggenhime, our Senior Vice President and Chief Financial Officer, has served in his current position since December 2008. From
April 2006 to December 2008, Mr. Guggenhime served as the Senior Vice President and Chief Financial Officer of PDL. From January 2000 to March 2006, Mr. Guggenhime served at Neoforma,
most recently as Chief Financial Officer. Neoforma was a provider of supply chain management solutions for the healthcare industry before it was acquired by Global Healthcare Exchange, LLC in
March 2006. From 1996 until 2000, Mr. Guggenhime was a part of the Healthcare Investment Banking group of Merrill Lynch & Co., most recently as a Vice President, where he
specialized in working with healthcare services firms and healthcare Internet companies on a variety of transactions, including mergers and acquisitions, initial public offerings, add-on
equity offerings and debt offerings. Prior to joining Merrill Lynch & Co., Mr. Guggenhime worked at Wells Fargo & Company in a number of capacities, most recently as
Assistant Vice President in Wells Fargo's Real Estate Capital Markets group. Mr. Guggenhime received his B.A. in International Politics and Economics from Middlebury College and his M.M. from
the J.L. Kellogg Graduate School of Management at Northwestern University.

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Maninder Hora, Ph.D., our Vice President, Product and Quality Operations, joined us in December 2008.
Dr. Hora has over 25 years of drug development experience in the biopharmaceutical and pharmaceutical industry. From July 2006 to December 2008, Dr. Hora served at PDL most
recently as Vice President, Product Operations. From 1986 to 2006, Dr. Hora held positions of increasing responsibility with Chiron Corporation (now Novartis) in Emeryville, California, serving
most recently at Chiron as Vice President of Process and Product Development. Dr. Hora served as a key member of various teams that successfully registered eight drugs or vaccines in the U.S.
and Europe during his 20-year tenure at Chiron. Dr. Hora has also held positions at Wyeth Pharmaceuticals and GlaxoSmithKline PLC prior to joining Chiron. Dr. Hora
completed his Ph.D. in Bioengineering from the Indian Institute of Technology, Delhi, India, and was a Fulbright Scholar at the University of Washington, Seattle prior to joining the industry.

Ted Llana, Ph.D., our Senior Vice President, Commercial and Corporate Development, joined us in January 2009. From September 2001 to
November 2008, Dr. Llana held various positions of increasing responsibility at Biogen, most recently as Vice President, Oncology/Rheumatology Strategic Business Unit. In his most recent role
at Biogen, he defined and executed the strategy to grow and progress Biogen's oncology and rheumatology pipelines and managed Biogen's Rituxan® collaboration with Genentech, Inc.
Prior to working in the oncology business unit, Dr. Llana headed up corporate strategy at Biogen and led global marketing at Biogen. Dr. Llana's prior business experience includes
serving as a partner at Documedics, Inc. and as a Vice President at Covance, Inc. where he provided strategic consulting on product commercialization and marketing in the pharmaceutical,
biotechnology and medical device industries. Dr. Llana began his career as a Biologist at the National Cancer Institute. He received his Ph.D. in Cellular Immunology from Cornell University and
his MBA from Georgetown.

Mark Rolfe, Ph.D., our Senior Vice President and Chief Scientific Officer, joined us in August 2009. From December 1999 to July 2009,
Dr. Rolfe held various positions of increasing responsibility at Millennium: The Takeda Oncology Company, most recently as Vice President, Oncology Discovery. From 1993 to 1999,
Dr. Rolfe worked at Mitotix, Inc., where he last served as Director, Molecular Biology. From 1989 to 1993, Dr. Rolfe worked at Celltech Ltd., where he last served as
Principal Scientist. Prior to Celltech, he completed post-doctoral fellowships at the Columbia University College of Physicians and Surgeons in New York and the Imperial Cancer Research
Fund in London. He received his Ph.D. from the National Institute for Medical Research, London, and his B.A. and M.A. from Brasenose College, Oxford University.

Francis Sarena, our Vice President, General Counsel and Secretary, has served in his current position since December 2008. From April 2006
to December 2008, Mr. Sarena held positions of increasing responsibility with PDL most recently as Vice President, General Counsel and Secretary of PDL. Mr. Sarena served as a Corporate
Associate at Bingham McCutchen LLP from September 2000 to April 2006 representing clients primarily in merger and acquisition transactions, corporate and securities law matters and equity
financing transactions. Mr. Sarena received his J.D. from University of California, Berkeley, Boalt Hall School of Law, and his B.S. in Finance from San Francisco State University.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Our directors and executive officers are required by Section 16(a) of the Securities Exchange Act of 1934 to timely file with
the SEC certain reports regarding their beneficial ownership of our common stock. These persons are also required to furnish us with copies of these reports they file with the SEC. To our knowledge,
based solely on our review of such Section 16 Reports we have received and written representations from our directors and executive officers, we believe that our officers and executive officers
complied with all filing requirements under Section 16(a) during 2009.

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CORPORATE GOVERNANCE

Code of Ethics

We have adopted a Code of Business Conduct (the "Code of Conduct"), which constitutes a
code of ethics as defined in Item 406 of SEC Regulation S-K. Our Code of Conduct applies to all our officers, directors and employees. A copy of our Code of Conduct is
available on our website atwww.facetbiotech.com/CodeOfConduct.

You
may also request a free copy of our Code of Conduct from:



Audit Committee

Our Audit Committee operates under a written charter, which is available in the "Corporate Governance" section on our website at
www.facetbiotech.com.

Mr. Goodwin
has served as the Chairperson of our Audit Committee since December 2008 and Mr. von Emster has served as a member of our Audit Committee since February 2009.
The Board, based on the recommendation of our Nominating and Governance Committee, has determined that Mr. Goodwin and Mr. von Emster are audit committee financial experts, as defined in
Item 407(d)(5)(2) of Regulation S-K promulgated by the SEC. The members of our Audit Committee, Mr. Goodwin, Mr. Lyons, Dr. Huh and Mr. von
Emster, are independent members of the Board under Nasdaq's Marketplace rules for listed companies.

The
primary purpose of our Audit Committee is to oversee our accounting and financial reporting process and the audits of our financial statements, assist the Board in fulfilling its
oversight responsibilities by reviewing and reporting to the Board on the integrity of the financial reports and other financial information we provide to any governmental body or to the public, and
on our compliance with these legal and regulatory requirements.

The
functions of our Audit Committee include:



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Compensation Committee

Our Compensation Committee operates under a written charter, which is available in the "Corporate Governance" section on our website at
www.facetbiotech.com.

The
primary purpose of our Compensation Committee is to discharge the Board's responsibilities relating to compensation and benefits of our officers and directors. In carrying out these
responsibilities, our Compensation Committee reviews all components of officer and director compensation for consistency with our Compensation Committee's compensation philosophy, as in effect from
time to time. The Compensation Committee also evaluates the design of our compensation policies and practices to ensure that incentives are aligned with the goals of the Company and do not encourage
or incentivize individuals to undertake excessive or inappropriate risk. The Compensation Committee also provides a level of oversight of the operation of our compensation programs
thattogether with the significant level of Board oversight of the Company's operationsallows the periodic evaluation of the level of risk taking by employees.

The
functions of our Compensation Committee include:



Our
Chief Executive Officer does not participate in the determination of his own compensation or the compensation of directors. However, he makes recommendations to our Compensation
Committee regarding the amount and composition of the compensation of our other officers and he participates in the Compensation Committee's deliberations about these other officers' compensation.

Our
Compensation Committee has the sole authority to retain and obtain advice or assistance from compensation consultants as well as legal counsel or accounting or other advisors. The
Company would bear the fees and costs of any such consultant or advisor engaged by our Compensation Committee. Our Compensation Committee has not yet engaged any compensation consultants.

Our
Compensation Committee expects that it would generally engage independent compensation consultants to provide:



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Our
management may from time to time separately retain its own compensation consultants to advise on various matters related to evaluating and designing compensation programs. These
management-engaged compensation consultants may coordinate with our Compensation Committee or our Compensation Committee's independent compensation consultant. The Company has not yet engaged any
compensation consultants.

Nominating and Governance Committee

Our Nominating and Governance Committee operates under a written charter, which is available in the "Corporate Governance" section on
our website at www.facetbiotech.com.

The
primary purpose of our Nominating and Governance Committee is to:



Our
Nominating and Governance Committee regularly assesses the optimum size of the Board and its committees and the needs of the Board for various skills, background and business
experience in determining whether it is advisable to consider additional candidates for nomination.

Evaluation of Director Nominations

In fulfilling its responsibilities to select, and recommend to the Board, director nominees for each election of directors, our
Nominating and Governance Committee considers the following factors:



The
goal of our Nominating and Governance Committee is to ensure that the Board is composed of directors that bring to the Company a variety of perspectives and skills derived from high
quality business and professional experience. Directors should possess the highest personal and professional

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ethics,
integrity and values, and be committed to representing the best interests of our stockholders. They must also have an inquisitive and objective perspective and mature judgment. Director
candidates,
in the judgment of our Nominating and Governance Committee, must also have sufficient time available to perform all Board and committee responsibilities. Board members are expected to prepare for,
attend and participate in all Board and applicable committee meetings.

Other
than the foregoing, there are no stated minimum criteria for director nominees, although our Nominating and Governance Committee may also consider such other factors as it may
deem, from time to time, to be in the best interests of the Company and our stockholders.

Our
Nominating and Governance Committee annually evaluates the Board members who are willing to continue in service against the criteria set forth above in determining whether to
recommend these directors for re-election at the next annual meeting of stockholders.

We
do not have a formal policy with regard to the consideration of diversity in identifying director nominees. Our Corporate Governance Guidelines
("Guidelines"), however, provide that our Nominating and Governance Committee should review with the Board the appropriate skills and characteristics
required of Board members in the context of the current make-up of the Board. The Guidelines provide that the assessment should include issues of diversity, age, skills such as
understanding of research, manufacturing, development, technology and finance, and international background.

The
primary consideration in the searches our Nominating and Governance Committee has conducted to date has been to identify candidates with professional backgrounds that would
complement those of existing Board members. The Nominating and Governance Committee has considered diversity, including racial, ethnic and gender diversity as one attribute in the process of
identifying candidates in the director searches it has conducted.

As
part of conducting director searches, our Nominating and Governance Committee has reported to the Board on its assessment of Board members skills as specified in our Guidelines.

Candidates for Nomination as Director

Candidates for nomination as director come to the attention of our Nominating and Governance Committee from time to time through
incumbent directors, management, stockholders or third parties. These candidates may be considered at meetings of our Nominating and Governance Committee at any point during the year. Such candidates
are evaluated against the criteria set forth above. If our Nominating and Governance Committee believes at any time that it is desirable that the Board consider additional candidates for nomination,
the committee may poll directors and management for suggestions or conduct research to identify possible candidates and may, if our
Nominating and Governance Committee believes it is appropriate, engage a third-party search firm to assist in identifying qualified candidates.

Our
Nominating and Governance Committee's policy is to evaluate any recommendation for director nominee proposed by a stockholder and our bylaws also permit stockholders to nominate
directors for consideration at an annual meeting, subject to certain conditions. Any recommendation for director nominee must be submitted in writing to:



Our
bylaws require that any director nomination made by a stockholder for consideration at an annual meeting must be received in writing 90 to 120 days prior to the anniversary of
the date of the

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prior
year's annual meeting of stockholders as first specified in the Company's notice of annual meeting (without regard to any postponements or adjournments of such meeting after such notice was
first sent). If no annual meeting was held in the previous year, or the date of the annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous
year's proxy statement, a stockholder's director nomination notice must be received in writing not later than 90 days prior to the annual meeting or the 10th day following
the date on which public announcement of the date of such annual meeting is first made.

Each
written notice containing a stockholder nomination of a director at an annual meeting must include:



Any
other recommendation of a director nominee must include:



All
director nominees must also complete a customary form of directors' questionnaire as part of the nomination process. The evaluation process may also include interviews and additional
background and reference checks for non-incumbent nominees, at the discretion of our Nominating and Governance Committee.

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ITEM 11.    EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Background Regarding Spin-off from PDL

In April 2008, PDL announced a plan to spin off (the "Spin-off") its
biotechnology operations (the "Biotechnology Operations") into a separate publicly traded U.S. company in order to separate the Biotechnology Operations
from PDL's antibody humanization royalty related operations (the "Royalty Operations"). In connection with preparing for the
Spin-off, we were incorporated in Delaware on July 29, 2008.

In
December 2008, PDL transferred to us the Biotechnology Operations and all but two of PDL's employees became employees of the Company. On December 18, 2008, the
Spin-off was effective, we ceased being a subsidiary of PDL and we became a publicly traded company independent from PDL.

Prior
to the Spin-off, the Biotechnology Operations were operated by PDL. PDL and the Biotechnology Operations experienced a significant amount of change from 2007 until the
Spin-off and the PDL Compensation Committee was particularly active throughout this period addressing a variety of compensation-related matters that emerged as a result of these changes.
During this time, PDL adopted broad-based cash retention bonus programs. Some of these retention benefits as originally offered by PDL were payable through the end of 2009. In connection with the
Spin-off, we offered these same retention benefits to ensure that employees joining the Company from PDL had comparable compensation packages and to retain them after the
Spin-off. Some of these retention programs and incentives were targeted at or designed for executive officers of PDL who became executive officers of the Company. The retention
compensation that was earned under these programs was in addition to what we would otherwise pay our officers and employees with respect to their service to the company. These retention programs ended
in 2009. The circumstances in which these retention bonus programs were adopted were unique and we do not expect to implement similar retention programs in the foreseeable future.

Also,
because the vast majority of PDL's employees solely supported the Biotechnology Operations during 2008 and because three of the named executive officers identified
herein were officers of PDL until mid-December 2008, we have included in the Summary Compensation Table the compensation earned by these officers as officers of PDL and refer in various
parts of this Compensation Discussion and Analysis to compensation policies of and decisions made by PDL or its Compensation Committee.

Compensation Program Objectives

The goal of our executive compensation program is to effectively motivate our executive leadership to achieve the stated goals of the
Company and to perform in a manner that maximizes stockholder value. To that end, we seek to maintain an executive compensation program that ensures that we can successfully recruit high quality
candidates for senior leadership positions and retain these executives through appropriate base compensation, equity and cash awards and incentives tied to their individual performance and their
contribution to our overall performance as measured against the achievement of company-wide goals and objectives.

Our
Compensation Committee annually reviews and evaluates the components and effectiveness of our executive compensation program to ensure that our programs are consistent with our goals
and that our executive compensation program is aligned with the marketplace in which we compete for executive talent.

Our
Compensation Committee solicits and receives input from our Human Resources, Finance and Legal departments and Chief Executive Officer and takes into account this input in
determining

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the
structure and amount of compensation for our individual officers and in designing compensation plans and programs. Our Compensation Committee also solicits input from other Outside Directors in
evaluating the performance of our Chief Executive Officer. Members of management of our Human Resources, Finance and Legal departments and our Chief Executive Officer attend portions of our
Compensation Committee's meetings; however, our Chief Executive Officer is not present during voting or deliberations regarding his compensation. Members of management of our Human Resources, Finance
and Legal departments are not present during voting regarding our Chief Executive Officer's compensation, but may be asked to participate in certain of the deliberations regarding our Chief Executive
Officer's compensation.

We
expect that from time to time our Compensation Committee will use the services of independent compensation consultants to provide advice regarding executive compensation independent
of the advice and recommendations of management, including with respect to the composition of our peer group, gathering peer group and other relevant executive compensation information and analysis of
this information and preparing "tally sheets" of each officer's compensation for our Compensation Committee's review.

Compensation Program Elements

Compensation payable to our executive officers is primarily comprised of five elements, designed together to motivate our officers to
perform in a manner that enables us to meet our strategic goals and annual business objectives and increase stockholder value. The five elements which comprise our total compensation program are
(1) base salary, (2) employee benefits, (3) annual cash incentives, (4) equity incentives and (5) change in control and severance benefits. Each of these elements is
discussed in more detail below.

Peer Group Selection and Benchmarking

The Compensation Committee periodically reviews and revises the list of peer group companies (the "Peer Group
List") that the Compensation Committee uses to compare the Company's officer compensation programs and obtain comparative data on officer and director compensation. The
Compensation Committee customarily receives input in this review process from the Company's management. Peer group companies are selected based on whether the company is similarly-sized based on the
number of employees, the amount of annual research and development expenses and market capitalization. In determining whether we should include a company on the Peer Group List, the Compensation
Committee also evaluates the therapeutic area or areas on which the company focuses, the stages of development of its products and whether we would compete for executive officer talent with the
company. Our Peer Group List is currently composed of the companies listed below:



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Our
Human Resources group periodically purchases third-party compensation benchmark surveys, including the Global Life Sciences Survey produced by Radford, and prepares and provides
additional analyses to assist our Compensation Committee's evaluation and comparison of each element of executive compensation. We have obtained comparative compensation data from Radford with respect
to our peer group. Because Radford requires a minimum of 20 companies to prepare comparative compensation reports, we included the following companies with our peer group for this purpose:



We
expect that our Compensation Committee would supplement the third-party compensation information that our Human Resources group obtains with information the Compensation Committee
would obtain from time to time from independent compensation consultants.

Our
Compensation Committee reviews the survey and peer group compensation information it receives to ensure that our total compensation program for executive officers is competitive and
that we retain and properly motivate our executive officers.

Base Salary

Base salary is the fundamental, fixed element of our executive officers' compensation and the foundation for each officer's total
compensation.

The
initial amount of base salary our Compensation Committee determines to pay each of our officers is primarily driven by two factors: (1) the amount the market would pay for
similar positions with like responsibilities and (2) the officer's experience, knowledge, skills and education. In assessing what the market would pay for a given position, our Compensation
Committee relies on peer group executive compensation information prepared by outside compensation consultants and compensation benchmark surveys we purchase. Our Compensation Committee currently
targets the 50th percentile of the market for an officer's total cash compensation, including base salary. However, the officer's overall experience and education would then
determine where within the market salary range the officer's base salary initially would be set.

Our
Compensation Committee annually reviews each officer's base salary and customarily adjusts it based on three elements: (1) performance of the officer's respective functional
responsibilities against defined objectives, (2) individual performance, using the performance areas identified below, and (3) changes in the competitive marketplace using benchmarks of
comparable positions in the biotech industry. To evaluate functional performance, our Compensation Committee receives a performance assessment from our Chief Executive Officer, rating each officer's
individual performance. Each officer's individual and functional area performance is measured through our annual focal review process, which assesses a variety of performance areas and evaluates
whether and to what extent the officer's performance meets, exceeds or falls below expectations and how consistently or often performance exceeds expectations. The areas for individual performance
review include contributions towards the meeting of corporate objectives and:



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To
ensure that each of our officers is compensated commensurate within market parameters, our Compensation Committee reviews peer group and benchmark survey information, using outside
compensation surveys, to assess the reasonableness and competitiveness of annual base salaries and any proposed salary increase for our officers. This benchmarked data helps to ensure that our overall
annual adjustments to salary are designed to appropriately reward, incentivize and retain our officers.

Shortly
prior to the events described under the heading "Background Regarding Spin-off from PDL" above, PDL had an employee base of nearly 1,200 employees,
which is approximately six times greater than our current employee base, a market capitalization several times larger than our current market capitalization and aggregate annual revenue and expense
amounts that were several times our expected annual revenue and expense amounts. As a result, PDL's peer group was significantly different than our current peer group and consisted of
entities that are significantly larger than companies we currently consider to be our peers based on several measures. In addition, during this time, PDL had a compensation philosophy that targeted
the 60th percentile of cash compensation for its peer group, whereas our current compensation philosophy is to target the 50th percentile for cash
compensation. The base salaries of some of our officers were originally established prior to the events described under the heading "Background Regarding Spin-off from PDL"
above.

In
February 2010, our Compensation Committee evaluated the 2009 performance of each of our officers, including our named executive officers, and the information relating to competitive
salary levels, to determine what adjustments, if any, should be made to each officer's annual base salary. Based on this evaluation, our Compensation Committee approved the adjustments to our named
executive officers' annual base salaries identified in the table below.

2009
Base Salary

2010
Base Salary

Increase 2009
to 2010 (%)Faheem Hasnain

$
550,000

$
550,000


Andrew Guggenhime

$
362,050

$
362,050


Ted Llana

$
300,000

$
306,000


2.0
%Mark Rolfe

$
320,000

$
326,000


4.5
%(1)Maninder Hora

$
294,150

$
294,150





(1)In
accordance with Company policy, Dr. Rolfe's merit increase was prorated based on his August 20, 2009 start date with the Company and
equaled 1.9% after the proration factor was applied.


Although
each of our named executive officers met or exceeded expectations in 2009, our Compensation Committee determined to not increase certain officers' annual base salaries for 2010.
With respect to Mr. Hasnain's base salary, the determination to keep his base salary unchanged for 2010 was based on his experience as a public company chief executive officer and his pay
position relative to current peer company data for his position. Mr. Guggenhime's and Dr. Hora's annual base salaries were left unchanged for 2010 because each of their annual base
salaries is significantly above the 50th percentile of annual base salary for comparable positions in our current peer group. Dr. Llana's base salary increase was based on
his performance with the Company since his hire in

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January
2009. Of particular note was Dr. Llana's contribution to the successful completion of the collaboration transaction with Trubion. Dr. Rolfe's increase was based on his
contributions since joining the Company in August 2009, and his expanded role as interim head of our Clinical organization in the absence of a Chief Medical Officer.

Employee Benefits

We provide our employees, including our officers, with customary benefits, including medical, dental, vision and life insurance
coverage, short-term and long-term disability coverage and the ability to participate in our 401(k) plan, which provides that we will match contributions up to certain limits
based on tenure of employment with credit given for tenure at PDL, and our tax-qualified employee stock purchase plan. The costs of our insurance coverage benefits are largely borne by us;
however, employees do pay portions of the premiums for some of these benefits. We believe these benefits are of the type customarily offered to employees by our peer group and in our industry.

This
element of compensation is intended to provide assurance of financial support in the event of illness or injury, encourage retirement savings through a 401(k) plan and encourage
equity ownership by our employees through our employee stock purchase plan.

Cash Incentive Bonuses

Another component of our officers' total compensation is the annual cash bonus. The annual cash bonus is intended to encourage high
levels of individual and Company performance by rewarding our officers for their individual contributions and our overall performance during the year.

Each
employee's baseline target bonus, including each officer's target bonus, is determined based on the salary grade or level of the employee and equals a percentage of the employee's
annual base salary. Our Compensation Committee sets the target bonus levels by salary grade level for all officers and employees, based on review of peer and benchmarking data and taking into
consideration the targeted levels of other elements of compensation. The targeted bonus levels are intended to put a higher amount of total compensation and cash compensation at risk based on our
performance and individual performance for officers and employees with relatively higher responsibilities. Our Compensation Committee will review target bonuses for officers each year with this goal
in mind.

The
actual amount of bonus to be received by each officer is adjusted from the target bonus level based on our performance during the year, as determined by the Board, and individual
performance of the officer during the year. As noted above, our Chief Executive Officer conducts the annual assessment of the performance of officers other than our Chief Executive Officer, and our
Compensation Committee reviews our Chief Executive Officer's assessment of the other officers. Our Compensation Committee is solely responsible for evaluating our Chief Executive Officer's performance
and assesses his performance annually. The individual performance of each officer is reviewed by our Compensation Committee, which determines the amount of target bonus adjustment.

2009 Bonus Program

In March 2009, the Board approved a performance-based bonus program for calendar year 2009 (the "2009 Bonus
Program") pursuant to which eligible employees, including officers, would receive cash bonuses for the successful achievement of certain corporate goals during 2009.

In
June and September 2009, our Compensation Committee reviewed management's estimate of performance against the goals under the 2009 Bonus Program and provided input as to the
reasonableness of management's estimates used for financial statement accrual purposes. In December 2009, the Board evaluated performance against the goals under the 2009 Bonus Program and determined
to fund the bonus pool under the 2009 Bonus Program at 110% of target.

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A
description of the goals under the 2009 Bonus Program, their respective possible weighting and the actual weighting based on the Board's assessment of performance against the goals
under the 2009 Bonus Program are set forth in the table below.

WeightingGoal Category

Goal Met

Possible

Actual1. Progress our Pipeline




25
%

29.8
%a. Undertake strategic review of daclizumab program

Yesb. Advance clinical development of elotuzumab as a monotherapy and in combination

Yesc. Advance clinical development of PDL192

Nod. Advance understanding of PDL192 signaling pathways

Yese. Advance pre-clinical development of PDL241

Yes2. Expand our Pipeline




25
%

26.2
%a. Advance technology platform strategy

Yesb. Enter into collaboration or other strategic technology platform transaction

Noc. Augment clinical pipeline with at least two clinical stage products

Partially3. Enhance Financial Strength and Flexibility




25
%

27.5
%a. Achieve budgeted operating expenses

Yesb. Utilize no more than $93 million in cash during 2009

Yesc. Decrease manufacturing spend

Yesd. Reduce facility-related expenses

Yes4. Recruit Key Talent




15
%

10.5
%a. Fill key open positions

Partiallyb. Establish Scientific Advisory Board

Partially5. Strengthen our Culture and Reputation




10
%

11.0
%a. Enhance performance oriented culture

Yesb. Build corporate reputation and increase awareness of the Company within the scientific and investment communities

Yes6. Other Considerations







5.0
%Total:




100
%

110.0
%


A
description of certain significant factors considered by the Board in making its bonus determination with respect to the above goal categories is included below.

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In
February 2010, our Compensation Committee evaluated the individual performance of each of our officers to determine the amount of bonus they would earn with respect to 2009 service.
The target bonus for each of our named executive officers for 2009, as well as adjustments for the Company's performance under the 2009 Bonus Program and individual officer performance, are included
in the table below. The actual cash bonuses earned by each named executive officer with respect to 2009 service are also listed in the Summary Compensation Table in the "Non-Equity
Incentive Plan Compensation" column.

Named Executive Officer

Target Bonus (%)
(unadjusted)

Bonus (%)
(adjusted for Company
performance(1))

Final Bonus (%)
(adjusted for Company
and individual
performance)

Final Bonus ($)
(adjusted for Company
and individual
performance)Faheem Hasnain


75.0
%

82.5
%

80.0
%
$
440,000Andrew Guggenhime


37.5
%

41.3
%

47.5
%
$
172,000Maninder Hora


30.0
%

33.0
%

35.4
%
$
104,000Ted Llana


37.5
%

41.3
%

49.7
%
$
149,000Mark Rolfe


37.5
%

41.3
%

41.3
%(2)
$
55,000
(2)


(1)The
target bonus of each named executive officer was multiplied by 110%, the performance multiplier under our 2009 Bonus Program, before further adjustment
to reflect individual performance.(2)In
accordance with Company policy, Dr. Rolfe's bonus rate was prorated based on his August 20, 2009 start date with the Company and equaled
17.2% or $55,000 after the proration factor was applied.


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Mr. Hasnain's
bonus was determined based on the performance of the Company in 2009 and his leadership during 2009 as our Chief Executive Officer. Of particular
note was the strategic leadership he provided during uncertain times for the Company, including a reduction in force and restructuring in January 2009 and addressing certain stockholders' advocacy for
the liquidation of the Company in March and April 2009 as well as Biogen Idec's unsolicited offers to acquire the Company in the second half of 2009. With respect to Mr. Guggenhime, the
Compensation Committee took into consideration his contributions in addressing certain stockholders' advocacy for the liquidation of the Company in
March and April 2009 and Biogen Idec's unsolicited offers to acquire the Company in the second half of 2009 and the financial performance of the Company in 2009. Dr. Hora's bonus was influenced
by his role in the extensive negotiations with Genmab A/S in connection with the Company's re-negotiation of its manufacturing commitments and later negotiation of the termination of the
Company's clinical supply agreement with Genmab, as well as his role in matters relating to collaboration-related manufacturing matters. In determining Dr. Llana's bonus, the Compensation
Committee took into account his contribution to the successful completion of the collaboration transaction with Trubion, his work in formulating the Company's strategy for its protein engineering
platform technologies and his contributions to the strategic matters facing the Company during 2009. Dr. Rolfe's bonus was impacted by the significant contributions Dr. Rolfe had on the
Research organization since joining the Company in August 2009 and his expanded role as interim head of the Clinical organization in absence of a Chief Medical Officer.

2010 Bonus Program

The Company's management has set goals for the Company for 2010. Management presented these goals, goal category bonus weighting and a
performance-based bonus program for calendar year 2010 (a "2010 Bonus Program") to the Board. The Board and management have discussed these goals and
the bonus program, however, the Board has not yet formally adopted a set of goals or the 2010 Bonus Program. Pursuant to the terms of the Merger Agreement, any action by the Board with respect to
adopting such goals for the 2010 Bonus Program would require the prior consent of Abbott while the Merger Agreement remains in effect.

The
target bonus that each eligible employee may receive with respect to performance in 2010 would equal a percentage of the employee's annual base salary at the end of 2010, which
percentage is dependent on the salary grade of the employee (the "Base Target Bonus"), adjusted upward or downward based on the Company's performance of
2010 goals (as adjusted, the "Target Bonus") and the individual performance of the eligible employee.

The
Company expects that the 2010 Bonus Program would provide that successful achievement of 2010 goals would, subject to the other terms of the 2010 Bonus Program, including the
exercise of the discretion of the Board to increase, decrease or eliminate bonuses payable under the 2010 Bonus Program, entitle each eligible employee to the employee's Target Bonus, subject to any
adjustment for the individual performance of each such employee. The Company's successful achievement of all of the goals in the 2010 Bonus Program would, subject to the other terms of the 2010 Bonus
Program, and without giving effect to any adjustment for individual performance or any adjustment made at the discretion of the Board of Directors of the Company, entitle each eligible employee to
100% of the Base Target Bonus for that employee.

All
employees, other than employees hired after September 30, 2010, would be eligible to participate in the 2010 Bonus Program, provided that they work 20 hours or more per
week. Eligible employees who are assigned to regularly work a schedule of less than 40 hours per week but more than 20 hours per week would be entitled to a pro-rated
portion, based on their work schedule but excluding overtime hours, of the amount of the Target Bonus to which they would otherwise be entitled, subject to any adjustment for the individual
performance of such employees. Eligible employees who start after January 31, 2010 but before October 1, 2010 would be entitled to a pro-rated portion of the amount of

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the
Target Bonus to which they would otherwise be entitled subject to any adjustment for the individual performance of such employees. In order to receive any bonus that may be paid out under the 2010
Bonus Program, eligible employees must also continue to be employed by the Company at the time bonuses, if any, are paid, which we expect would occur in the first quarter of 2011.

The
actual bonuses that we may pay under the 2010 Bonus Program will depend on the extent to which we achieve the goals set forth in the 2010 Bonus Program as approved and determined by
the Board and, to the extent applicable, Abbott. We expect that the Board would reserve the right, exercisable at its discretion, to increase, decrease or eliminate the bonuses that could be paid
under the 2010 Bonus Program and to amend or terminate the 2010 Bonus Program at any time.

Equity Incentives

We believe that equity awards encourage the perspective necessary to meet longer-term financial and strategic goals and
more closely align the interests of our employees with those of our stockholders. These awards cause our employees to think like owners because the value of equity awards, especially stock options,
increases only if the value of our common stock increases. The long-term incentive of equity awards provides balance to the shorter-term and medium-term focus that
base salary and annual bonuses may foster in isolation, thereby promoting thoughtful, balanced decision-making by our employees. We also believe that equity incentives are a key part of our ability to
attract and retain employees, especially officers, in a highly competitive labor market.

New Hire Grants

We grant to all our new employees stock option awards in connection with the start of their employment. The number of option shares
granted to a new employee is based
on the salary grade of the new employee and is subject to grant size guidelines established by our Compensation Committee. Because compensation packages for officers tend to be more highly negotiated
than are compensation packages for other employees, equity awards to officers may vary from the guidelines customarily followed to a greater degree than awards to other employees and often will
include a mix of stock options and restricted stock. For retention purposes, we target the size of our equity grants to be competitive with our peers and roughly at the
60th percentile based on compensation survey data we obtain. However, the actual grant date fair value of a given equity grant to an officer may differ from the
60th percentile target grant size for that officer's position depending on the officer's experience, knowledge, skills and education. Also, new hire equity grants to officers may
be highly negotiated, which may cause a particular grant to differ from the 60th percentile target grant size for a particular position.

Stock
option grants to new employees, other than officers, are approved and granted by the Equity Grant Committee of the Board customarily on the first business day of the week following
the new employee's start date and have an exercise price equal to the closing price of our common stock on the date of grant. We believe that the process of granting new hire option grants on a weekly
basis provides an even-handed, fair approach for our employees generally, because the new hire stock option grant to each new employee is granted closer in time to the employee's decision
to accept an employment offer than if grants were made on a monthly, quarterly or less-frequent basis. Stock option grants to promoted employees, other than officers, are also customarily
approved and granted by the Equity Grant Committee on the first business day of the first week after the date of the promotion. Most promotions occur in February in connection with the annual
performance review process; however, promotions also occur from time to time throughout the year. Our new hire and promotion stock option grants vest over four years with 25% of the shares subject to
the option vesting on the first anniversary of the grant date and 1/48 of the shares subject to the option vesting monthly after the first anniversary.

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The Equity Grant Committee is not authorized to grant equity awards to those officers that would be deemed "officers" ("Section 16
Officers") under Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Grants to Section 16 Officers are made only by our Compensation Committee. Grants to other officers are also customarily made by our Compensation Committee and not by our Equity Grant
Committee, even though our Equity Grant Committee also has the authority to grant equity awards to these other officers. Our Compensation Committee customarily approves the general terms of employment
offers to prospective new officers, subject to limitations to allow our management to negotiate final terms with the candidate. The equity award grant negotiated with the prospective new officer is
then sent to our Compensation Committee for approval after the officer candidate accepts our employment offer but before the start of employment. Because stock option grants to newly hired officers
are customarily approved prior to the start of employment, these grants are usually effective on the officer's employment start date and have an exercise price equal to the closing price of our common
stock on the officer's employment start date, which is the grant date. Our Compensation Committee also approves equity awards to officers in connection with promotions. These grants are customarily
effective on the date of the promotions.

Annual Incentive Grants

In addition to new hire option grants, we may grant employees, including our officers, annual equity awards, which customarily are
granted in the third quarter of each year,
approximately six months after the time we customarily pay annual cash bonuses. We believe that spacing the timing of the award of cash bonuses and annual equity grants in this manner, as opposed to
awarding these incentives concurrently, increases retention value by providing employees awards twice during the year.

Our
annual stock option and restricted stock grants are on average approximately half the size of the grants that would otherwise be made to a new hire of the same salary grade, although
an employee's individual performance affects the actual size of the grant, with higher performers receiving larger awards and lower performers receiving smaller or no awards. The goal of our annual
equity incentive grant is to provide officers and employees with continued incentives to improve corporate performance as well as to provide retention benefits.

Our
annual incentive grants are composed of stock options and restricted stock awards to our employees and officers and with allocation between these types of equity awards based on our
Compensation Committee's assessment of the relative motivational impact of the respective types of equity and consistent with our Compensation Committee's goal to minimize dilution of stockholders.
Our Compensation Committee determines the number of option shares or shares of restricted stock to be granted to each individual employee or officer based on a review of:



Our
annual stock option grants have an exercise price equal to the closing price of our common stock on the date of grant and vest with respect to 1/48 of the shares
subject to the option on a monthly basis after the grant date. Annual restricted stock grants vest annually with respect to one-third of the shares subject to the grant.

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Re-engagement and Value-Transfer Grants

In connection with the Spin-off, we hired nearly all of PDL's employees because all of these employees
support the Biotechnology Operations. Upon the Spin-off, the unvested PDL stock options held by these employees terminated, the vested portion of their PDL stock options remained
exercisable for three months following the Spin-off and any unvested PDL restricted stock held by these employees was cancelled. We did not assume any of the PDL stock options held by our
employees in connection with the Spin-off and our employees did not have any equity interest in the Company at the time of the Spin-off other than shares of the Company they
may have received in the distribution to all PDL stockholders with respect to PDL stock they held prior to the ex-dividend date for the Spin-off.

In
order to provide initial equity incentives to our employees and better align the interest of our employees with those of our stockholders, we made broad-based equity grants to our
employees in early 2009. On January 23, 2009, consistent with disclosures we made in the Information Statement attached as an exhibit to the Registration Statement on Form 10 we filed on
August 13, 2008, we granted to our employees, including our officers, unvested stock options and restricted stock ("re-engagement
grants"). The re-engagement grants for non-officer employees were market competitive with the 60th percentile based on salary grade
level for new hire grants. Because our Chief Executive Officer had negotiated the terms of his employment with us, including his equity grants, at the time he joined PDL in October 2008, he did not
receive a re-engagement grant, but instead received the equity grants that were provided for in his offer letter with us (the "CEO Offer Letter
Grants"). We granted the CEO Offer Letter Grants at the same time we granted all of the re-engagement grants and the ratio of stock options to restricted stock in
the CEO Offer Letter Grants impacted the mix of stock options and restricted stock in the re-engagement grants awarded to our other officers as discussed below. With respect to our officer
employees, other than our Chief Executive Officer, we determined re-engagement grant levels by evaluating both the 60th percentile grant size for new hire grants as
well as average share ownership data of officers in our peer group. As noted, we also evaluated the ratio between option shares and shares of restricted stock granted to our Chief Executive Officer,
which was a ratio of 3-to-1, and determined to use the same
ratio for the re-engagement grants awarded to our other officers to demonstrate alignment among our officers. The CEO Offer Letter Grants and the re-engagement grants to
Mr. Guggenhime and Dr. Hora, two of our named executive officers, that we awarded on January 23, 2009 are listed in the table below. Dr. Llana, one of our other named
executive officers, became an officer and employee of the Company on January 6, 2009. We granted Dr. Llana's new hire equity grants on the same date as the re-engagement
grants.

January 2009 Equity Grants

Named Executive Officer

Stock Options

Restricted Shares

Approximate Share
Ownership(1)Faheem Hasnain


300,000


100,000


1.63
%Andrew Guggenhime


64,000


21,330


0.35
%Maninder Hora


32,000


10,650


0.17
%Ted Llana


64,000


21,330


0.35
%


(1)The
approximate share ownership represents the aggregate number of stock option and restricted shares in this table divided by 24,576,879, which was the
number of outstanding shares on January 23, 2009, the grant date for these awards.


Also,
in an attempt to reflect the prior contributions of our continuing employees to the Biotechnology Operations while at PDL, we granted these employees, other than our Chief
Executive Officer, restricted stock awards ("value-transfer restricted shares") and stock option awards ("value-transfer
options") with an approximate value, based on certain assumptions, of the unvested PDL

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restricted
stock and vested PDL stock options held by these employees that expired in connection with the Spin-off. The value-transfer restricted shares were granted on January 23,
2009 at the same time we granted the re-engagement grants described above. The number of value-transfer restricted shares received by a given employee was determined by the value of
unvested shares of PDL restricted stock that were cancelled upon the Spin-off. Each value-transfer restricted share award has a vesting schedule that matches the vesting schedule of the
corresponding unvested PDL restricted stock award which terminated upon the Spin-off. The value-transfer options were granted on April 2, 2009 to our current employees who
(1) held unexercised vested stock options to purchase shares of common stock of PDL on March 17, 2009, which vested PDL options expired on March 17, 2009 (the
"Vested PDL Options"); (2) held stock options to purchase shares of common stock of PDL immediately prior to the Spin-off, which
options were granted after December 18, 2007 (each, a "2008 PDL Grant"); or (3) were promoted to a higher grade level by PDL in 2008 but
did not receive a stock option to purchase shares of PDL in connection with such promotion (each, a "2008 Missed Grant", and together with the Vested
PDL Options and the 2008 PDL Grants, the "Eligible PDL Options"). The number of shares issuable under each value transfer stock option grant was
determined using a Black-Scholes valuation methodology, with each value transfer stock option granted to our employee having a value approximately equal to the value as of December 18, 2008 of
the Eligible PDL Option that (1) with respect to each Vested PDL Option, was vested and unexercised at the end of business on March 17, 2009, (2) with respect to each 2008 PDL
Grant, would have been vested and unexercised at the end of business on December 17, 2008 had such stock option vested on a monthly basis from the date of grant, or (3) with respect to
each 2008 Missed Grant, would have been vested and unexercised at the end of business on December 17, 2008 had such stock option been granted on the effective date of the relevant promotion and
vested on a monthly basis from the date of grant. We determined the value of each Eligible PDL Option using a Black-Scholes valuation methodology (1) assuming reductions to the exercise price
of certain Eligible PDL Options to account for the special cash dividend distributed by PDL in May 2008, to the extent such Eligible PDL Options had not previously been adjusted for such special cash
dividend, and assuming increases to the exercise price of each Eligible PDL Option by the amount of the decrease in exercise price effected in connection with the Spin-off; and
(2) assuming with respect to each 2008 PDL Grant that such stock option would have vested monthly from the date of grant and with respect to each 2008 Missed Grant that such stock option would
have been granted on the effective date of the relevant promotion and that such stock option would have vested monthly from the date of grant.

Value-Transfer Equity Grants

Named Executive Officer

Value-Transfer
Restricted Shares

Value-Transfer
OptionsFaheem Hasnain(1)





Andrew Guggenhime


8,270


20,980Maninder Hora


2,756


16,856Ted Llana(2)








(1)Mr. Hasnain
joined PDL in October 2008 shortly before the Spin-off and did not receive any value-transfer equity awards.(2)Dr. Llana
was not an employee of PDL prior to the Spin-off and did not receive any value-transfer equity awards.


Policy on Timing of Equity Grants

We do not have any plan or practice to time equity grants in coordination with our public release or disclosure of material nonpublic
information. We also do not time our release of material nonpublic

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information
for purposes of affecting the value of compensation to employees, including our officers. Under our equity compensation plans:



Change in Control and Severance Benefits

Our change in control benefits are intended to retain our officers during the pendency of a proposed change of control transaction and
to align the interests of our officers with our stockholders in the event of a change in control. We believe that proposed or actual change in control transactions can adversely impact the morale of
officers and create uncertainty regarding their continued employment. Our Compensation Committee has determined that offering change in control benefits would better ensure the retention of our
officers during the pendency of a potential change in control transaction. Without these benefits, officers may be tempted to leave us prior to the closing of the change in control, especially if they
do not wish to remain with the entity after the transaction closes, and any such departures could jeopardize the consummation of the transaction or our interests if the transaction does not close and
we remain independent. Our Compensation Committee believes that these benefits therefore serve to enhance stockholder value in any such transaction, and align our officers' interests with those of our
stockholders in change in control transactions.

The
potential payments that each of our named executive officers would have received if a change in control or termination of employment had occurred on December 31, 2009 are set
forth under the section below titled "Potential Payments Upon Termination or Change in Control".

Retention and Severance Plan

We adopted our Retention and Severance Plan, or the "retention plan," which provides for the acceleration of vesting of equity awards
and severance benefits in connection with a participant's involuntary termination of employment, whether following a "change in control" or otherwise. Each of our officers, including our named
executive officers, is eligible to receive benefits under the retention plan. The extent of vesting acceleration and amount of severance payable to an officer is based on whether an officer is a "key
employee," "vice president," "senior vice president" or the "chief executive officer."

A
change in control under our retention plan is deemed to occur if:



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If
the surviving or acquiring entity in a change in control does not assume or otherwise issue substitutes for equity awards whose vesting is based on continued service alone
("service-based equity awards"), then, immediately prior to the change in control, 100% of the unvested portion of awards held by each participant would become vested in full. In addition, all equity
awards whose vesting is based on achievement of performance goals ("performance-based equity awards") would vest in full immediately prior to the change in control in an amount that would vest had the
target level of performance been
achieved. In either case, continued employment to the time of the change in control is a condition to acceleration of vesting of a participant's equity awards, except as otherwise provided by the
retention plan in the event of involuntary termination.

Without
the above-described acceleration of equity awards, officers may be tempted to leave us prior to the closing of the change in control, especially if they do not wish to remain
with the acquiring or surviving entity, and any such departures could jeopardize the consummation of the transaction or our interests if the transaction does not close and we remain independent.

The
retention plan also provides for severance and health and life insurance continuation benefits, outplacement benefits and certain acceleration of vesting of equity awards in the
event the participating officer's employment is involuntarily terminated. For the purposes of the retention plan, involuntary termination means termination of employment by the company other than for
"cause" or the participant's death or permanent disability, or the participant's resignation for "good reason" (each, a "triggering termination"). The specific benefits provided vary depending on
whether involuntary termination occurs within 18 months after the change in control or at other times not in connection with a change in control. In any case, the severance benefits provided
and equity award vesting acceleration that occurs in connection with a triggering termination are conditioned on the officer's execution of a general release of all claims against us in a form
prescribed by the retention plan.

If
a participant's employment is involuntarily terminated within 18 months after a change in control, then the participant is entitled to certain payments based on the
participant's monthly base salary and annual incentive bonus rates, together with certain additional benefits, as follows:



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If
a participant's employment is involuntarily terminated at any time other than within 18 months after a change in control, then the participant is entitled to certain payments
based on the participant's monthly base salary rate alone, together with certain additional benefits, as follows:



For
purposes of the retention plan, the term "monthly base salary rate" means an amount equal to the officer's monthly base salary immediately prior to the triggering termination
(without giving effect to any reduction constituting "good reason" for resignation) or, if greater, the officer's monthly base salary immediately prior to the change in control. The term "monthly
annual incentive bonus rate" means a quotient determined by dividing by 12 whichever of the following amounts is the greatest: (1) the aggregate amount of all annual incentive bonuses earned by
the officer during the fiscal year immediately prior to the year of the change in control, (2) the aggregate amount of all annual incentive bonuses earned by the officer during the fiscal year
immediately prior to the year of the triggering termination, or (3) the aggregate of all annual incentive bonuses that would be earned by the officer at the targeted annual rate assuming
attainment of 100% of all applicable performance goals in the year which the triggering termination occurs. For this purpose, annual incentive bonuses do not include signing bonuses, retention bonuses
or other nonrecurring cash awards that are not part of an annual incentive bonus program.

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For
purposes of the retention plan, the term "cause" means the occurrence of any of the following:



For
purposes of the retention plan, the term "good reason" means the occurrence of any of the following conditions without such participant's informed written
consent:



The
offer letter we entered into with Faheem Hasnain, our Chief Executive Officer, provided that his participation agreement under the Retention and Severance Plan would provide for a
tax "gross-up" payment to Mr. Hasnain in the event that an excise tax payment becomes payable by Mr. Hasnain under Sections 280G and 4999 of the Internal Revenue Code,
which excise tax may be due in certain change of control events. The effect of the tax "gross-up" payment is that the net amount retained by him from all payments after deduction of
applicable taxes, including excise tax, penalties and interest

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with
respect to these payments, would equal the net amount that he would have retained in the absence of the excise tax imposed by Section 280G and Section 4999 of the Internal Revenue
Code.

Employment Arrangements

We entered into employment offer letters with each of our named executive officers in connection with their start of employment with
us. None of these employment offer letters indicates a specific term of employment, each officer is an "at-will" employee and each officer's employment may be terminated by us or the named
executive officer at any time. Each offer letter specifies the officer's initial annual base salary and annual target bonus, which are set forth in the table below. Certain additional terms of our
employment arrangements with Mr. Hasnain, Dr. Llana and Dr. Rolfe are summarized below.

Named Executive Officer

Initial Annual
Base Salary

Initial Annual
Target BonusFaheem Hasnain

$
550,000


75.0
%Andrew Guggenhime

$
362,050


37.5
%Maninder Hora

$
294,150


30.0
%Ted Llana

$
300,000


37.5
%Mark Rolfe

$
320,000


37.5
%


Faheem Hasnain

Our employment offer letter with Mr. Hasnain specifies that he would receive a monthly housing allowance of $6,000 until the
earlier of his termination of employment or October 1, 2010. The offer letter also provided that Mr. Hasnain would be granted (1) an option to acquire 300,000 shares of our common
stock and (2) a restricted stock award for 100,000 shares of our common stock; we granted these awards to Mr. Hasnain on January 23, 2009. The offer letter also provides that
Mr. Hasnain's participation agreement under our retention plan will provide for a "gross-up" payment to Mr. Hasnain in the event that an excise tax payment becomes payable by
Mr. Hasnain under Sections 280G and 4999 of the Internal Revenue Code, which excise tax may be due in certain change of control events, in connection with payments and benefits
Mr. Hasnain may receive under our retention plan described above under the heading "Retention and Severance Plan."

Ted Llana

Our employment offer letter with Dr. Llana also specifies that he would receive a new hire bonus of $20,000 and certain
relocation benefits. We also agreed to grant to Dr. Llana shares of restricted stock and an option to purchase shares of our common stock; we granted these awards to Dr. Llana on
January 23, 2009.

Mark Rolfe

Our employment offer letter with Dr. Rolfe also specifies that he would receive a new hire bonus of $100,000 and certain
relocation benefits. We also agreed to recommend that our Compensation Committee approve a grant to Dr. Rolfe of shares of restricted stock and an option to purchase shares of our common stock;
we granted these awards to Dr. Rolfe on August 20, 2009.

Tax Considerations

Our Compensation Committee has considered the provisions of Section 162(m) of the Internal Revenue Code and related Treasury
Department regulations, which restrict deductibility for federal income tax purposes of executive compensation paid to our Chief Executive Officer and each of the four other most highly compensated
executive officers holding office at the end of any year to the extent such compensation exceeds $1,000,000 for any of such officers in any year and does not qualify

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for
an exception under the statute or regulations. The members of our Compensation Committee qualify as outside directors for purposes of exempting executive compensation from the limits on
deductibility under Section 162(m). Our Compensation Committee is solely responsible for granting stock options to officers. In the future, our Compensation Committee will continue to evaluate
the advisability of exempting executive compensation from the deductibility limits of Section 162(m). Our Compensation Committee's policy is to qualify our executives' compensation for
deductibility under applicable tax laws to the maximum extent possible, consistent with our compensation objectives.

Stock Ownership Guidelines

The Board believes that ownership of our common stock by our officers and directors promotes a focus on long-term growth
and aligns the interests of our officers and directors with those of our stockholders, however, the Board has not adopted formal stock ownership guidelines that would apply to our executive officers
and directors to mandate or encourage any particular ownership level.

Prohibition against Certain Equity Transactions

Our Trading Compliance Policy prohibits our officers and directors from engaging in "short" sales and hedging or monetization
transactions which could reasonably cause our officers and directors to have interests adverse to our stockholders. "Short" sales, which are sales of shares of common stock by a person that does not
own the shares at the time of the sale, evidence an expectation that the value of the shares will decline in value. We prohibit our officers and directors from entering into "short" sales because such
transactions signal to the market that the officer or director has no confidence in us or our short-term prospects and may reduce the officer's or director's incentive to improve our
performance. In addition, Section 16(c) of the Exchange Act expressly prohibits officers and directors from engaging in short sales. Our officers and directors are also prohibited under our
Trading Compliance Policy from entering into hedging or monetization transactions, such as zero-cost collars and forward sale contracts, which allow a party to lock in much of the value of
their stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions would allow someone to continue to own the covered securities, but
without the full risks and rewards of ownership. If an officer or director were to enter into such a transaction, the officer or director would no longer have the same objectives as our other
stockholders.

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REPORT OF THE COMPENSATION COMMITTEE*

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this
Amendment. Based on this review and these discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Amendment for filing with
the SEC.



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EXECUTIVE OFFICER COMPENSATION

Summary Compensation Table

The following table sets forth information concerning the compensation earned by our chief executive officer, our chief financial
officer and our three other most highly compensated executive officers (each, a "named executive officer") during 2008 with PDL and the Company.

Name and Principal Position

Year

Salary
($)

Bonus
($)

Stock Awards
($)(1)

Option
Awards
($)(1)

Non-Equity
Incentive
Plan
Compensation
($)

All Other
Compensation
($)

Total ($)Faheem Hasnain

2009


571,154





858,810


1,794,658


440,000
(2)

76,290
(3)

3,740,912President and Chief

2008


112,115
(4)




1,167,500
(5)

2,250,690
(5)

103,125
(6)

25,787
(7)

3,659,217Executive OfficerAndrew Guggenhime

2009


379,975


179,000
(8)

315,926


683,040


172,000
(2)

5,561
(9)

1,735,502Senior Vice President

2008


345,804


116,000
(8)

111,400





180,000
(6)

4,619
(9)

757,823and Chief Financial

2007


348,081


17,755





382,487


97,245


3,668
(9)

849,236OfficerManinder Hora

2009


305,464


112,500
(8)

129,256


334,598


104,000
(2)

7,412
(9)

993,230Vice President, Product

2008


280,951


97,500
(8)







110,000
(6)

192,664
(10)

681,115and Quality Operations

2007


280,125


4,622





235,260


62,608


4,371
(9)

586,986Ted Llana

2009


292,722
(11)

20,000
(12)

460,457


440,078


149,000
(2)

35,863
(13)

1,398,120Senior Vice President,Commercial andCorporateDevelopmentMark Rolfe(18)

2009


112,000
(14)

100,000
(15)

231,676


425,760


55,000
(2)

48,965
(16)

973,401Senior Vice Presidentand Chief ScientificOfficer


(1)Amounts
listed in this column reflect the aggregate grant date fair value of stock and option awards granted during 2009 to officers computed in accordance
with FASB ASC Topic 718. Assumptions used in the calculation of these amounts for awards in 2009, 2008 and 2007 are included in Note 3 to the Company's audited financial statements for fiscal
year ended December 31, 2009 included in the Company's Annual Report on Form 10-K filed with the SEC on February 24, 2010.(2)This
amount reflects the amount of cash bonus earned under the 2009 Bonus Program.(3)Consists
of (A) matching contributions made to Mr. Hasnain under the Company's 401(k) plan, (B) insurance premiums paid with respect to
life insurance for the benefit of Mr. Hasnain and (C) a monthly housing allowance in accordance with Mr. Hasnain's employment offer letter.(4)Mr. Hasnain's
annual base salary in 2008 was $550,000. The amount of salary earned is lower than his base salary, however, because Mr. Hasnain
joined PDL in October 2008.(5)Represents
the aggregate grant date fair value of equity awards granted by PDL to Mr. Hasnain in October 2008 upon the start of his employment with
PDL. These awards were forfeited in their entirety on December 18, 2008 without having vested or been exercised.(6)This
amount reflects the amount of cash bonus earned under the 2008 Bonus Program.(7)Pursuant
to the offer letter Mr. Hasnain entered into with both PDL and Facet, he is entitled to a $6,000 monthly housing allowance and
reimbursement of up to $7,500 of his attorneys' fees incurred in connection with his negotiation of his offer letter with PDL. This amount consists of three months of the housing allowance benefit and
reimbursement of Mr. Hasnain's attorneys' fees.(8)In
2008, PDL's Compensation Committee approved time-based cash retention bonuses payable to certain of our named executive
officers. The dates on which many of these retention bonuses were earnable extended to the end of 2009. We assumed these retention bonus obligations in connection with the Spin-off and
entered into retention bonus letter


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agreements
with the named executive officers listed in the tables below. The circumstances in which these retention bonuses were adopted were unique and we do not expect to implement similar retention
programs in the foreseeable future.


Retention Bonus Payment Dates in 2009January 31,
2009

May 31,
2009

June 30,
2009

September 4,
2009

December 31,
2009Andrew Guggenhime

$
25,000




$
66,000




$
88,000Maninder Hora




$
45,000




$
67,500







Retention Bonus Payment Dates in 2008July 31,
2008

September 30,
2008

October 31,
2008

December 1,
2008Andrew Guggenhime

$
25,000

$
66,000

$
25,000


Maninder Hora




$
30,000




$
67,500


(9)Consists
of (A) matching contributions made to the officer under the Company's 401(k) plan and (B) insurance premiums paid with respect to
life insurance for the benefit of the officer.(10)Consists
of (A) matching contributions PDL made to Dr. Hora under PDL's 401(k) plan, (B) insurance premiums paid with
respect to life insurance for the benefit of Dr. Hora and (C) a relocation payment of $185,048 that PDL paid to Dr. Hora in connection with his purchase of a residence pursuant to
a letter agreement between Dr. Hora and PDL.(11)Dr. Llana's
annual base salary in 2009 was $300,000. The amount of salary earned is lower than his base salary, however, because Dr. Llana
joined us in January 2009.(12)Consists
of a hiring bonus paid to Dr. Llana at the start of his employment in January 2009.(13)Consists
of (A) matching contributions made to Dr. Llana under the Company's 401(k) plan, (B) insurance premiums paid with respect to
life insurance for the benefit of Dr. Llana and (C) a relocation allowance in accordance with Dr. Llana's employment offer letter.(14)Dr. Rolfe's
annual base salary in 2009 was $320,000. The amount of salary earned is lower than his base salary, however, because Dr. Rolfe
joined us in August 2009.(15)Consists
of a hiring bonus paid to Dr. Rolfe at the start of his employment in August 2009.(16)Consists
of (A) matching contributions made to Dr. Rolfe under the Company's 401(k) plan, (B) insurance premiums paid with respect to
life insurance for the benefit of Dr. Rolfe and (C) a relocation allowance in accordance with Dr. Rolfe's employment offer letter.


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Grants of Plan-Based Awards During 2009

Please see the sections titled "Re-engagement and Value-Transfer Grants" above and the descriptions of our employment
arrangements with Mr. Hasnain above regarding equity awards we made to our executive officers in early 2009.

The
following table lists each equity award we granted to our named executive officers during 2009.

Name

Grant Date

Date of Board of
Directors Action

All Other Stock
Awards: Number
of Shares of Stock
or Units
(#)

All Other Option
Awards: Number of
Securities
Underlying Options
(#)

Exercise or Base
Price of Option
Awards ($/Share)

Grant Date Fair
Value of Stock and
Option AwardsFaheem Hasnain


01-23-2009
(1)

01-23-2009


100,000


300,000

$
6.17

$
1,883,18008-06-2009
(2)

07-28-2009


27,667


83,000

$
9.95

$
770,287Andrew Guggenhime


01-23-2009
(1)

01-23-2009


21,330


64,000

$
6.17

$
401,72501-23-2009
(1)

01-23-2009


8,270







$
51,02604-02-2009
(3)

04-02-2009





20,980

$
9.55

$
121,55808-06-2009
(2)

07-28-2009


15,251


45,760

$
9.95

$
424,657Maninder Hora


01-23-2009
(1)

01-23-2009


10,650


32,000

$
6.17

$
200,77001-23-2009
(1)

01-23-2009


2,756







$
17,00504-02-2009
(3)

04-02-2009





16,856

$
9.55

$
97,66408-06-2009
(2)

07-28-2009


5,325


16,000

$
9.95

$
148,416Ted Llana


01-23-2009
(1)

01-23-2009


21,330


64,000

$
6.17

$
401,72508-06-2009
(2)

07-28-2009


8,896


26,693

$
9.95

$
247,71109-21-2009


09-21-2009


15,000







$
251,100Mark Rolfe


08-20-2009
(4)

08-18-2009


21,333


64,000

$
10.86

$
657,436


(1)The
equity awards granted on January 23, 2009 are discussed further in the section titled "Re-engagement and Value-Transfer Grants."(2)Our
Compensation Committee approved this award on July 28, 2009, which was shortly before the anticipated public release of the Company's results of
operations and financial condition for the quarter and six months ended June 30, 2009 (the "Q2 Earnings"). As a result, our Compensation Committee
determined to make these grants effective as of the date that was two trading days after the public release of the Q2 Earnings.(3)The
equity awards granted on April 2, 2009 are discussed further in the section titled "Re-engagement and Value-Transfer Grants."(4)Our
Compensation Committee approved this award on August 18, 2009, which grant was conditioned on the start of Mr. Rolfe's employment with the
Company, which began two days later on August 20, 2009.


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Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information regarding each unexercised option to purchase shares of our common stock and shares of
unvested restricted common stock held by each of our named executive officers as of December 31, 2009

Option Awards

Stock AwardsName

Number of
Securities Underlying
Unexercised Options
(#)
Exercisable

Number of Securities
Underlying
Unexercised Options
(#)
Unexercisable

Option
Exercise
Price
($)

Option
Expiration
Date(1)

Number of Shares
or Units of Stock
That Have Not
Vested
(#)

Market Value of
Shares or Units of
Stock That Have
Not Vested
($)Faheem Hasnain


87,500


212,500
(1)
$
6.17


01-23-20166,916


76,084
(2)
$
9.95


08-06-201675,000
(3)
$
1,316,25027,667
(4)
$
485,556Andrew Guggenhime


14,666


49,334
(5)
$
6.17


01-23-201620,980




$
9.55


04-02-20163,813


41,947
(6)
$
9.95


08-06-201621,330
(7)
$
374,3424,135
(8)
$
72,56915,251
(9)
$
267,655Maninder Hora


7,333


24,667
(10)
$
6.17


01-23-201616,856




$
9.55


04-02-20161,333


14,667
(11)
$
9.95


08-06-201610,650
(12)
$
186,9081,378
(13)
$
24,1845,235
(14)
$
91,874Ted Llana





64,000
(15)
$
6.17


01-23-20162,224


24,469
(16)
$
9.95


08-06-201621,330
(17)
$
374,3428,896
(18)
$
156,12515,000
(19)
$
263,250Mark Rolfe





64,000
(20)
$
10.86


08-20-201621,333
(21)
$
374,394


(1)Mr. Hasnain
will vest in 6,250 shares subject to this option each month through the final vest date of October 1, 2012, subject to his
continued employment.(2)Mr. Hasnain
will vest in 1,729 shares subject to this option each month through the final vest date of August 6, 2013, subject to his
continued employment.(3)Mr. Hasnain
will vest in 25,000 shares subject to this restricted stock award annually on October 1st through the final
vest date of October 1, 2012, subject to his continued employment.(4)Mr. Hasnain
will vest in 9,222 shares subject to this restricted stock award annually on August 6th through the final
vest date of August 6, 2012, subject to his continued employment.(5)Mr. Guggenhime
will vest in 1,333 shares subject to this option each month through the final vest date of January 23, 2013, subject to his
continued employment.(6)Mr. Guggenhime
will vest in 953 shares subject to this option each month through the final vest date of August 6, 2013, subject to his
continued employment.(7)Mr. Guggenhime
will vest in 7,110 shares subject to this restricted stock award annually on January 23rd through the
final vest date of January 23, 2012, subject to his continued employment.(8)Mr. Guggenhime
will vest in the remaining 4,135 shares subject to this restricted stock award on April 23, 2010, subject to his continued
employment.(9)Mr. Guggenhime
will vest in 5,084 shares subject to this restricted stock award annually on August 6th through the final
vest date of August 6, 2012, subject to his continued employment.(10)Mr. Hora
will vest in 666 shares subject to this option each month through the final vest date of January 23, 2013, subject to his continued
employment.


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(11)Mr. Hora
will vest in 333 shares subject to this option each month through the final vest date of August 6, 2013, subject to his continued
employment.(12)Mr. Hora
will vest in 3,550 shares subject to this restricted stock award annually on January 23rd through the final
vest date of January 23, 2012, subject to his continued employment.(13)Mr. Hora
will vest in the remaining 1,378 shares subject to this restricted stock award on July 24, 2010, subject to his continued
employment.(14)Mr. Hora
will vest in 1,775 shares subject to this restricted stock award annually on August 6th through the final vest
date of August 6, 2012, subject to his continued employment.(15)Mr. Llana
will vest in 16,000 shares subject to this option on January 6, 2010, after which he will vest in 1,333 shares subject to this
option each month through the final vest date of January 6, 2013, all such vesting being subject to his continued employment.(16)Mr. Llana
will vest in 556 shares subject to this option each month through the final vest date of August 6, 2013, subject to his continued
employment.(17)Mr. Llana
will vest in 5,333 shares subject to this restricted stock award annually on January 6th through the final
vest date of January 6, 2013, subject to his continued employment.(18)Mr. Llana
will vest in 2,965 shares subject to this restricted stock award annually on August 6th through the final vest
date of August 6, 2012, subject to his continued employment.(19)Mr. Llana
will vest in 5,000 shares subject to this restricted stock award annually on September 21st through the final
vest date of September 21, 2012, subject to his continued employment.(20)Mr. Rolfe
will vest in 16,000 shares subject to this option on August 20, 2010, after which he will vest in 1,333 shares subject to this
option each month through the final vest date of August 20, 2013, all such vesting being subject to his continued employment.(21)Mr. Rolfe
will vest in 7,111 shares subject to this restricted stock award annually on August 20th through the final
vest date of August 20, 2012, subject to his continued employment.


Option Exercises and Stock Vested in 2009

The following table lists the number of shares of our common stock acquired upon exercise of options by each named executive officer
during 2009 and the number of shares of restricted common stock held by each named executive officer that vested during 2009.

Option Awards

Stock AwardsName

Number of Shares
Acquired on Exercise
(#)

Value Realized on
Exercise
($)

Number of Shares
Acquired on Vesting
(#)

Value Realized on
Vesting(1)
($)Faheem Hasnain








25,000

$
434,250Andrew Guggenhime








4,135

$
40,482Maninder Hora








1,378

$
11,410Mark Rolfe











Ted Llana














(1)Value
realized on vesting equals the market value of the shares that vested on the vesting date(s).


Potential Payments Upon Termination or Change in Control

The tables below identify the potential payments that each of our named executive officers would have received in the event of a change
in control or termination of employment assuming that the transaction or termination occurred on December 31, 2009 based on our closing price of $17.55 per Share on the Nasdaq Global Select
Market as of that date. Except as noted below, all of the potential

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payments
listed in the table below are payments that would have been made pursuant to the terms of our retention plan discussed above under the heading "Change in Control and Severance Benefits."

Acceleration of VestingContinuation
of Benefits
and Outplacement
Services(2)Stock
Options

Restricted
Stock

Severance
Payment(1)

Tax
Gross-Up
Payments

TotalFaheem HasnainChange in control transaction (options not assumed)(3)

$
2,996,488

$
1,801,806

$


$


$


$
4,798,294Change in control employment termination(4)

$
2,996,488

$
1,801,806

$
1,980,000

$
59,363

$
1,337,627

$
8,175,284Employment termination absent a change in control(5)

$
1,011,200

$
600,596

$
1,485,000

$
47,022

$


$
3,143,818Andrew GuggenhimeChange in control transaction (options not assumed)(3)

$
880,218

$
714,566

$


$


$


$
1,594,784Change in control employment termination(4)

$
880,218

$
714,566

$
801,075

$
47,094

$


$
2,442,953Employment termination absent a change in control(5)

$
269,024

$
237,746

$
534,050

$
34,729

$


$
1,075,549Maninder HoraChange in control transaction (options not assumed)(3)

$
392,180

$
304,545

$


$


$


$
696,725Change in control employment termination(4)

$
392,180

$
304,545

$
398,150

$
34,776

$


$
1,129,651Employment termination absent a change in control(5)

$
121,440

$
117,638

$
298,613

$
28,582

$


$
566,272Ted LlanaChange in control transaction (options not assumed)(3)

$
914,284

$
793,716

$


$


$


$
1,708,001Change in control employment termination(4)

$
914,284

$
793,716

$
682,500

$
47,094

$


$
2,437,595Employment termination absent a change in control(5)

$
399,705

$
233,397

$
455,000

$
34,729

$


$
1,122,832Mark RolfeChange in control transaction (options not assumed)(3)

$
428,160

$
374,394

$


$


$


$
802,554Change in control employment termination(4)

$
428,160

$
374,394

$
672,375

$
47,094

$


$
1,522,023Employment termination absent a change in control(5)

$
142,718

$
124,798

$
448,250

$
34,729

$


$
750,495


(1)The
amounts listed in this column do not include the payment of accrued salary and vacation that would be due upon termination of employment. Severance
payments are based on the officer's annual base salary and annual incentive bonus rate as of December 31, 2009.(2)Represents
the present value of the continuation of our current employee benefits, including medical, dental, disability and life insurance as well as the
value of six months of outplacement services under our retention plan. Under our retention plan, benefits continue for 24 months after a triggering termination for our Chief Executive Officer,
18 months after a triggering termination for our senior vice presidents and 12 months after a triggering termination for our vice presidents.(3)If
a "change in control" under our retention plan occurs and the surviving or acquiring entity in the change in control transaction neither assumes the
officer's equity awards nor issues substitute awards, then 100% of the unvested portion of equity awards held by the officer would become vested in full and all equity awards the vesting of which is
based on achievement of performance goals would vest in full immediately prior to the change in control in an amount that would vest had the target level of performance been achieved.(4)The
amounts in this row were determined on the assumption that a "change in control" under our retention plan occurred and a triggering termination occurred
with respect to the officer's employment. In this event, 100% of the unvested portion of equity awards held by such officer would become vested in full and all equity awards the vesting of which is
based on achievement of performance goals would vest in full immediately prior to the change in control in an amount that would vest had the target level of performance been achieved.(5)If
a triggering termination occurred with respect to the officer's employment absent a change in control, then each equity award the vesting of which is
solely conditioned upon the continued service of the officer would vest upon employment termination to the same extent that such equity award would have vested over the 12 months following the
employment termination and each equity award the vesting of which is conditioned upon the achievement of performance goals would vest in whole or in part dependent on certain factors pursuant to the
terms of our retention plan.


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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of our Compensation Committee was at any time during 2009 one of our officers or employees. None of our officers
serves as a member of the board of directors or compensation committee of any other entity that has one or more officers serving as a member of the Board or Compensation Committee.

DIRECTOR COMPENSATION

The following table sets forth the compensation paid to our non-employee Board members in 2009, and the narrative
discussion that follows describes different components of our directors' compensation. Mr. Hasnain, one of our Board members, is also our President and Chief Executive Officer, and as such does
not receive additional compensation with respect to his service as a Board member. For a description of Mr. Hasnain's compensation, please see the section above entitled "Executive Officers."

Name

Fees Earned
or
Paid in Cash
($)

Stock
Awards(1)(2)
($)

Option
Awards(1)(2)
($)

All Other
Compensation
($)

Total
($)Brad Goodwin

$
149,000

$
93,573

$
125,363




$
367,936Hoyoung Huh, M.D., Ph.D.(3)

$
45,167

$
128,162

$
166,345




$
339,674Gary Lyons

$
133,500

$
75,315

$
101,057




$
309,872David R. Parkinson, M.D.

$
103,125

$
75,315

$
101,057




$
279,497Kurt von Emster(4)

$
119,209

$
70,101

$
94,477




$
283,787


(1)Amounts
listed in this column reflect the aggregate grant date fair value of stock and option awards granted during 2009 to directors computed in accordance
with FASB ASC Topic 718. Assumptions used in the calculation of these amounts for awards in 2009, 2008 and 2007 are included in Note 3 to the Company's audited financial statements for fiscal
year ended December 31, 2009 included in the Company's Annual Report on Form 10-K filed with the SEC on February 24, 2010.(2)The
aggregate number of option and restricted stock awards outstanding at December 31, 2009 held by each of our non-employee directors is
set forth in the table below. Information regarding the number of stock and option awards held as of December 31, 2009 by our employee director, Mr. Hasnain, is set forth in the table
titled "Outstanding Equity Awards at December 31, 2009" in the "Compensation Discussion and Analysis" section above.(3)Dr. Huh
joined the Board in September 2009.(4)Mr. von
Emster joined the Board in February 2009.


Option AwardsStock AwardsNumber of Securities
Underlying
Unexercised Options
Exercisable

Number of Securities
Underlying
Unexercised Options
UnexercisableDirector

Number of Shares or
Units of Stock That
Have Not VestedBrad Goodwin


18,333


8,334


13,334Hoyoung Huh, M.D., Ph.D.


4,166


12,501


8,333Gary Lyons


15,278


6,389


10,833David R. Parkinson, M.D.


15,278


6,389


10,833Kurt von Emster


13,889


6,112


10,000


The cash and equity compensation payable to non-employee directors ("Outside
Directors") is described below. Members of the Board who are also employees of the Company are not entitled to any compensation with respect to their service as Board members.

Cash Compensation



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Equity Compensation



Stock
options granted to Board members customarily vest monthly over 12 months and restricted stock granted to the Board members customarily vests approximately one year after
grant, in each case subject to the Board member's continued service to the Company.

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

EQUITY COMPENSATION PLANS APPROVED BY STOCKHOLDERS

As of December 31, 2009, we maintained two equity compensation plans that provide for the issuance of common stock-based awards
to officers and other employees, directors and consultants. These consist of the 2008 Employee Stock Purchase Plan and the 2008 Equity Incentive Plan, each of which has been approved by our
stockholders. The following table sets forth information regarding outstanding options and shares reserved for future issuance under the foregoing plans as of December 31, 2009.

Equity Compensation Plan Information

Plan Category

Number of
shares to be
issued upon
exercise of
outstanding
options,
warrants and
rights
(a)

Weighted-average
exercise price
of outstanding
options,
warrants and
rights
(b)

Number of shares
remaining available
for future issuance
under equity
compensation plans
(excluding shares
reflected in column (a))
(c)Equity compensation plans approved by stockholders


2,194,473

$
8.20


1,683,277Equity compensation plans not approved by stockholders




$



Total


2,194,473





1,683,277


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial ownership of our common stock as of March 9, 2010 with
respect to our current officers and directors, and for those persons or groups that beneficially hold more than 5% of our outstanding shares of common stock. The table contains ownership information
for:



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Unless
otherwise specified, the address of each named individual in the table below is the address of the Company.

Name of Beneficial Owner or Identity of Group(1)

Shares of Common
Stock Beneficially
Owned

Percent of
ClassBVF Partners L.P.(2)


3,971,121

15.7%900 North Michigan Avenue, Suite 1100Chicago, Illinois 60611The Baupost Group, L.L.C.(3)


3,506,875

13.9%10 St. James Avenue, Suite 1700Boston, Massachusetts 02116BlackRock, Inc.(4)


1,836,674

7.3%40 E. 52nd StreetNew York, New York 10022NB Public Equity K/S(5)


1,538,338

6.1%Oestergade 5, 3rd floorDK-1100, Copenhagen KDenmarkBrad Goodwin(6)


37,778

*Hoyoung Huh, M.D., Ph.D.(7)


19,444

*Gary Lyons(8)


30,833

*David R. Parkinson, M.D.(9)


30,833

*Kurt von Emster(10)


27,222

*Faheem Hasnain(11)


255,442

1.0%Andrew Guggenhime(12)


95,549

*Maninder Hora(13)


51,175

*Ted Llana(14)


72,219

*Mark Rolfe


22,446

*All directors and executive officers as a group (10 persons)(15)


642,941

2.5%


*Less
than 1%(1)Except
as indicated in the footnotes to this table, the persons named in the table have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them, subject to community property laws where applicable.(2)All
information included in this table and this footnote regarding the beneficial ownership of Biotechnology Value Fund, L.P.
("BVF"), Biotechnology Value Fund II, L.P. ("BVF2"), BVF Investments, L.L.C.
("BVLLC"), Investment 10, L.L.C. ("ILL10"), BVF Partners L.P.
("Partners"), BVF Inc. ("BVF Inc.") and Mark N. Lampert
("Mr. Lampert") is based on our review of Amendment No. 2 to Schedule 13D filed with the SEC by BVF, BVF2, BVLLC, ILL10, Partners,
BVF Inc. and Mr. Lampert on February 2, 2010 regarding the beneficial ownership of our common stock (the "BVF 13D").
According to the BVF 13D, BVF beneficially owns 915,121 shares, or 3.6% of our common stock; BVF2 beneficially owns 634,000 shares, or 2.5% of our common stock; BVLLC beneficially owns
2,195,000 shares, or 8.7% of our common stock; ILL10 beneficially owns 227,000 shares, or less than 1% of our common stock; and Partners, BVF Inc. and Mr. Lampert each beneficially owns
3,971,121 shares, or 15.7% of our common stock. The BVF 13D also states that each of the reporting persons on the BVF 13D may be deemed to be a member of a group for the purpose of
Section 13(d) or 13(g) of the Exchange Act. The table below reflects the


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number
of shares of our common stock to which BVF, BVF2, BVLLC, ILL10, Partners, BVF Inc. and Mr. Lampert have sole voting power, shared voting power, sole dispositive power and shared
dispositive power according to the BVF 13D.


BVF

BVF2

BVLLC

ILL10

Partners

BVF Inc.

Mr. LampertSole voting power (shares)


0


0


0


0


0


0


0Shared voting power (shares)


915,121


634,000


2,195,000


227,000


3,971,121


3,971,121


3,971,121Sole dispositive power (shares)


0


0


0


0


0


0


0Shares dispositive power (shares)


915,121


634,000


2,195,000


227,000


3,971,121


3,971,121


3,971,121


(3)All
information included in this footnote regarding the beneficial ownership of The Baupost Group, L.L.C.
("Baupost"), SAK Corporation ("SAK"), and Seth A. Klarman
("Mr. Klarman") is based on our review of Amendment No. 3 to Schedule 13D filed with the SEC by Baupost, SAK and Mr. Klarman
on December 16, 2009 regarding their beneficial ownership of our common stock (the "Baupost 13D"). According to the Baupost 13D, BVP LP
beneficially owns 1,238,128 shares, or 4.9% of our common stock; and Baupost, SAK and Mr. Klarman each beneficially owns 3,506,875 shares, or 13.9% of our common stock. The table below reflects
the number of shares of our common stock to which Baupost, BVP LP, SAK and Mr. Klarman have sole voting power, shared voting power, sole dispositive power and shared dispositive power
according to the Baupost 13D.


BVP LP

Baupost

SAK

Mr. KlarmanSole voting power (shares)


0


0


0


0Shared voting power (shares)


1,238,128


3,506,875


3,506,875


3,506,875Sole dispositive power (shares)


0


0


0


0Shares dispositive power (shares)


1,238,128


3,506,875


3,506,875


3,506,875


(4)All
information included in this footnote regarding the beneficial ownership of BlackRock, Inc. ("BlackRock") is based on our review of
Schedule 13G filed with the SEC by BlackRock on January 29, 2010 regarding its beneficial ownership of our common stock (the "BlackRock 13G"). According to the BlackRock 13G, BlackRock
owns 1,836,674 shares, or 7.3%, of our common stock and has sole voting and dispositive power with respect to these shares.(5)All
information included in this footnote regarding the beneficial ownership of NB Public Equity K/S ("NB"),
NB Public Equity Komplementar ApS ("NB KAS"), Cora Madsen ("Ms. Madsen"), Christian Hansen
("Mr. Hansen") and Florian Schönharting ("Mr. Schönharting") is based on our review of Amendment
No. 1 to Schedule 13G filed with the SEC by NB, NB KAS, Ms. Madsen, Mr. Hansen and Mr. Schönharting on February 16, 2010 regarding their
beneficial ownership of our common stock (the "NB 13G"). According to the NB 13G, NB, NB KAS, Ms. Madsen, Mr. Hansen and
Mr. Schönharting each beneficially owns 1,538,338 shares, or 6.1%, of our common stock and each shares voting and dispositive power with respect to these shares.(6)Includes
24,444 shares issuable upon the exercise of options which are currently exercisable or will become exercisable by May 8, 2010, the date
60 days after March 9, 2010.(7)Includes
11,111 shares issuable upon the exercise of options which are currently exercisable or will become exercisable by May 8, 2010, the date
60 days after March 9, 2010.(8)Includes
20,000 shares issuable upon the exercise of options which are currently exercisable or will become exercisable by May 8, 2010, the date
60 days after March 9, 2010.


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Table of Contents

(9)Includes
20,000 shares issuable upon the exercise of options which are currently exercisable or will become exercisable by May 8, 2010, the date
60 days after March 9, 2010.(10)Includes
17,222 shares issuable upon the exercise of options which are currently exercisable or will become exercisable by May 8, 2010, the date
60 days after March 9, 2010.(11)Includes
134,312 shares issuable upon the exercise of options which are currently exercisable or will become exercisable by May 8, 2010, the date
60 days after March 9, 2010.(12)Includes
49,560 shares issuable upon the exercise of options which are currently exercisable or will become exercisable by May 8, 2010, the date
60 days after March 9, 2010.(13)Includes
29,856 shares issuable upon the exercise of options which are currently exercisable or will become exercisable by May 8, 2010, the date
60 days after March 9, 2010.(14)Includes
29,337 shares issuable upon the exercise of options which are currently exercisable or will become exercisable by May 8, 2010, the date
60 days after March 9, 2010.(15)Consists
of all shares beneficially owned by our directors and executive officers who served in that capacity as of March 9, 2010. Includes 335,842
shares issuable upon the exercise of options which are currently exercisable or will become exercisable by May 8, 2010, the date 60 days after March 9, 2010.


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ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Independence

In March 2010, the Board, based on the recommendation of our Nominating and Governance Committee, determined that each of the directors
listed below, representing a majority of the Board, is an independent director under Rule 5605(a)(2) of the Nasdaq Marketplace rules for listed companies.

Independent Directors



The
Board, based on the recommendation of our Nominating and Governance Committee, also determined that each member of our Audit, Compensation and Nominating and Governance Committees
was independent during 2009, and is currently independent, under Nasdaq's Marketplace rules for listed companies.

Certain Relationships and Related Person Transactions

In 2009 we were not a party to any transaction in which the amount involved exceeds $120,000 and in which any of our directors or
executive officers or any other related person had or will have a direct or indirect material interest, other than the compensation paid to our executive officers with respect to their employment
relationship with us and compensation paid to our non-employee directors for their service as members of the Board, which compensation
is disclosed herein. All other relationships previously considered by the Audit Committee were not deemed material.

The
Company and Trubion Pharmaceuticals, Inc. ("Trubion") are in the process of negotiating an agreement with Nodality pursuant to
which the Company, Trubion and Nodality would collaborate in the application of certain of Nodality's technology to the TRU-016 product, which the Company and Trubion are
co-developing. Trubion would reimburse Nodality for certain out-of-pocket and personnel costs under the agreement. The Company expects that the aggregate cost of
currently planned work under the agreement with Nodality would be approximately $250,000, 50% of which the Company would reimburse Trubion pursuant to the terms of the Company's collaboration
agreement with Trubion. David Parkinson, M.D., Ph.D., is a member of our Board and is the President and Chief Executive Officer and a member of the Board of Directors of Nodality. Although we have
reviewed with our Audit Committee the possibility of our entering into this agreement with Nodality and the general terms and conditions of this potential agreement, our Audit Committee has not yet
formally assessed (1) the materiality of any direct or indirect interest of Dr. Parkinson in the planned agreement among the Company, Trubion and Nodality or (2) the approximate
dollar value of the amount of the Dr. Parkinson's interest, if any, in the transaction.

Our
Audit Committee is responsible for reviewing and approving all related person transactions, including transactions with executive officers and directors, for potential conflicts of
interests or potential improprieties. Under SEC rules, related person transactions are those transactions to which we are or may be a party to in which the amount involved exceeds $120,000, and in
which any of our directors or executive officers or any other related person had or will have a direct or indirect material interest, excluding, among other things, compensation arrangements with
respect to employment and

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Table of Contents

Board
membership. Our Audit Committee would approve a related person transaction if it determined that the transaction is in our best interests.

Our
directors are required to disclose in an executive session of the Board any potential conflict of interest, or personal interest in a transaction that the Board is considering. Our
executive officers are required to disclose any related person transaction to our Compliance Officer who would notify the Audit Committee of the transaction. We also poll our directors on a quarterly
basis with respect to related person transactions and their service as an officer or director of other entities.

Any
director involved in a related person transaction that is being reviewed or approved must recuse himself or herself from participation in any related deliberation or decision.
Whenever possible, the transaction should be approved in advance and if not approved in advance, must be submitted for ratification promptly after.

We
have not yet adopted written policies and procedures regarding the review and approval or ratification of related-person transactions that the Company would be required to disclose
pursuant to Item 404 of Regulation S-K, other than the general proscriptions regarding conflicts of interest set forth in our Code of Business Conduct, which is applicable to
all of our officers, directors, and employees.

Board Structure and Risk Oversight

The Board believes that separate individuals should, generally, hold the positions of Chairperson of the Board and Chief Executive
Officer, and that the Chairperson should not be an employee of the Company. Since the Spin-off of the Company, the Chairperson of the Board has been an independent,
non-employee member of the Board. The Chairperson of the Board is responsible for coordinating the Board's activities, including the scheduling of meetings and executive sessions of the
non-employee directors and the relevant agenda items in each case (in consultation with the Chief Executive Officer as appropriate). The Board believes this leadership structure enhances
the Board's oversight of and independence from our management, the ability of the Board to carry out its roles and responsibilities on behalf of our stockholders and our overall corporate governance.

The
Board meets in executive session after each regular Board meeting to, among other things, assess management's reports to the Board, evaluate the strategic direction of the Company
and consider the effectiveness of management and similar matters. The Chairperson customarily meets with the Chief Executive Officer after such independent sessions to communicate the independent
directors' views on particular matters.

The
Board has designated five committees to address particular areas of responsibility: the Audit, Compensation, Nominating and Governance, Scientific Review and Equity Grant Committees.
The Board believes that this structure provides the Board with the opportunity to exercise independent review of the Company's results and to apply more directed oversight of specific functions
through its committees.

The
Board exercises it role in the oversight of risk management both directly and through its committees, in particular the Audit Committee. Our senior financial and accounting and legal
personnel periodically report to the Audit Committee regarding material risks to our business, among other matters, including in connection with the preparation of periodic reports on
Form 10-Q and 10-K, and the Audit Committee meets in executive sessions with representatives of our independent registered public accounting firm. The Board also is
periodically apprised by our management of material risks to our business, and changes in material risks to our business, and considers these risks and the Company's efforts to address or mitigate
these risks.

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ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

The Board of Directors appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal
year ending December 31, 2009.

The
following table sets forth the aggregate fees billed by Ernst & Young LLP for audit services rendered in connection with the consolidated financial statements and
reports for 2008 and 2009 and for other services rendered related to fiscal 2008 and 2009 on behalf of us, as well as all out-of-pocket costs incurred in connection with these
services, which have been billed to us:

Fee Category:

2008

% of Total

2009

% of Total(in thousands)Audit Fees(1)(2)(1)

$
1,059


99.9
%
$
774


83.4
%Audit-Related Fees(3)








150


16.2
%Tax Fees(4)(3)











All Other Fees(5)


2


0.1
%

4


0.4
%Total Fees

$
1,061


100.0
%
$
928


100.0
%


(1)Audit
fees consist of fees billed for professional services rendered for the audits of our consolidated financial statements as of December 31, 2009,
2008, and 2007 and for each of the four years in the period ended December 31, 2009, the review of our consolidated financial statements for each of the quarterly periods in 2009 as well as
those included in our Registration Statement on Form 10, and other services that are normally provided by Ernst & Young LLP in connection with statutory and regulatory filings or
engagements, except those not required by statute or regulation.(2)Approximately
$787,000 of the total Audit Fees billed by Ernst & Young LLP related to fiscal 2008 was paid for by PDL as the costs were
incurred prior to the spin-off of Facet from PDL in December 2008.(3)Audit
related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our
consolidated financial statements and are not reported under "Audit Fees." The $150,000 in Audit-related fees incurred in 2009 related to the audit of certain carve-out financial
statements for portions of our former commercial operations we agreed to prepare for the benefit of EKR Pharmaceuticals. We were fully reimbursed by EKR for all costs incurred in the preparation and
audit of those financial statements, including all EY fees incurred.(4)Tax
fees consist of tax compliance/preparation and other tax services. No such services were incurred in 2008 or 2009.(5)"All
Other Fees" consists of fees for accounting literature subscription services.


Our
Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may
include audit services, audit related services, tax services and other services. Our Audit Committee may delegate pre-approval authority to one or more of its members. During fiscal years
2008 and 2009, our Audit Committee pre-approved all of the services rendered.

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Table of Contents

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



Exhibit No.

Exhibit24.1

Power of Attorney31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.






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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

FACET BIOTECH CORPORATION (REGISTRANT)By:

/s/ FAHEEM HASNAIN Faheem Hasnain President and Chief Executive Officer
(Principal Executive Officer)Date: April 19, 2010


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

Signature

Title

Date/s/ FAHEEM HASNAIN (Faheem Hasnain)

President and Chief Executive Officer
(Principal Executive Officer)

April 19, 2010/s/ ANDREW L. GUGGENHIME (Andrew L. Guggenhime)

Senior Vice President and Chief Financial Officer
(Principal Financial Officer)

April 19, 2010/s/ HERB C. CROSS (Herb C. Cross)

Vice President, Finance
(Principal Accounting Officer)

April 19, 2010* (Bradford S. Goodwin)

Director

April 19, 2010* (Gary Lyons)

Director

April 19, 2010* (David R. Parkinson, M.D.)

Director

April 19, 2010* (Kurt von Emster)

Director

April 19, 2010* (Hoyoung Huh)

Director

April 19, 2010




*By:

/s/ ANDREW L. GUGGENHIME Andrew L. Guggenhime Attorney-In-Fact


46

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