Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20142015

 

OR

 

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from             to             

 

Commission file number 001-33497

 

Amicus Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

71-0869350

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification Number)

 

1 Cedar Brook Drive, Cranbury, NJ 08512

(Address of Principal Executive Offices and Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (609) 662-2000

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:  Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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 x  No o

 

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

 

Large accelerated filer o

 

Accelerated filer x

Non-accelerated filer o

 

Smaller Reporting Company o

 

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

 

The number of shares outstanding of the registrant’s common stock, $.01 par value per share, as of October 31, 2014July 29, 2015 was 79,321,630118,618,119 shares.

 

 

 



Table of Contents

 

AMICUS THERAPEUTICS, INC.

 

Form 10-Q for the Quarterly Period Ended SeptemberJune 30, 20142015

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

4

 

 

 

 

Item 1.

Financial Statements (unaudited)

4

 

 

 

 

Consolidated Balance Sheets as of DecemberJune 30, 2015 and Dec 31, 2013 and September 30, 2014

4

 

 

 

 

Consolidated Statements of Operations for the Three and NineSix Months Ended SeptemberJune 30, 20132015 and 2014

5

 

 

 

 

Consolidated Statements of Comprehensive Loss for the Three and NineSix Months Ended SeptemberJune 30, 20132015 and 2014

6

 

 

 

 

Consolidated Statements of Cash Flows for the Three and NineSix Months Ended SeptemberJune 30, 20132015 and 2014

7

 

 

 

 

Notes to Consolidated Financial Statements

8

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2420

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

3830

 

 

 

 

Item 4.

Controls and Procedures

3830

 

 

 

PART II.

OTHER INFORMATION

3931

 

 

 

 

Item 1.

Legal Proceedings

3931

 

 

 

 

Item 1A.

Risk Factors

3931

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

3933

 

 

 

 

Item 3.

Defaults Upon Senior Securities

3933

 

 

 

 

Item 4.

Mine Safety Disclosures

3933

 

 

 

 

Item 5.

Other Information

3933

 

 

 

 

Item 6.

Exhibits

4034

 

 

 

SIGNATURES

41

35

 

 

 

INDEX TO EXHIBITS

4236

 

We have registered or filed applications to register certain trademarks in the United States and abroad, including AMICUS™, AMICUS THERAPEUTICS™ (and design), GALAFOLD™ and CHART™ (and design).

2



Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This quarterly report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties.  All statements, other than statements of historical facts, included in this quarterly report on Form 10-Q regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “potential,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “should,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward- looking statements contain these identifying words.

 

The forward-looking statements in this quarterly report on Form 10-Q include, among other things, statements about:

 

·                                     the progress and results of our clinical trials of our drug candidates, including our pharmacological chaperone migalastat HCl;HCl (“Galafold™”);

·                                     the cost of manufacturing drug supply for our clinical and preclinical studies, including the significant cost of new Fabry enzyme replacement therapy (ERT)(“ERT”) cell line development and manufacturing as well as the cost of manufacturing the vIGF-2 peptide tag;Pompe ERT;

·                                     the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our product candidates including those testing the use of pharmacological chaperones co-formulated and co-administered with ERT and for the treatment of  lysosomal storage diseases;disorders (“LSDs”);

·                                     the costs, timing and outcome of regulatory review of our product candidates;

·                                     the number and development requirements of other product candidates that we pursue;

·                                     the costs of commercialization activities, including product marketing, sales and distribution;

·                                     the emergence of competing technologies and other adverse market developments;

·                                     our ability to obtain reimbursement for Galafold;

·                                     our ability to commercialize Galafold in the European Union;

·the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property related claims;

·                                     the extent to which we acquire or invest in businesses, products and technologies; and

·                                     our ability to establish collaborations and obtain milestone, royalty or other payments from any such collaborators.

 

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in Part I Item 1A — Risk Factors of the Annual Report on Form 10-K for the year ended December 31, 20132014 that we believe could cause actual results or events to differ materially from the forward-looking statements that we make.  Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations or investments we may make.

 

You should read this quarterly report on Form 10-Q in conjunction with the documents that we reference herein. We do not assume any obligation to update any forward-looking statements.

3



Table of Contents

PART I.          FINANCIAL INFORMATION

 

Item 1.             Financial Statements (unaudited)

 

Amicus Therapeutics, Inc.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)

 

 

December 31,

 

September 30,

 

 

2013

 

2014

 

 

June 30,
2015

 

December 31,
2014

 

Assets:

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

43,640

 

$

19,671

 

 

$

249,023

 

$

24,074

 

Investments in marketable securities

 

38,360

 

65,511

 

 

112,396

 

127,601

 

Receivable due from collaboration agreements

 

1,083

 

293

 

Prepaid expenses and other current assets

 

5,195

 

1,762

 

 

3,578

 

2,902

 

Total current assets

 

88,278

 

87,237

 

 

364,997

 

154,577

 

 

 

 

 

 

Property and equipment, less accumulated depreciation and amortization of $9,973 and $11,157 at December 31, 2013 and September 30, 2014, respectively

 

4,120

 

3,129

 

Investments in marketable securities

 

 

17,464

 

Property and equipment, less accumulated depreciation of $12,381 and $11,520 at June 30, 2015 and December 31, 2014, respectively

 

3,379

 

2,811

 

In-process research & development

 

23,000

 

23,000

 

 

23,000

 

23,000

 

Goodwill

 

11,613

 

11,613

 

 

11,613

 

11,613

 

Other non-current assets

 

552

 

508

 

 

924

 

502

 

Total Assets

 

$

127,563

 

$

125,487

 

 

$

403,913

 

$

209,967

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

10,162

 

$

11,331

 

 

$

16,901

 

$

16,345

 

Current portion of secured loan

 

299

 

2,493

 

 

 

3,840

 

Total current liabilities

 

10,461

 

13,824

 

 

16,901

 

20,185

 

 

 

 

 

 

 

 

 

 

 

Deferred reimbursements

 

36,677

 

36,677

 

 

36,620

 

36,620

 

Secured loan, less current portion

 

14,174

 

11,809

 

 

 

10,510

 

Contingent consideration payable

 

10,600

 

10,200

 

 

11,800

 

10,700

 

Deferred tax liability

 

9,186

 

9,186

 

 

9,186

 

9,186

 

Other non-current liability

 

714

 

514

 

 

504

 

588

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

Common stock, $.01 par value, 125,000,000 shares authorized, 61,975,416 shares issued and outstanding at December 31, 2013, 125,000,000 shares authorized, 79,257,588 shares issued and outstanding at September 30, 2014

 

679

 

853

 

Common stock, $.01 par value, 250,000,000 shares authorized, 118,367,319 shares issued and outstanding at June 30, 2015, 125,000,000 shares authorized, 95,556,277 shares issued and outstanding at December 31, 2014

 

1,241

 

1,015

 

Additional paid-in capital

 

423,593

 

468,650

 

 

826,582

 

568,743

 

Accumulated other comprehensive income

 

1

 

2

 

 

(52

)

(132

)

Accumulated deficit

 

(378,522

)

(426,228

)

 

(498,869

)

(447,448

)

Total stockholders’ equity

 

45,751

 

43,277

 

 

328,902

 

122,178

 

Total Liabilities and Stockholders’ Equity

 

$

127,563

 

$

125,487

 

 

$

403,913

 

$

209,967

 

 

See accompanying notes to consolidated financial statements

4



Table of Contents

Amicus Therapeutics, Inc.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share amounts)

 

 

Three Months

 

Nine Months

 

 

Three Months

 

Six Months

 

 

Ended September 30,

 

Ended September 30,

 

 

Ended June 30,

 

Ended June 30,

 

 

2013

 

2014

 

2013

 

2014

 

 

2015

 

2014

 

2015

 

2014

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research revenue

 

$

39

 

$

293

 

$

39

 

$

1,224

 

 

 

$

475

 

 

$

931

 

Total revenue

 

39

 

293

 

39

 

1,224

 

 

 

475

 

 

931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

10,110

 

$

12,049

 

$

32,824

 

$

32,019

 

 

$

17,234

 

$

9,978

 

$

33,347

 

$

19,970

 

General and administrative

 

4,635

 

5,270

 

14,288

 

15,199

 

 

8,278

 

4,753

 

14,705

 

9,929

 

Changes in fair value of contingent consideration payable

 

 

(600

)

 

(400

)

 

100

 

(305

)

1,100

 

200

 

Restructuring charges

 

 

15

 

 

(74

)

 

26

 

(81

)

36

 

(89

)

Depreciation and amortization

 

429

 

375

 

1,318

 

1,183

 

Loss on extinguishment of debt

 

952

 

 

952

 

 

Depreciation

 

353

 

396

 

861

 

808

 

Total operating expenses

 

15,174

 

17,109

 

48,430

 

47,927

 

 

26,943

 

14,741

 

51,001

 

30,818

 

Loss from operations

 

(15,135

)

(16,816

)

(48,391

)

(46,703

)

 

(26,943

)

(14,266

)

(51,001

)

(29,887

)

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

36

 

55

 

147

 

133

 

 

158

 

36

 

329

 

78

 

Interest expense

 

(7

)

(377

)

(26

)

(1,106

)

 

(338

)

(374

)

(710

)

(729

)

Change in fair value of warrant liability

 

517

 

 

874

 

 

Other expense

 

 

(11

)

 

(30

)

 

(10

)

(10

)

(39

)

(19

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(14,589

)

$

(17,149

)

$

(47,396

)

$

(47,706

)

 

$

(27,133

)

$

(14,614

)

$

(51,421

)

$

(30,557

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common shares — basic and diluted

 

$

(0.29

)

$

(0.22

)

$

(0.96

)

$

(0.68

)

 

$

(0.27

)

$

(0.22

)

$

(0.53

)

$

(0.46

)

Weighted-average common shares outstanding — basic and diluted

 

49,621,188

 

78,889,346

 

49,621,188

 

70,216,251

 

 

99,994,125

 

67,212,764

 

97,888,573

 

65,799,059

 

 

See accompanying notes to consolidated financial statements

5



Table of Contents

Amicus Therapeutics, Inc.

Consolidated Statements of Comprehensive Loss

(Unaudited)

(in thousands)

 

 

Three Months

 

Nine Months

 

 

 

Ended September 30,

 

Ended September 30,

 

 

 

2013

 

2014

 

2013

 

2014

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(14,589

)

$

(17,149

)

$

(47,396

)

$

(47,706

)

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss)/ income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain/ (loss) on available-for-sale securities

 

2

 

4

 

(9

)

1

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive gain/ (loss) before income taxes

 

2

 

4

 

(9

)

1

 

Provision for income taxes related to other (loss)/ comprehensive income items (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive gain/ (loss)

 

$

2

 

$

4

 

$

(9

)

$

1

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

$

(14,587

)

$

(17,145

)

$

(47,405

)

$

(47,705

)

 

 

Three Months

 

Six Months

 

 

 

Ended June 30,

 

Ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(27,133

)

$

(14,614

)

$

(51,421

)

$

(30,557

)

 

 

 

 

 

 

 

 

 

 

Other comprehensive income/(loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on available-for-sale securities

 

(17

)

(4

)

80

 

(3

)

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) gain before income taxes

 

(17

)

(4

)

80

 

(3

)

Provision for income taxes related to other (loss)/ comprehensive income items (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss)income

 

$

(17

)

$

(4

)

$

80

 

$

(3

)

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

$

(27,150

)

$

(14,618

)

$

(51,341

)

$

(30,560

)

 


(a) — Taxes have not been accrued on unrealized gain on securities as the Company is in a loss position for all periods presented.

See accompanying notes to consolidated financial statements

6



Table of Contents

Amicus Therapeutics, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

Nine Months

 

 

Six Months

 

 

Ended September 30,

 

 

Ended June 30

 

 

2013

 

2014

 

 

2015

 

2014

 

Operating activities

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(47,396

)

$

(47,706

)

 

$

(51,421

)

$

(30,557

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

Non-cash interest expense

 

 

176

 

 

136

 

115

 

Depreciation and amortization

 

1,318

 

1,183

 

Depreciation

 

861

 

808

 

Stock-based compensation

 

4,674

 

4,398

 

 

4,191

 

2,748

 

Restructuring charges

 

 

(74

)

 

36

 

(89

)

Change in fair value of warrant liability

 

(874

)

 

Loss on extinguishment of debt

 

952

 

 

Non-cash changes in the fair value of contingent consideration payable

 

 

(400

)

 

1,100

 

200

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Receivable due from collaboration agreements

 

1,064

 

790

 

 

 

607

 

Prepaid expenses and other current assets

 

618

 

3,433

 

 

641

 

4,245

 

Other non-current assets

 

 

26

 

 

(482

)

25

 

Accounts payable and accrued expenses

 

(679

)

1,213

 

 

459

 

(155

)

Non-current liabilities

 

 

(200

)

 

(84

)

14

 

Deferred reimbursements

 

3,601

 

 

Net cash used in operating activities

 

(37,674

)

(37,161

)

 

(43,611

)

(22,039

)

Investing activities

 

 

 

 

 

 

 

 

 

 

Sale and redemption of marketable securities

 

68,348

 

47,959

 

 

63,163

 

31,114

 

Purchases of marketable securities

 

(33,654

)

(75,109

)

 

(30,414

)

(28,849

)

Purchases of property and equipment

 

(645

)

(192

)

 

(1,429

)

(132

)

Net cash provided by/(used in) investing activities

 

34,049

 

(27,342

)

Net cash provided by investing activities

 

31,320

 

2,133

 

Financing activities

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

38,736

 

 

243,216

 

18,344

 

Payments of secured loan agreement

 

(299

)

(299

)

 

(15,291

)

(199

)

Proceeds from exercise of stock options

 

 

2,097

 

 

6,932

 

25

 

Net cash (used in)/provided by financing activities

 

(299

)

40,534

 

Net decrease in cash and cash equivalents

 

(3,924

)

(23,969

)

Purchase of vested restricted stock units

 

(1,617

)

 

Proceeds from exercise of warrants

 

4,000

 

 

Net cash provided by financing activities

 

237,240

 

18,170

 

Net increase/(decrease) in cash and cash equivalents

 

224,949

 

(1,736

)

Cash and cash equivalents at beginning of period

 

33,971

 

43,640

 

 

24,074

 

43,640

 

Cash and cash equivalents at end of period

 

$

30,047

 

$

19,671

 

 

$

249,023

 

$

41,904

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

24

 

$

864

 

 

$

605

 

$

537

 

Non-cash activities

 

$

 

$

 

 

See accompanying notes to consolidated financial statements

Amicus Therapeutics, Inc.

 

7Notes to Consolidated Financial Statements



Table of Contents

Note 1. Description of Business and Significant Accounting Policies

 

Corporate Information, Status of Operations, and Management Plans

 

Amicus Therapeutics, Inc. (the Company)“Company,” “we,” “us,” or “our”) was incorporated on February 4, 2002 in Delaware and is a biopharmaceutical company focused on the discovery, development and commercialization of next-generation medicines for a range of rare and orphan diseases, with a focus on improved therapies for lysosomal storage diseases (LSDs)disorders (“LSDs”). The Company’s lead programproduct candidate isthe pharmacological chaperone migalastat HCl (migalastat) for Fabry disease.  Migalastat is(“Galafold”), a novel, small molecule pharmacological chaperone in developmentthat can be used as a monotherapy and in combination with enzyme replacement therapy (ERT)(“ERT”) for Fabry disease.  The Company is leveraging its Chaperone-Advanced Replacement Therapy, or CHART™  platform along with other proprietary technologies to developCompany’s development programs also include next-generation ERTs for LSDs, including Fabry disease, Pompe disease and Mucopolysaccharidosis Type I (MPS I) and Gaucher diseases.(“MPS I”).  The Company’s activities since inception have consisted principally of raising capital, establishing facilities, and performing research and development.

 

In August 2014, the Company announced positive 18 month data from the Study 012.  A summary of the 18-month results areOur Fabry franchise strategy is to develop Galafold for all patients with Fabry disease - as follows:

·Migalastat had a comparable effect to ERT on patients’ kidney function as measured by the change in eGFR and mGFR.

·Levels of plasma lyso-Gb3, an important biomarker of disease, remained low and stable inmonotherapy for patients with amenable mutations who switched from ERT to migalastat.

·Migalastat was generally safe and well-tolerated.

·Of 48 patients with GLP HEK-amenable mutations who completed Study 012, 46 (96%) elected to continue with the 12-month treatment extension and 45 remain on migalastat today as their only treatment for Fabry disease.

The Company looks forward to meeting with the EMEA in the fourth quarter of 2014 and the US FDA early in 2015 to make migalastat available for all amenable Fabry patients as quickly as possible.

In July 2014, the Company completed a $40 million at the market (ATM) equity offering under which the Company sold shares of its common stock, par value $0.01 per share, with Cowen  and Company LLC as sales agent. Under the ATM equity program, the Company sold 14.3 million shares of common stock raising approximately $38.7 million in net proceeds.

For further information on the ATM Agreement, see — Note 7. Stockholder’s Equity.

In November 2013, the Company completed the acquisition of Callidus Biopharma, Inc. (Callidus).  Callidus was a privately-held biologics company focused on developing best-in-class enzyme replacement therapies (ERTs) for lysosomal storage diseases (LSDs). Callidus lead ERT is a recombinant human acid-alpha glucosidase (rhGAA, called ATB200) for Pompe disease in late preclinical development.

For further information, see — Note 4. Acquisition of Callidus Biopharma, Inc.

In November 2013, Amicus entered into the Revised Agreement (the Revised Agreement) with GlaxoSmithKline plc (GSK), pursuant to which Amicus has obtained global rights to develop and commercialize migalastat as a monotherapy and in combination with ERT for Fabry disease. The Revised Agreement amendsall other patients.

During the first quarter of 2015, the Company met with regulatory authorities in Europe and replaces in its entirety the Expanded Agreement entered into between Amicus and GSK in July 2012 (the Expanded Collaboration Agreement). UnderUnited States to discuss the terms of the Revised Agreement, Amicus obtained global commercial rights toapproval pathways for migalastat both as a monotherapy for Fabry patients who have amenable mutations. In June 2015, the European Medicines Agency (“EMA”) validated the Company’s Marketing Authorization Application (“MAA”) submission for Galafold and co-formulated with ERT. For the next-generation Fabry ERT (migalastat co-formulated with ERT), GSKCentralized Procedure has begun under Accelerated Assessment. The Committee for Medicinal Products for Human Use (“CHMP”) may shorten the MAA review period from 210 days, under standard review, to 150 days under Accelerated Assessment. The CHMP opinion is eligible to receive single-digit royaltiesthen reviewed by the European Commission, which generally issues a final decision on net sales in eight major markets outside the U.S. For migalastat monotherapy, GSK is eligible to receive post-approval and sales-based milestones, as well as tiered royaltiesEuropean Union (“EU”) approval within three months. The MAA submission will be reviewed in the mid-teensCentralized Procedure, which if authorized, provides a marketing license valid in eight major markets outside the U.S.  There was no other consideration paid to GSK as part of the Revised Agreement.

In November 2013,all 28 EU member states. Once authorized, the Company entered into a securities purchase agreement (the 2013 SPA) with certain entities controlled by Redmile Group, LLC and GSK forwould then begin the private placement of a combination of shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock.  The warrants have a term of one year and are exercisable between July 1, 2014 and June 30, 2015 at an exercise price of $2.50 per share.  The aggregate offer proceeds were $15 million.

In September 2013, the Company entered into a collaboration agreement with Biogen Idec (Biogen) to discover, develop and commercialize novel small molecules that target the glucocerobrosidase (GCase) enzyme for the treatment of Parkinson’s disease.country-by-country reimbursement approval process.

 

8In the United States, the Company plans to conduct a pre-new drug application (“NDA”) meeting with the U.S. Food and Drug Administration (“FDA”) and to submit an NDA for



TableGalafold under Subpart H (accelerated approval) in the second half of Contents2015 for accelerated approval. Following the MAA validation, the Company is also initiating the regulatory submission process in several additional geographies.

 

In September 2014,June 2015, the Company issued a total of 19.5 million shares through a public offering at a price of $13.25 per share, with net proceeds of $243.2 million. The Company expects to use the net proceeds of the offering for investment in the global commercialization infrastructure for Galafold for Fabry disease, the continued clinical development of its product candidates and Biogen concluded their research collaboration.  Amicus’ most advanced Parkinson’s candidate is AT3375, which was developed outside the collaboration and is wholly-owned by Amicus.

For further information, see — Note 10. Collaborative Agreements.for other general corporate purposes.

 

The Company had an accumulated deficit of approximately $426.2$498.9 million at SeptemberJune 30, 20142015 and anticipates incurring losses through the fiscal year ending December 31, 20142015 and beyond. The Company has not yet generated commercial sales revenue and has been able to fund its operating losses to date through the sale of its redeemable convertible preferred stock, issuance of convertible notes, net proceeds from its initial public offering (IPO) and subsequent stock offerings, payments from partners during the terms of the collaboration agreements and other financing arrangements.

Including the net proceeds from the completed ATM equity program, the The Company believes that its existing cash and cash equivalents and short-term investments will be sufficient to fund the current operating plan into 2016.2017.

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The Company has prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP)(“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10-01 of Regulations S-X. Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements.  In the opinion of management, the accompanying unaudited financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim financial information.

The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s financial statements and related notes as contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.2014.  For a complete description of the Company’s accounting policies, please refer to the Annual Report on Form 10-K for the fiscal year ended December 31, 2013.2014.

 

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Significant Accounting Policies

 

There have been no material changes to the Company’s significant accounting policies during the threesix months ended SeptemberJune 30, 2014,2015, as compared to the significant accounting policies disclosed in Note 2 of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, except for the adoption of Accounting Standards Update (ASU) 2014-10, as described below.2014. However, the following accounting policies are the most critical in fully understanding and evaluating the Company’s financial condition and results of operations.

 

Revenue Recognition

 

The Company recognizes revenue when amounts are realized or realizable and earned. Revenue is considered realizable and earned when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the price is fixed or determinable; and (4) collection of the amounts due are reasonably assured.

 

In multiple element arrangements, revenue is allocated to each separate unit of accounting and each deliverable in an arrangement is evaluated to determine whether it represents separate units of accounting. A deliverable constitutes a separate unit of accounting when it has standalone value and there is no general right of return for the delivered elements. In instances when the aforementioned criteria are not met, the deliverable is combined with the undelivered elements and the allocation of the arrangement consideration and revenue recognition is determined for the combined unit as a single unit of accounting. Allocation of the consideration is determined at arrangement inception on the basis of each unit’s relative selling price. In instances where there is determined to be a single unit of accounting, the total consideration is applied as revenue for the single unit of accounting and is recognized over the period of inception through the date where the last deliverable within the single unit of accounting is expected to be delivered.

 

The Company’s current revenue recognition policies which were applied in fiscal 2010, provide that, when a collaboration arrangement contains multiple deliverables, such as license and research and development services, the Company allocates revenue to each separate unit of accounting based on a selling price hierarchy. The selling price hierarchy for a deliverable is based on (i) its vendor specific objective evidence (VSOE)(“VSOE”) if available, (ii) third party evidence (TPE)(“TPE”) if VSOE is not available, or (iii) best estimated selling price (BESP)(“BESP”) if neither VSOE nor TPE is available. The Company would establish the VSOE of selling price using the price charged for a deliverable when sold separately. The TPE of selling price would be established by evaluating largely similar and interchangeable competitor products or services in standalone sales to similarly situated customers. The BESP would be established considering internal factors such as an internal pricing analysis or an income approach using a discounted cash flow model.

 

The Company also considers the impact of potential future payments it makes in its role as a vendor to its customers and evaluates if these potential future payments could be a reduction of revenue from that customer. If the potential future payments to the customer are:

 

·      a payment for an identifiable benefit; and

·      the identifiable benefit is separable from the existing relationship between the Company and its customer; and

·      the identifiable benefit can be obtained from a party other than the customer; and

·      the Company can reasonably estimate the fair value of the identifiable benefit

 

then the payments are accounted for separate from the revenue received from that customer. If, however, all these criteria are not satisfied, then the payments are treated as a reduction of revenue from that customer.

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If the Company determines that any potential future payments to its customers are to be considered as a reduction of revenue, it must evaluate if the total amount of revenue to be received under the arrangement is fixed and determinable. If the total amount of revenue is not fixed and determinable due to the uncertain nature of the potential future payments to the customer, then any customer payments cannot be recognized as revenue until the total arrangement consideration becomes fixed and determinable.

 

The reimbursements for research and development costs under collaboration agreements that meet the criteria for revenue recognition are included in Research Revenue and the costs associated with these reimbursable amounts are included in research and development expenses.

 

In order to determine the revenue recognition for contingent milestones, the Company evaluates the contingent milestones using the criteria as provided by the Financial Accounting Standards Boards (FASB)(“FASB”) guidance on the milestone method of revenue recognition at the inception of a collaboration agreement. The criteria requires that (i) the Company determines if the

milestone is commensurate with either its performance to achieve the milestone or the enhancement of value resulting from the Company’s activities to achieve the milestone, (ii) the milestone be related to past performance, and (iii) the milestone be reasonable relative to all deliverable and payment terms of the collaboration arrangement. If these criteria are met then the contingent milestones can be considered as substantive milestones and will be recognized as revenue in the period that the milestone is achieved.

 

Although the Company believes the assumptions and estimates made are reasonable, they are based in part on historical experience and information obtained from the management of the acquired businesses and are inherently uncertain. Examples of critical estimates in valuing any contingent acquisition consideration issued or which may be issued and the intangible assets we have acquired or may acquire in the future include but are not limited to:

·the feasibility and timing of achievement of development, regulatory and commercial milestones;

·expected costs to develop the in-process research and development into commercially viable products; and

·future expected cash flows from product sales.

Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.

Fair Value Measurements

 

The Company records certain asset and liability balances under the fair value measurements as defined by the FASB guidance. Current FASB fair value guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, current FASB guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions that market participants assumptions would use in pricing assets or liabilities (unobservable inputs classified within Level 3 of the hierarchy).

 

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at measurement date. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

 

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NewRecent Accounting StandardsPronouncements

 

In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The amendments in ASU 2015-05 provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments do not change the accounting for a customer’s accounting for service contracts. As a result of the amendments, all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets. The ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the impact that this standard will have on our consolidated financial statements.

In April 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in ASU 2015-03 are intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. We are currently assessing the impact that this standard will have on our consolidated financial statements.

In November 2014, the FASB issued ASU 2014-17, Business Combinations (Topic 805): Pushdown Accounting. The amendments in ASU 2014-17 provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The ASU is effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle. We are currently assessing the impact that this standard will have on our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, “PresentationPresentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (ASU 2014-15)Concern, which defines management’s responsibility

to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures if there is substantial doubt about its ability to continue as a going concern. The pronouncement is effective for annual reporting periods ending after December 15, 2016 with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on the Company’sour consolidated financial statements.

In June 2014, the FASB issued ASU 2014-10 that removes the definition of development stage entity from the accounting standards codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the ASU eliminates the requirements for development stage entities to (i) present inception-to-date information in the statement of income, cash flow and stockholders’ equity, (ii) label the financial statements as those of a development stage entity, (iii) disclose a description of the development stage activities in which the entity is engaged, and (iv) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.  The Company has applied the ASU effective from the financial statements as of June 30, 2014.

 

In May 2014, FASB issued ASU 2014-09, Revenue From Contracts With Customers, that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The ASU becomes effective for the Companyus at the beginning of itsour 2017 fiscal year; early adoption is not permitted. The Company isWe are currently assessing the impact that this standard will have on its consolidated financial statements.

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Note 2.3.  Cash, Money Market Funds and Marketable Securities

 

As of SeptemberJune 30, 2014,2015, the Company held $19.7$249.0 million in cash and cash equivalents and $65.5$112.4 million of available-for-sale investment securities which are reported at fair value on the Company’s balance sheet. Unrealized holding gains and losses are reported within accumulated other comprehensive income/ (loss) in the statementstatements of comprehensive loss. If a decline in the fair value of a marketable security below the Company’s cost basis is determined to be other than temporary, such marketable security is written down to its estimated fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge. To date, only temporary impairment adjustments have been recorded.

 

Consistent with the Company’s investment policy, the Company does not use derivative financial instruments in its investment portfolio. The Company regularly invests excess operating cash in deposits with major financial institutions, money market funds, notes issued by the U.S. government, as well as fixed income investments and U.S. bond funds both of which can be readily purchased and sold using established markets. The Company believes that the market risk arising from its holdings of these financial instruments is mitigated as many of these securities are either government backed or of the highest credit rating. Investments that have original maturities or greater than 3 months but less than 1 year are classified as short-term and investments with maturities that are greater than 1 year are classified as long-term.

 

Cash and available-for-sale securities are all classified as current unless indicated otherwise and consisted of the following as of June 30, 2015 and December 31, 2013 and September 30, 2014 (in thousands):

 

 

 

As of December 31, 2013

 

 

 

Cost

 

Unrealized
Gain

 

Unrealized
Loss

 

Fair
Value

 

Cash balances

 

$

43,640

 

$

 

$

 

$

43,640

 

Corporate debt securities

 

30,817

 

1

 

(6

)

30,812

 

Commercial paper

 

7,192

 

6

 

 

7,198

 

Certificate of deposit

 

350

 

 

 

350

 

 

 

$

81,999

 

$

7

 

$

(6

)

$

82,000

 

 

 

 

 

 

 

 

 

 

 

Included in cash and cash equivalents

 

$

43,640

 

$

 

$

 

$

43,640

 

Included in marketable securities

 

38,359

 

7

 

(6

)

38,360

 

Total cash and available for sale securities

 

$

81,999

 

$

7

 

$

(6

)

$

82,000

 

 

As of September 30, 2014

 

 

As of June 30, 2015

 

 

Cost

 

Unrealized
Gain

 

Unrealized
Loss

 

Fair
Value

 

 

Cost

 

Unrealized
Gain

 

Unrealized
Loss

 

Fair Value

 

Cash balances

 

$

19,671

 

$

 

$

 

$

19,671

 

 

$

249,023

 

$

 

$

 

$

249,023

 

Corporate debt securities

 

53,674

 

1

 

(13

)

53,662

 

 

103,101

 

2

 

(57

)

103,046

 

Commercial paper

 

11,486

 

13

 

 

11,499

 

 

8,996

 

4

 

 

9,000

 

Certificate of deposit

 

350

 

 

 

350

 

 

350

 

 

 

350

 

 

$

85,181

 

$

14

 

$

(13

)

$

85,182

 

 

$

361,470

 

$

6

 

$

(57

)

$

361,419

 

 

 

 

 

 

 

 

 

 

Included in cash and cash equivalents

 

$

19,671

 

$

 

$

 

$

19,671

 

 

$

249,023

 

$

 

$

 

$

249,023

 

Included in marketable securities

 

65,510

 

14

 

(13

)

65,511

 

 

112,447

 

6

 

(57

)

112,396

 

Total cash and available for sale securities

 

$

85,181

 

$

14

 

$

(13

)

$

85,182

 

Total cash and marketable securities

 

$

361,470

 

$

6

 

$

(57

)

$

361,419

 

 

 

As of December 31, 2014

 

 

 

Cost

 

Unrealized
Gain

 

Unrealized
Loss

 

Fair Value

 

Cash balances

 

$

24,074

 

$

 

$

 

$

24,074

 

Corporate debt securities, current portion

 

115,862

 

 

(110

)

115,752

 

Corporate debt securities, non-current portion

 

17,508

 

 

(44

)

17,464

 

Commercial paper

 

11,477

 

22

 

 

11,499

 

Certificate of deposit

 

350

 

 

 

350

 

 

 

$

169,271

 

$

22

 

$

(154

)

$

169,139

 

Included in cash and cash equivalents

 

$

24,074

 

$

 

$

 

$

24,074

 

Included in marketable securities

 

145,197

 

22

 

(154

)

145,065

 

Total cash and marketable securities

 

$

169,271

 

$

22

 

$

(154

)

$

169,139

 

 

Unrealized gains and losses are reported as a component of other comprehensive income/(loss) in the statements of comprehensive loss.  For the year ended December 31, 2013, unrealized holding loss of $13 thousand and for the ninesix months ended SeptemberJune 30, 2014,2015, unrealized holding gain of $1$80 thousand were recognized.

Forand for the year ended December 31, 20132014, unrealized holding loss of $132 thousand, were included in the statement of comprehensive loss.

For the six months ended June 30, 2015 and the nine monthsyear ended September 30,December 31, 2014, there were no realized gains or losses.  The cost of securities sold is based on the specific identification method.

 

Unrealized loss positions in the available for sale securities as of June 30, 2015 and December 31, 2013 and September 30, 2014 reflect temporary impairments that have not been recognized and have been in a loss position for less than twelve months.  The fair value of these available for sale securities in unrealized loss positions was $23.6$94.7 million and $42.6$129.2 million as of June 30, 2015 and December 31, 2013 and September 30, 2014, respectively.

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The Company holds available-for-sale investment securities which are reported at fair value on the Company’s balance sheet. Unrealized holding gains and losses are reported within accumulated other comprehensive income (AOCI)(“AOCI”) in the statements of comprehensive loss.  The changes in AOCI associated with the unrealized holding gain on available-for-sale investments during the three and ninesix months, ended SeptemberJune 30, 20132015 and 2014, were as follows (in thousands):

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2013

 

2014

 

2013

 

2014

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

2015

 

2014

 

Balance, beginning

 

$

3

 

(2

)

$

14

 

$

1

 

 

$

(35

)

$

2

 

$

(132

)

$

1

 

Current period changes in fair value, (a)

 

2

 

4

 

(9

)

1

 

 

(17

)

(4

)

80

 

(3

)

Reclassification of earnings, (a)

 

 

 

 

 

 

 

 

 

 

Balance, ending

 

$

5

 

$

2

 

$

5

 

$

2

 

 

$

(52

)

$

(2

)

$

(52

)

$

(2

)

 


(a) — Taxes have not been accrued on the unrealized gain on securities as the Company is in a loss position for all periods presented.

Note 3.  Basic and Diluted Net Loss Attributable to Common Stockholders per Common Share

The Company calculates net loss per share as a measurement of the Company’s performance while giving effect to all dilutive potential common shares that were outstanding during the reporting period.  The Company has a net loss for all periods presented; accordingly, the inclusion of common stock options and warrants would be anti-dilutive.  Therefore, the weighted average shares used to calculate both basic and diluted earnings per share are the same.

The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net loss attributable to common stockholders per common share:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

(In thousands, except per share amounts)

 

2013

 

2014

 

2013

 

2014

 

Historical

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders per common

 

$

(14,589

)

$

(17,149

)

$

(47,396

)

$

(47,706

)

 

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding — basic and diluted

 

49,621,188

 

78,889,346

 

49,621,188

 

70,216,251

 

Dilutive common stock equivalents would include the dilutive effect of common stock options, restricted stock units and warrants for common stock equivalents.  Potentially dilutive common stock equivalents were excluded from the diluted earnings per share denominator for all periods because of their anti-dilutive effect. The table below presents potential shares of common stock that were excluded from the computation as they were anti-dilutive using the treasury stock method (in thousands):

 

 

As of September 30,

 

 

 

2013

 

2014

 

Options to purchase common stock

 

10,112

 

10,329

 

Outstanding warrants, convertible to common stock

 

1,404

 

1,600

 

Unvested restricted stock units

 

 

955

 

Total number of potentially issuable shares

 

11,516

 

12,884

 

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Note 4.   Acquisition of Callidus Biopharma, Inc.

 

In November 2013, the Company acquired Callidus through the merger of the Company’s subsidiary, CB Acquisition Corp. with and into Callidus (see — Note 1. Description of Business).  Callidus was a privately-held biologics company focused on developing best-in-class ERTs for LSDs andwith its lead ERT is ATB200 for Pompe disease in late preclinical development. The acquisition of the Callidus assets and technology complements Amicus’ CHART™ platform for the development of next generation ERTs.

 

In consideration for the merger, the Company agreed to issue an aggregate of 7.2 million shares of its common stock, par value $0.01 per share, to the former stockholders of Callidus.  As of SeptemberJune 30, 2014,2015, approximately 25 thousand shares remain issuable to former Callidus shareholders.stockholders.  In addition, the Company will be obligated to make additional payments to the former stockholders of Callidus upon the achievement by the Company of certain clinical milestones of up to $35 million and regulatory approval milestones of up to $105 million as set forth in the Merger Agreement, provided that the aggregate consideration shall not exceed $130 million.  The Company may, at its election, satisfy certain milestone payments identified in the Merger Agreement aggregating $40 million in shares of its Common Stock (calculated based on a price per share equal to the average of the last closing bid price per share for the Common Stock on The NASDAQ Global Market for the ten (10) trading days immediately preceding the date of payment).  The milestone payments not permitted to be satisfied in Common Stock (as well as any payments that the

Company is permitted to, but chooses not to, satisfy in Common Stock), as a result of the terms of the Merger Agreement, the rules of The NASDAQ Global Market, or otherwise, will be paid in cash.

 

The fair value of the contingent acquisition consideration payments on the acquisition date was $10.6 million and was estimated by applying a probability-based income approach utilizing an appropriate discount rate. This estimation was based on significant inputs that are not observable in the market, referred to as Level 3 inputs. Key assumptions included a discount rate of 13.0%11.5% and various probability factors.  As of SeptemberJune 30, 2014,2015, the range of outcomes and assumptions used to develop these estimates has changed to better reflect the probability of certain milestone outcomes.  (see “— Note 8. Assets and Liabilities Measured at Fair ValueValue”, for additional discussion regarding fair value measurements of the contingent acquisition consideration payable).  The Company determined the fair value of the contingent consideration to be $10.2$11.8 million at SeptemberJune 30, 2014,2015, resulting in a decreasean increase in the contingent consideration payable and related incomeexpense of $0.4$0.1 million and $1.1 million for the ninethree and six months ended SeptemberJune 30, 2014.

A substantial portion of the assets acquired consisted of intangible assets related to Callidus lead ERT.2015, respectively. The Company determined that the estimated acquisition-date fair values of the IPR&D related to the lead ERT was $23.0 million.

Asexpense is recorded as part of the Callidus acquisition, the Company recognized $9.2 million of deferred tax liabilities, which relates to the tax impact of future amortization or possible impairments associated with the identified intangible assets acquired, and are not deductible for tax purposes. The Company also recorded goodwilloperating expense in the Company’s consolidated balance sheet asConsolidated Statement of the acquisition date. The goodwill results from the recognition of the deferred tax liability on the intangible assets as well as synergies expected from the acquisition and other benefits that do not qualify for separate recognition as acquired intangible assets. None of the goodwill is expected to be deductible for income tax purposes. The final valuation of this acquisition was completed on March 31, 2014.Operations.

 

For further information, see “— Note 55. Goodwill & — Note 66. Intangible Assets.

Supplemental Pro Forma Information

The following pro forma information for the three and nine months ending September 30, 2013 assumes the Merger Agreement occurred as of January 1, 2013.  The pro forma information is not necessarily indicative either of the combined results of operations that actually would have been realized had the Merger Agreement been consummated during the period for which pro forma information is presented, or is it intended to be a projection of future results or trends.

(in thousands)

 

Three Months ended
September 30, 2013

 

Nine Months ended
September 30, 2013

 

Revenue

 

$

 

$

 

Net loss

 

$

(15,838

)

$

(49,569

)

15



Table of Contents

 

Note 5.   Goodwill

 

In connection with the acquisition of Callidus as discussed in November 2013,“—Note 4. Acquisition of Callidus Biopharma, Inc.”, the Company recognized goodwill of $11.6 million of goodwill, resulting from the recognition of the deferred tax liability on the intangible assets as well as synergies expected from the acquisition and other benefits that do not qualify for separate recognition as acquired intangible assets.

million.  Goodwill is testedassessed annually for impairment on October 1 and whenever events or circumstances indicate that the carrying amount of an annual basis.  In between annual testsasset may not be recoverable. If it is determined that the Company assesses any events occurring or changesfull carrying amount of an asset is not recoverable, an impairment loss is recorded in the circumstances that would reduceamount by which the fair valuecarrying amount of the asset exceeds its fair value. During the 2014 impairment assessment, it was determined that the goodwill below its carrying amount.

The following table representshad not been impaired and there were no changes to the changesgoodwill balance in goodwill for2014. For the ninesix months ended SeptemberJune 30, 2014:2015, there were no indicators of impairment and the goodwill balance remained at $11.6 million.

 

 

(in thousands)

 

Balance at December 31, 2013

 

$

11,613

 

Change in goodwill related to the acquisition of Callidus

 

 

Balance at September 30, 2014

 

$

11,613

 

 

Note 6.   Intangible Assets

 

In connection with the acquisition of Callidus as discussed in November 2013,“—Note 4. Acquisition of Callidus Biopharma, Inc.”, the Company recognized In Process Research & Development (“IPR&D”) of $23.0 million of IPR&D.

million.  Intangible assets consisting ofrelated to IPR&D assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. During the period the assets are considered indefinite lived,indefinite-lived, they will not be amortized but will be tested for impairment on an annual basis. Inbasis on October 1 and between annual tests if the Company assessesbecomes aware of any events occurring or changes in the circumstances that would reduceindicate a reduction in the fair value of the intangible assetIPR&D assets below itstheir respective carrying amount.

The following table representsamounts.  During the changes2014 impairment assessment, it was determined that the IPR&D had not been impaired and there was no change in intangible assets for the nineIPR&D balance in 2014.  For the six months ended SeptemberJune 30, 2014:2015, there were no indicators of impairment and the IPR&D balance remained at $23.0 million.

 

 

(in thousands)

 

Balance at December 31, 2013

 

$

23,000

 

Change in IPR&D related to the acquisition of Callidus

 

 

Balance at September 30, 2014

 

$

23,000

 

 

Note 7.   Stockholders’ Equity

 

Common Stock and Warrants

 

As of SeptemberJune 30, 2014,2015, the Company was authorized to issue 125250 million shares of common stock. Dividends on common stock will be paid when, and if, declared by the board of directors. Each holder of common stock is entitled to vote on all matters that are appropriate for stockholder voting and is entitled to one vote for each share held.

 

In MarchJune 2015, the Company issued a total of 19.5 million shares through a public offering at a price of $13.25 per share, with net proceeds of $243.2 million. The Company expects to use the net proceeds of the offering for investment in the global commercialization infrastructure for Galafold for Fabry disease, the continued clinical development of its product candidates and for other general corporate purposes.

As of June 30, 2015, there was approximately $1.4 million of receivables in other current assets on the balance sheet related to stock options exercises.  The cash proceeds for these exercises was received in July 2015. The warrants issued in connection with the November 2013 securities and purchase agreement (“SPA”) were classified as equity. As part of the SPA, a total of 7.5 million common shares and 1.6 million warrants were issued at $2.00 per share, for total cash received of $15 million. The warrants were included in stockholder’s equity and were initially measured at fair value of $1.0 million using the Black Scholes valuation model. The warrants were fully exercised in June 2015 resulting in cash proceeds to the Company of $4.0 million.

In November 2014, we sold a total of 15.9 million shares of our common stock, par value $0.01 per share, at a public offering price of $6.50 per share. The aggregate offering proceeds were approximately $97.2 million.

In July 2014, the Company entered intocompleted a $40 million at the Sales Agreement with Cowen to create an ATMmarket (“ATM”) equity programoffering under which the Company sold shares of its common stock, par value $0.01 per share,shares with an aggregate offering price of up to $40 million (ATM Shares) through Cowen. Upon delivery of a placement noticeCowen and subject to the terms and conditions ofCompany LLC as sales agent.  Under the ATM agreement, Cowen used its commercially reasonable efforts to sellequity program the ATM Shares, based upon the Company’s instructions. The Company had provided Cowen with customary indemnification rights, and Cowen was entitled to a commission at a fixed commission rate of up to 3.0% of the gross proceeds per Share sold.  Sales of the ATM Shares under the Sales Agreement were to be made in transactions that were deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers’ transactions, including on The NASDAQ Global Market, at market prices or as otherwise agreed with Cowen. The Company began the sale of ATM Shares in May 2014.  The Company sold 14.3 million shares of common stock resulting in net proceeds of $38.7 million, which included Cowen’s commission of $1.1 million and legal fees of $0.1 million. The Company completed all sales under the ATM equity program in July 2014.

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Table of Contents

In November 2013, the Company entered into the 2013 SPA with certain entities controlled by Redmile Group, LLC and GSK and for the private placement of shares of the Company’s common stock, par value $0.01 and a combination of shares of common stock (the Shares) and warrants (the Warrants) to purchase shares of the Common Stock (collectively, the Units).  Each of the investors was one of the Company’s shareholders prior to consummation of these transactions.  The Shares and the Units sold to the investors were offered and sold in reliance on exemptions from registration pursuant to Rule 506 of Regulation D promulgated under the Securities Act based on the nature of such investors and certain representations made to the Company. Pursuant to the 2013 SPA, Amicus agreed to issue 1.5 million Shares at $2.00 per Share to GSK and (b) 6 million Units at $2.00 per Unit to Redmile Group, with each Unit consisting of one Share and .267 Warrants resulting in an aggregate of 6 million Shares and 1.6 million Warrants underlying the Units to be issued. Each Warrant is exercisable between July 1, 2014 and June 30, 2015 with an exercise price of $2.50, subject to certain adjustments. The Company received total proceeds of $15 million for general corporate and working capital purposes as a result of the private placement and the transaction closed in November 2013.

At the time of issuance the Company evaluated the warrants against current accounting guidance and determined that these warrants should be accounted as a component of equity. As such, these warrants were valued at issuance date using the Black Scholes valuation model using inputs such as the underlying price of the shares issued when the warrant is exercised, volatility, risk free interest rate and expected life of the instrument. The six inputs used to determine the value of the warrants were: (1) the closing price of Amicus stock on the day of evaluation of $2.12; (2) the exercise price of the warrants of $2.50; (3) the remaining term of the warrants of 1 year; (4) the volatility of Amicus’ stock for the one year term of 93.5%; (5) the annual rate of dividends of 0%; and (6) the riskless rate of return of 0.12%. The annual rate of dividends is based on the Company’s historical practice of not granting dividends.  The resulting Black Scholes value of the warrants was $1.0$38.6 million.

 

In November 2013, in connection with its acquisition of Callidus, the Company agreed to issue an aggregate of 7.2 million shares of its common stock, par value $0.01 per share, to the former stockholders of Callidus. As of SeptemberJune 30, 2014,2015, approximately 25 thousand shares remain issuable to former Callidus shareholders.stockholders.

 

Nonqualified Cash Deferral Plan

 

In July 2014, the Board of Directors approved the Company’s Cash Deferral Plan, (the Deferral Plan),“Deferral Plan”) which provides certain key employees and other service providersmembers of the Board of Directors as selected by the Compensation Committee, of the Board of Directors of the Company (the Compensation Committee), with an opportunity to defer the receipt of such Participant’sparticipant’s base salary, bonus and director’s fees, as applicable. The Deferral Plan is intended to be a nonqualified deferred compensation plan that complies with the provisions of Section 409A of the Internal Revenue Code (the Code).of 1986 as amended.

 

Deferred compensation amounts under the Deferral Plan as of June 30, 2015 were approximately $0.5 million, as compared to $0.1 million on December 31, 2014 and are included in other long-term liabilities. As of September 30,December 31, 2014, the amounts deferred under the Deferral Plan havehad not been invested. Theinvested and the investments are expected to bewere subsequently made in the fourth quarter of fiscal year 2014. All of the investments held in thesix months ended June 30, 2015.  Deferral Plan will beassets as of June 30, 2015 were $0.5 million and are classified as trading securities andsecurities. The Deferred Plan assets are recorded at fair value with changes in the investments’ fair value recognized in the period they occur. The corresponding liability forDuring the Deferral Plan is included in other non-current liability insix months ended June 30, 2015, income from the Company’s consolidated balance sheets.investments was over $6 thousand and unrealized loss was under $10 thousand.

 

Equity Incentive Plan

In June 2014, the Company’s shareholders approved the Amended and Restated 2007 Equity Incentive Plan (the Plan). The amendment to the Plan makes an additional 6 million shares of the Company’s common stock available for issuance and increases the maximum number of shares within the Plan that may be issued as restricted stock, restricted stock units (RSUs), stock grants and any other similar awards from 1.1 million to 1.5 million shares. As of September 30, 2014, awards issued under the Plan include both stock options and RSUs.

 

Stock Option Grants

 

The fair value of the stock options granted is estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

 

 

 

Three Months

 

Nine Months

 

 

 

Ended September 30,

 

Ended September 30,

 

 

 

2013

 

2014

 

2013

 

2014

 

Expected stock price volatility

 

81.7

%

81.0

%

82.0

%

81.3

%

Risk free interest rate

 

1.8

%

1.9

%

1.3

%

1.9

%

Expected life of options (years)

 

6.25

 

6.25

 

6.25

 

6.25

 

Expected annual dividend per share

 

$

0.00

 

$

0.00

 

$

0.00

 

$

0.00

 

17



Table of Contents

 

 

Three Months ended June 30,

 

Six Months ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Expected stock price volatility

 

74.3

%

81.3

%

75.6

%

81.4

%

Risk free interest rate

 

1.7

%

1.9

%

1.7

%

2.0

%

Expected life of options (years)

 

6.25

 

6.25

 

6.25

 

6.25

 

Expected annual dividend per share

 

$

0.00

 

$

0.00

 

$

0.00

 

$

0.00

 

 

A summary of the Company’s stock options for the ninesix months ended SeptemberJune 30, 20142015 is as follows:

 

 

 

Number of
Shares
(in thousands)

 

Weighted
Average Exercise
Price

 

Weighted
Average
Remaining
Contractual Life

 

Aggregate Intrinsic
Value

(in millions)

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2013

 

9,041.1

 

$

5.65

 

 

 

 

 

Options granted

 

2,894.1

 

$

2.87

 

 

 

 

 

Options exercised

 

(594.4

)

$

3.53

 

 

 

 

 

Options forfeited

 

(1,012.3

)

$

5.82

 

 

 

 

 

Balance at September 30, 2014

 

10,328.5

 

$

4.97

 

6.9 years

 

$

17.6

 

Vested and unvested expected to vest, September 30, 2014

 

9,649.5

 

$

5.10

 

6.8 years

 

$

15.6

 

Exercisable at September 30, 2014

 

5,551.1

 

$

6.40

 

5.2 years

 

$

4.9

 

 

 

Number of
Shares
( in thousands)

 

Weighted
Average Exercise
Price

 

Weighted
Average
Remaining
Contractual Life

 

Aggregate Intrinsic
Value
( in millions)

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2014

 

10,020.7

 

$

5.02

 

 

 

 

 

Options granted

 

3,113.7

 

$

11.11

 

 

 

 

 

Options exercised

 

(1,427.5

)

$

5.83

 

 

 

 

 

Options forfeited

 

(43.5

)

$

5.10

 

 

 

 

 

Balance at June 30, 2015

 

11,663.4

 

$

6.55

 

7.6 years

 

$

89.1

 

Vested and unvested expected to vest June 30, 2015

 

10,691.9

 

$

6.41

 

7.5 years

 

$

83.1

 

Exercisable at June 30, 2015

 

5,413.7

 

$

5.82

 

6.0 years

 

$

45.1

 

 

As of SeptemberJune 30, 2014,2015, the total unrecognized compensation cost related to non-vested stock options granted was $8.3$22.3 million and is expected to be recognized over a weighted average period of 2.43.2 years.

Restricted Stock Units

 

In April 2014, the Compensation Committee made awards of restricted stock units (the RSUs) to certain employees of the Company.  The RSUs awarded under the Plan are generally subject to graded vesting of 50% of the RSUs on the 13th month anniversary of the grant date and the remaining 50% of the RSUs on the 20th month anniversary of the grant date, in each case, contingent on such employee’s continued service on such date.

RSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. The Company expenses the cost of the RSUs, which is determined to be the fair market value of the shares of common stock underlying the RSUs at the date of grant, ratably over the period during which the vesting restrictions lapse.

A summary of non-vested RSURestricted Stock Units (“RSU”) activity under the Plan for the ninesix months ended SeptemberJune 30, 20142015 is as follows:

 

 

Number of
Shares

(in thousands)

 

Weighted
Average Grant
Date Fair
Value

 

Weighted
Average
Remaining Years

 

Aggregate Intrinsic
Value

(in millions)

 

 

Number of Shares
( in thousands)

 

Weighted
Average Grant
Date Fair
Value

 

Weighted
Average
Remaining Years

 

Aggregate Intrinsic
Value
( in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-vested units as of December 31, 2013

 

 

$

 

 

 

 

 

Non-vested units as of December 31, 2014

 

955

 

$

2.28

 

 

 

 

 

Granted

 

975

 

$

2.28

 

 

 

 

 

 

125

 

$

11.82

 

 

 

 

 

Vested

 

 

$

 

 

 

 

 

 

(405

)

$

10.80

 

 

 

 

 

Forfeited

 

(20

)

$

2.15

 

 

 

 

 

 

 

$

 

 

 

 

 

Non-vested units as of September 30, 2014

 

955

 

$

2.28

 

1.0

 

$

3.5

 

 

 

 

 

 

 

 

 

 

Non-vested units as of June 30, 2015

 

675

 

$

4.06

 

0.69

 

$

6.6

 

Non-vested units expected to vest at June 30, 2015

 

675

 

$

4.06

 

0.69

 

$

6.6

 

 

For the ninesix months ended SeptemberJune 30, 2014, there were no2015, 0.4 million of the RSUs that vested and all non-vested units are expected to vest over their normal term. The total fair value of restricted stock that vested and was released in the six months ended June 30, 2015 was $4.4 million.

As of SeptemberJune 30, 2014,2015, there was $1.5$1.7 million of total unrecognized compensation cost related to unvested RSUs with service-based vesting conditions. These costs are expected to be recognized over a weighted average period of 1.00.69 years.

In April 2014, the Board of Directors approved the Company’s Restricted Stock Unit Deferral Plan (the Deferred Compensation Plan), which provides selected employees with an opportunity to defer receipt of RSUs until the first to occur of termination of the employee’s employment or a date selected by the employee.  Any RSUs deferred under the Deferred Compensation Plan would be fully vested once the original vesting conditions of the RSU were satisfied.

18



Table of Contents

 

Compensation Expense Related to Equity Awards

 

The following table summarizes information related to compensation expense recognized in the statements of operations related to the equity awards (in thousands):

 

 

Three Months

 

Nine Months

 

 

Three Months

 

Six Months

 

 

Ended September 30,

 

Ended September 30,

 

 

Ended June 30,

 

Ended June 30,

 

 

2013

 

2014

 

2013

 

2014

 

 

2015

 

2014

 

2015

 

2014

 

Stock compensation expense recognized in:

 

 

 

 

 

 

 

 

 

Equity compensation expense recognized in:

 

 

 

 

 

 

 

 

 

Research and development expense

 

$

824

 

$

698

 

$

2,634

 

$

1,950

 

 

$

1,044

 

$

702

 

$

1,991

 

$

1,252

 

General and administrative expense

 

693

 

953

 

2,040

 

2,448

 

 

1,187

 

788

 

2,200

 

1,496

 

Total stock compensation expense

 

$

1,517

 

$

1,651

 

$

4,674

 

$

4,398

 

Total equity compensation expense

 

$

2,231

 

$

1,490

 

$

4,191

 

$

2,748

 

 

Note 8.  Assets and Liabilities Measured at Fair Value

 

The Company’s financial assets and liabilities are measured at fair value and classified within the fair value hierarchy which is defined as follows:

 

Level 1 — Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

Level 2 — Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly.

 

Level 3 — Inputs that are unobservable for the asset or liability.

 

Cash, Money Market Funds and Marketable Securities

 

The Company classifies its cash and money market funds within the fair value hierarchy as Level 1 as these assets are valued using quoted prices in active market for identical assets at the measurement date.  The Company considers its investments in marketable securities as available-for-sale and classifies these assets within the fair value hierarchy as Level 2 primarily utilizing broker quotes in a non-active market for valuation of these securities. No changes in valuation techniques or inputs occurred during the three and nine months ended SeptemberJune 30, 2014.2015.  No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the three and nine months ended SeptemberJune 30, 2014.2015.

Secured Debt

 

As disclosed in “—Note 9,9. Short Term Borrowings and Long Term Debt”, the Company entered intohad a loan and security agreement (the 2013 Loan Agreement) with MidCap Funding III, LLC,Midcap Financial, Oxford Finance LLC and Silicon Valley Bank (SVB) in December 2013.  The Company also entered into an equipment loan with SVB in 2011. The carrying amount of the Company’s borrowings approximates fair value at September 30, 2014.(“Term Loan”). The Company’s secured debt iswas classified as Level 2 and the fair value iswas estimated using quoted prices for similar liabilities in active markets, as well as inputs that are observable for the liability (other than quoted prices), such as interest rates that are observable at commonly quoted intervals. In June 2015, the Company paid the outstanding balance on this loan in full.

 

In connection with the 2013Term Loan, Agreement, as disclosed in “—Note 9,9. Short Term Borrowings and Long Term Debt”, the Company recorded a contingent liability of approximately $0.3 million representing the fair value of a contingent payment of up to  $0.4 million related to a success fee payable within six months of a trigger event, with the trigger event being regulatory acceptance of a New Drug Application (NDA)NDA or the Marketing Authorization Application (MAA)MAA submission. This is effective five years from the closing of the 2013 Loan Agreement. The success fee payable to the lender was probability adjusted and discounted utilizing an appropriate discount rate and hence classified as Level 3.

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Table of Contents

For In June 2015, EMA validated the nine months ended September 30, 2014, change in fair valuesubmission of the contingentCompany’s MAA and the success fee payable was $30 thousand, and is recordedbecame payable. The Company paid the success fee in other income/(expense)connection with the re-payment of the debt in the Company’s consolidated statements of operations.June 2015.

 

 

(in thousands)

 

Fair value balance at December 31, 2013

 

$

264

 

Change in fair value

 

30

 

Fair value balance at September 30, 2014

 

$

294

 

 

Contingent Consideration Payable

 

The Company recorded a liability upon thecontingent consideration payable resulted from acquisition of Callidus, as discussed in “—Note 4. Acquisition of Callidus Biopharma, Inc.” Our most recent valuation was determined using a probability weighted discounted cash flow valuation approach. Using this approach, expected future cash flows are calculated over the expected life of the agreement, are discounted, and then exercise scenario probabilities are applied. Some of the more significant assumptions used in the valuation include (i) ATB200 clinical forecasts (ii) the probability and timing related to estimatethe achievement of certain developmental milestones and (iii) the discount rate of 11.5% which is a measure of the credit risk associated with settling the liability.  The probability of achievement of clinical milestones ranged from 24% to 75% with milestone payment outcomes ranging from $0 to $81 million.  The valuation is performed quarterly. Gains and losses are included in the statement of operations.  There is no assurance that any of the conditions for the milestone payments will be met.

The contingent consideration payable has been classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market.  If different assumptions were used for the various inputs to the valuation approach the estimated fair value could be significantly higher or lower than the fair value of future contingent consideration payments whichthe Company determined.  The Company may be maderequired to former Callidus stockholders, as outlined under the terms of the merger agreement with Callidus. These contingent payments are owed if upon the achievement by the Company of certain clinical milestones of up to $35 million and regulatory approval milestones of up to $105 million as set forthrecord losses in the Merger Agreement, provided that the aggregate consideration shall not exceed $130 million. The fair values of these Level 3 liabilities are estimated using a probability-weighted discounted cash flow analysis. Such valuations require significant estimates and assumptions including but not limited to: determining the timing and estimated costs to complete the in-process projects, projecting regulatory approvals, estimating future cash flows, and developing appropriate discount rates.periods.

Subsequent changes in the fair value of these contingent consideration liabilities are recorded to the “Change in fair value of contingent consideration payable” expense line item in the consolidated statements of operations under operating expenses. For the nine months ended September 30, 2014, the recognized amount of the contingent consideration payable decreased by $0.4 million as a result of changes in certain probability factors and the time value of money.

 

 

(in thousands)

 

Fair value balance at December 31, 2013

 

$

10,600

 

Change in fair value

 

(400

)

Fair value balance at September 30, 2014

 

$

10,200

 

 

WarrantsDeferred Compensation Plan- Investment and Liability

 

As disclosed in “—Note 7. Stockholders’ Equity”, the Deferral Plan provides certain key employees and members of the Board of Directors with an opportunity to defer the receipt of such Participant’s base salary, bonus and director’s fees, as applicable. Deferral Plan assets as of June 30, 2015 were $0.5 million, are classified as trading securities and recorded at fair value with changes in the investments’ fair value recognized in the period they occur. The assets investments consist of market exchanged mutual funds. During the six months ended June 30, 2015, the unrealized loss was under $10 thousand.  The Company allocated $3.3 million of proceeds fromconsiders its March 2010 registered direct offering to warrants issuedinvestments in connection with the offering that was classifiedmarketable securities, as a liability. The valuation of the warrants was determined using the Black-Scholes model. The Company determined the warrantavailable-for-sale and classifies these assets and related liability is most appropriately classified within Level 3 of the fair value hierarchy. This liability was subject tohierarchy as Level 2 primarily utilizing broker quotes in a fair value mark-to-market adjustment each period and the Company recognized the change innon-active market for valuation of these securities.

A summary of the fair value of the warrant liability as non-operating expense of $0.3 million forCompany’s assets and liabilities aggregated by the three months ended March 31, 2013 andlevel in the resulting fair value of the warrant liability at March 31, 2013 was $1.2 million. The warrants expired on March 2, 2014 and hence the warrant liability is no longer recognized on the consolidated balance sheethierarchy within which those measurements fall as of SeptemberJune 30, 2014.2015, are identified in the following table (in thousands):

 

 

Level 1

 

Level 2

 

Total

 

Assets:

 

 

 

 

 

 

 

Cash/ money market funds

 

$

249,023

 

$

 

$

249,023

 

Corporate debt securities

 

 

103,046

 

103,046

 

Commercial paper

 

 

9,000

 

9,000

 

Certificate of deposit

 

 

350

 

350

 

Deferred compensation plan assets

 

 

482

 

482

 

 

 

$

249,023

 

$

112,878

 

$

361,901

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

Contingent consideration payable

 

 

 

11,800

 

11,800

 

Deferred compensation plan liability

 

 

490

 

 

490

 

 

 

$

 

$

490

 

$

11,800

 

$

12,290

 

 

A summary of the fair value of the Company’s assets and liabilities aggregated by the level in the fair value hierarchy within which those measurements fall as of December 31, 2013, are identified in the following table (in thousands):

 

 

Level 1

 

Level 2

 

Total

 

Assets:

 

 

 

 

 

 

 

Cash/ money market funds

 

$

43,640

 

$

 

$

43,640

 

Corporate debt securities

 

 

30,812

 

30,812

 

Commercial paper

 

 

7,198

 

7,198

 

Certificate of deposit

 

 

350

 

350

 

 

 

$

43,640

 

$

38,360

 

$

82,000

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

Secured debt

 

$

 

$

14,473

 

$

 

$

14,473

 

Contingent success fee payable

 

 

 

264

 

264

 

Contingent consideration payable

 

 

 

10,600

 

10,600

 

Warrants liability

 

 

 

 

 

 

 

$

 

$

14,473

 

$

10,864

 

$

25,337

 

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A summary of the fair value of the Company’s assets and liabilities aggregated by the level in the fair value hierarchy within which those measurements fall as of September 30, 2014, are identified in the following table (in thousands):

 

 

Level 1

 

Level 2

 

Total

 

 

Level 1

 

Level 2

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash/ money market funds

 

$

19,671

 

$

 

$

19,671

 

 

$

24,074

 

$

 

$

24,074

 

Corporate debt securities

 

 

53,662

 

53,662

 

 

 

133,216

 

133,216

 

Commercial paper

 

 

11,499

 

11,499

 

 

 

11,499

 

11,499

 

Certificate of deposit

 

 

350

 

350

 

 

 

350

 

350

 

Deferred compensation plan assets

 

 

 

 

 

$

19,671

 

$

65,511

 

$

85,182

 

 

$

24,074

 

$

145,065

 

$

169,139

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured debt

 

$

 

$

14,302

 

$

 

$

14,302

 

Contingent success fee payable

 

 

 

294

 

294

 

 

 

 

341

 

341

 

Contingent consideration payable

 

 

 

10,200

 

10,200

 

 

 

 

10,700

 

10,700

 

Deferred compensation plan liability

 

 

124

 

 

124

 

 

$

 

$

14,302

 

$

10,494

 

$

24,796

 

 

$

 

$

124

 

$

11,041

 

$

11,165

 

 

Note 9.   Short-Term Borrowings and Long-Term Debt

 

In December 2013, the Company entered into the 2013 Loan Agreementa credit and security agreement with a lending syndicate consisting of MidCap Funding III, LLC, Oxford Finance LLC, and SVB which provides an aggregate of $25 million (the Term Loan).Silicon Valley Bank. The Company drew $15 million of the aggregate principal amount of the Term Loan at the end of December 2013 (the First Tranche) and may draw up to an additional $10 million through the end of the fourth quarter of 2014 (the Second Tranche).  The principal outstanding balance of the First Tranche bearswhich bore interest at a rate per annum fixed at 8.5%.  If the Company draws from the Second Tranche, the principal outstanding balance of the Second Tranche will also have a fixed interest rate, which will be determined by reference to the applicable index rate at the time of the draw.  The Company will makemade interest-only payments on the Term Loan beginningfrom January 1, 2014 and continuing through April 1,2014. In June 2015, after which the Company will repaypaid off the aggregate principal outstanding balance of the Term Loan in 33 equal monthly installments of principal, plus accrued interest at the applicable rate. The Term Loan matures on December 27, 2017.  At September 30, 2014, the total principal amount due under the Term Loan was $15 million.term loan.

 

In connection with the repayment of the Term Loan, the Company recordedpaid a debt discount of $0.8 million at December 31, 2013 which consists of payments to be made and a contingent payable to the lenders. These payments include a debt facility fee of $0.1 million which was paid on the date of the First Tranche, $0.4 million exit fee.  The Company also paid a $0.4 million success fee that will be payable upon repaymentdue to the successful acceptance of the term loan and $0.3 million representing the fair value of a contingent payment of up to $0.4 million related to a success fee payable within six months of a trigger event, with the trigger event being regulatory acceptance of NDA or MMA submission. This is effective 5 years from the closing of the Term Loan.MAA in June 2015. The success fee payable to the lender was probability adjusted and discounted utilizing an appropriate discount rate and is shown as a current liabilitynet loss on the Company’s consolidated balance sheet.  The amortizationextinguishment of the debt discountwas $1.0 million and is recorded as noncash interest expense overincluded in the lifestatement of operations for the loan.

For the threesix months ended SeptemberJune 30, 2014, the Company amortized the debt discount and the deferred financing using the effective interest method and recorded amortization expense of $45 thousand and $6 thousand, respectively, under operating expense on the consolidated statement of operations. For the nine months ended September 30, 2014, the Company amortized the debt discount and the deferred financing using the effective interest method and recorded amortization expense of $131 thousand and $18 thousand, respectively, under operating expense on the consolidated statement of operations.2015.

In February 2012, the Company borrowed approximately $1.0 million from a loan and security agreement (the 2011 Loan Agreement) with SVB which was to be repaid over the following 2.5 years. The 2011 Loan Agreement contains financial covenants and the Company has at all times been in compliance with these covenants.  As of September 30, 2014, the 2011 Loan Agreement has been fully repaid and there is no amount currently due.

The carrying amount of the Company’s borrowings approximates fair value at September 30, 2014.

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Note 10.  Collaborative Agreements

 

GSK

 

In October 2010, the Company entered into the Original Collaboration Agreement with Glaxo Group Limited, an affiliate of GSK, to develop and commercialize migalastat. Under the terms of the Original Collaboration Agreement, GSK received an exclusive worldwide license to develop, manufacture and commercialize migalastat. In consideration of the license grant, the Company received an upfront, license payment of $30 million from GSK and was eligible to receive further payments of approximately $173.5 million upon the successful achievement of development, regulatory and commercialization milestones, as well as tiered double-digit royalties on global sales of migalastat GSK and the Company were jointly funding development costs in accordance with an agreed upon development plan. Additionally, GSK purchased approximately 6.9 million shares of the Company’s common stock at $4.56 per share, a 30% premium on the average price per share of the Company’s stock over a 60 day period preceding the closing date of the transaction. The total value of this equity investment to the Company was approximately $31 million.

In July 2012, the Company entered into the Expanded Collaboration Agreement with GSK pursuant to which the Company and GSK continue to develop and commercialize migalastat, currently in Phase 3 development for the treatment of Fabry disease. The Expanded Collaboration Agreement amended and replaced in its entirety the Original Collaboration Agreement. Under the terms of the Expanded Collaboration Agreement, the Company and GSK were to co-develop all formulations of migalastat for Fabry disease, including the development of migalastat co-formulated with an investigational enzyme replacement therapy (ERT) for Fabry disease (the Co-formulated Product).

Additionally, simultaneous with entry into the Expanded Collaboration Agreement, Amicus and GSK entered into a Securities Purchase Agreement (the 2012 SPA) pursuant to which GSK purchased approximately 2.9 million shares of Amicus common stock at a price of $6.30 per share for proceeds of $18.6 million.

In November 2013, Amicus entered into the Revised Agreement with GSK,GlaxoSmithKline (“GSK”), pursuant to which Amicus has obtained global rights to develop and commercialize migalastatGalafold as a monotherapy and in combination with ERT for Fabry disease. The Revised Agreement amends and replaces in its entirety the Expanded Collaboration Agreement entered into between Amicus and GSK in July 2012. Under the terms of the Revised Agreement, there was no upfront payment from Amicus to GSK. For the next-generation Fabry ERT (migalastat co-formulated with ERT), GSK is eligible to receive single-digit royalties on net sales in eight major markets outside the U.S. For migalastatGalafold monotherapy, GSK is eligible to receive post-approval and sales-based milestones up to $40 million, as well as tiered royalties in the mid-teens in eight major markets outside the U.S.United States.

 

Under the terms of the Revised Agreement, GSK will no longer jointly fund development costs for all formulations of migalastat.Galafold.

 

Biogen

 

In September 2013, the Company entered into a license and collaboration agreement (the “Biogen Agreement”) with Biogen Idec (“Biogen”) to discover, develop and commercialize novel small molecules for the treatment of Parkinson’s disease. Under terms of the agreement, the Company and Biogen collaborated in the discovery of a new class of small molecules that target the GCase enzyme, for the treatment of Parkinson’s disease.further development and commercialization by Biogen.  Biogen was responsible for funding all discovery, development, and commercialization activities andactivities.  In addition, the Company was reimbursed for all full-time employees working on the project as part of a cost sharing arrangement.  The Company was also eligible to receive development and regulatory milestones, as well as modest royalties in global net sales.

 

In accordance with the revenue recognition guidance related to reimbursement of research and development expenses, the Company identified all deliverables at the inception of the Biogen Agreement.  Theagreement.  As the Company has not commenced its planned principal operations (i.e. selling commercial products) and is therefore a development stage enterprise.  The, the Company is only performing development of its compounds, and therefore, development activities are part of the Company’s ongoing central operations.  Additionally, the Company has the following accounting policies:

 

·                  Research and development expenses related to a collaboration agreement will be recorded on a gross basis in the income statement and not presented net of any reimbursement received from a collaboration agreement; and

·                  The reimbursement of research and development expenses from a collaborator will be recognized in the income statement as “Research Revenue” for the period in which the research activity occurred.

 

For the ninesix months ended SeptemberJune 30, 2015 and 2014, the Company recognized $1.2$0 and $0.9 million, respectively, in Research Revenue for work performed under the cost sharing arrangement of the Biogen Agreement.

 

In September 2014, the Company and Biogen concluded their research collaboration.  The Company’s most advanced Parkinson’s candidate is AT3375, which was developed outside the collaboration and is wholly-owned by the Company.

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Note 11.  Restructuring Charges

In November 2013, the Company announced a work-force reduction of approximately 14 percent, or 15 employees, as a part of a corporate restructuring. This measure was intended to reduce costs and to align the Company’s resources with its key strategic priorities.

 

In December 2013, the Company initiated and completed a facilities consolidation effort, closing one of its subleasedleased locations in San Diego, CA. The Company recorded a total charge of $2.0 million during the fourth quarter of 2013 which included $1.2 million for employment termination costs payable and a facilities consolidation charge of $0.8 million consisting of lease payments of $0.7 million related to the net present value of the net future minimum lease payments at the cease-use date and the write-down of the net book value of the fixed assets in the vacated building of $0.1 million. At September 30, 2014, $77 thousand of the restructuring charges related to employment termination costs were unpaid and classified under accrued expenses on the balance sheet.date.

 

The following table summarizes the restructuring charges and utilization for the ninesix months ended SeptemberJune 30, 20142015 (in thousands):

 

 

 

Balance as of
December 31,
2013

 

Charges

 

Cash Payments

 

Adjustments

 

Balance as of
September 30,
2014

 

Employment termination costs

 

$

1,139

 

$

 

$

(1,062

)

$

 

$

77

 

Facilities consolidation

 

703

 

 

(299

)

(74

)

330

 

 

 

$

1,842

 

$

 

$

(1,361

)

$

(74

)

$

407

 

 

 

Balance as of
December 31, 2014

 

Charges

 

Cash Payments

 

Adjustments

 

Balance as of
June 30, 2015

 

Facilities consolidation

 

$

283

 

$

 

$

(130

)

$

36

 

$

189

 

 

Note 12.  Subsequent Events

 

In October 2014, GSK sold 11,315,825 shares of our common stock at a price of $5.29 per share, representing their entire holdings in our common stock.  We did not sell any sharesThe Company evaluated events that occurred subsequent to June 30, 2015 and there were no material recognized or receive any proceeds and the total number of shares of our outstanding common stock did not change as a result ofnon-recognized subsequent events during this sale.period.

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Note 13.  Basic and Diluted Net Loss Attributable to Common Stockholders per Common Share

The Company calculates net loss per share as a measurement of the Company’s performance while giving effect to all dilutive potential common shares that were outstanding during the reporting period.  The Company has a net loss for all periods presented; accordingly, the inclusion of common stock options and warrants would be anti-dilutive.  Therefore, the weighted average shares used to calculate both basic and diluted earnings per share are the same.

The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net loss attributable to common stockholders per common share:

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

(In thousands, except per share amounts)

 

2015

 

2014

 

2015

 

2014

 

Historical

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$

(27,133

)

$

(14,614

)

$

(51,421

)

$

(30,557

)

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding — basic and diluted

 

$

99,994,125

 

$

67,212,764

 

$

97,888,573

 

$

65,799,059

 

Dilutive common stock equivalents would include the dilutive effect of common stock options, restricted stock units and warrants for common stock equivalents.  Potentially dilutive common stock equivalents were excluded from the diluted earnings per share denominator for all periods because of their anti-dilutive effect. The table below presents potential shares of common stock that were excluded from the computation as they were anti-dilutive using the treasury stock method (in thousands):

 

 

As of June 30,

 

 

 

2015

 

2014

 

Options to purchase common stock

 

11,663

 

9,634

 

Outstanding warrants, convertible to common stock

 

 

1,600

 

Unvested restricted stock units

 

675

 

930

 

Total number of potentially issuable shares

 

12,338

 

12,164

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

We are a biopharmaceutical company focused on the discovery, development and commercialization of next-generation medicines for a range of rare and orphan diseases, with a focus on improved therapies for lysosomal storage disorders (LSDs)(“LSDs”). Our lead product candidate is a small molecule that can be used as a monotherapy and in combination with enzyme replacement therapy (“ERT”) for Fabry disease.  Our development programs also include next-generation enzyme replacement therapies (ERTs)ERTs for LSDs, including Fabry disease, Pompe disease and MucopolysaccharoidosisMucopolysaccharidosis Type I (MPS I)(“MPS I”). We are also developing novel small molecules as monotherapy treatments for Fabry disease and Parkinson’s disease.  We believe that our platform technologies and our advanced product pipeline uniquely position us at the forefront of developing therapies for rare and orphan diseases.

 

Our personalized medicine approach consists of an oral small molecule pharmacological chaperone monotherapy that is designed to bind to and stabilize a patient’s own endogenous target protein. Patients with “amenable mutations” may respond based on their genetics.  Our Chaperone-Advanced Replacement Therapy, or CHART™, platform combines chaperones with ERTs independent of a patient’s own genetics. In each CHART program, a unique pharmacological chaperone is designed to bind to a specific therapeutic (exogenous) enzyme, stabilizing the enzyme in its properly folded and active form. This may allow for enhanced tissue uptake, greater lysosomal activity, more reduction of substrate, and the potential for lower immunogenicity.

Program StatusOur Fabry franchise strategy is to develop the pharmacological chaperone migalastat HCl for all patients with Fabry disease - as a monotherapy for patients with amenable mutations (“Galafold™”) and in combination with ERT for all other patients.

 

Migalastat HClGalafold for Fabry Disease as a Monotherapy: Phase 3 Global Registration ProgramMonotherapy

 

We are conductinghave completed two global Phase 3 global registration studies (Study 011 and Study 012) of Galafold and plan to submit marketing applications in the oral pharmacological chaperone migalastat HClUnited State and Europe in 2015. We have reported Phase 3 data in both treatment-naïve patients (“migalastat”Study 011” or “FACETS”) as a monotherapy.  Bothand enzyme replacement therapy (“ERT”) switch patients (“Study 012” or “ATTRACT”). Positive results from these studies enrolled maleshave shown that treatment with Galafold has resulted in reductions in disease substrate, stability of kidney function, reductions in cardiac mass, and femalesimprovement in gastrointestinal symptoms in patients with Fabry disease who have alpha-Gal A mutations that are amenable to migalastat monotherapy. Amenable mutations are defined as having an absolute increase of 3% of wild type alpha-Gal A enzyme activity and a relative increase of 20% when exposed to migalastat in a cell-based in vitro assay.mutations.

 

Study 011 was a 24-month study of Fabry disease patients naïve to or not receiving ERT, which investigated the safety and efficacy of oral migalastat (150 mg every other day).Galafold.  The study consisted of a 6-month double-blind, placebo-controlled period, a 6-month open-label period, and a 12-month open-label extension phase.  Subjects completing Study 011 were eligible to continue treatment with Galafold in a long-term open-label extension (“Study 041”).  67 subjects (24 male) were enrolled.  All subjects enrolled in Study 011 had amenable mutations in the clinical trial human embryonic kidney (HEK)(“HEK”) cell-based in vitroassay that was available at study initiation (clinical(“clinical trial assay)assay”). Following the completion of enrollment, a GLP-validated HEK assay was developed with a third party to measure the criteria for amenability with more quality control and rigor (GLP(“GLP HEK assay)assay”). Approximately 10% of mutations in the HEK database switched categorization between “amenable” and “non-amenable” when moving from the clinical trial assay to the GLP HEK assay. Therefore, there were changes in categorization from amenable to non-amenable in 17 of the 67 patients enrolled in Study 011.

 

Study 011 was designed to measure the reduction of the disease substrate (Globotriaosylceramide, or GL-3)“GL-3”) in the interstitial capillaries of the kidney following treatment with oral migalastatGalafold (150 mg every other day). The 24-month study began with a 6-month double-blind, placebo-controlled treatment period, after which all patients were treated with migalastat for a 6-month open-label follow-up period, and a subsequent 12-month open-label extension phase. The study also measured clinical outcomes, including renal function, as secondary endpoints.

 

As previously reported, patients on migalastatGalafold experienced greater reductions in GL-3 as compared to placebo during the initial 6-month period; however, this difference was not statistically significant under the original analysis of the primary endpoint (responder analysis with a 50% reduction threshold at month 6).  The variability and low levels of GL-3 at baseline contributed to a higher-than-anticipated placebo response at month 6.

 

Following the unblindingunbinding of the 6-month data, and while still blinded to the 12-month data, we reported the mean change in GL-3 from the baseline to month 6 as a post-hoc analysis in the subgroup of patients with GLP HEK-amenable mutations.  This analysis showed a statistically significant reduction in GL-3 in the migalastatGalafold group compared to placebo.  The mean change in GL-3 was identified as a more appropriate way to control for the variability in GL-3 levels in Study 011 and to measure the biological effect of migalastat.Galafold.

 

Results from this subgroup analysis further support use of the GLP HEK assay in predicting responsiveness to migalastat.Galafold. Following a Type C Meeting with the U.S. Food and Drug Administration (FDA)(“FDA”), we revised the Statistical Analysis Plan to pre-specifypre-

specify the primary analysis at month 12 as the mean change in interstitial capillary GL-3 in patients with GLP HEK amenable mutations.

 

In AprilThroughout 2014 and in early 2015, we announced positive 12- and 24-month resultsdata from Study 011 and longer-term data from Study 041 in patients with GLP HEK amenable mutations.mutations who were naïve to ERT. Top-line data were announced in April 2014 and presented to the scientific community at the American Society of Human Genetics (“ASHG”) in October 2014 and WORLDSymposium™ in February 2015. Highlights were as follows:

 

·                  Subjects who switched from placebo to migalastatGalafold after month 6 demonstrated a statistically significant reduction in disease substrate, or kidney interstitial capillary GL-3, at month 12 (p=0.013), and a statistically significant reduction of disease substrate in another important biomarker of disease, plasma lyso-Gb3.

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·. Subjects who remained on migalastat demonstrated a durable reduction in kidney interstitial capillary GL-3, as well as a durable reduction in lyso-Gb3.

·                  Six months migalastat treatment was associated with a significant reduction in plasma lyso-Gb3 versus placebo (p=.0033). The reduction remained stable following 6 additional months migalastat.  A significant reduction in plasma lyso-Gb3 was found in patients switching from placebo to migalastat between 6 and 12-months (p< .0001).

·Kidney function, as measured by estimated glomerular filtration rate (eGFR)(“eGFR”) and iohexol measured GFR (mGFR)(“mGFR”), remained stable following 18-24 months of treatment with migalastat.

·From a safety perspective, migalastat was generally safe and well-tolerated.

In October 2014, we announced further positive data fromGalafold in Study 011. Assessment of kidneyKidney function, as measured by estimated glomerular filtration rate (eGFR) foreGFR, continued to remain stable in patients receiving migalastat in Study 011 for at least 18 months and continuing migalastatGalafold treatment in Study 041 (an open-label extension study) showed continued stability of kidney function for an average of 32 months. Decline in kidney function is a key cause of morbidity and mortality in patients with Fabry disease. Measured (iohexol) GFR (mGFR)mGFR was not collected in Study 041; mGFR041.

·                  Reduction in cardiac mass, as measured by left ventricular mass index (“LVMi”), was previously reportedstatistically significant following treatment with toplinemigalastat for up to 36 months (average of 22 months) in patients in Study 011 results.and 041.

·                  There was a significant decrease in diarrhea (unadjusted p=0.03) in patients treated with migalastat versus placebo during the 6-month double-blind phase (Stage 1). After 18-24 months of treatment with Galafold, significant improvements in diarrhea and indigestion were observed, in addition to favorable trends in reflux and constipation. Gastrointestinal symptoms were assessed using the Gastrointestinal Symptoms Rating Scale (“GSRS”), a validated instrument.

·                  Galafold was generally safe and well-tolerated.

 

Study 012, our second Phase 3 registration study, iswas a randomized, open-label 18-month study investigatingthat investigated the safety and efficacy of oral migalastatGalafold (150 mg, every other day) compared to standard-of-care infused ERTs (Fabrazyme®(agalsidase beta and Replagal®)agalsidase alfa). The study also includesincluded a 12 month12-month open-label migalastatGalafold extension phase.  The study enrolled a total of 60 patients (males and females) with Fabry disease and genetic mutations identified as amenable to migalastat monotherapyGalafold in athe clinical trial assay. Subjects were randomized 1.5:1 to switch to migalastatGalafold or remain on ERT. All subjects had been receiving ERT infusions for a minimum of 12 months (at least 3 months at the labeled dose) prior to entering the study. Based on the GLP HEK assay, there were changes in categorization from amenable to non-amenable in 4 of the 60 patients enrolled in Study 012.

 

Taking into account scientific advice from European regulatory authorities, the pre-specified co-primary outcome measures of efficacy in Study 012 are the descriptive assessments of comparability of the mean annualized change in measured (iohexol) glomerular filtration rate (mGFR)mGFR and estimated GFR (eGFR)eGFR for migalastatGalafold and ERT. Both mGFR and eGFR are considered important measures of renal function. Success on mGFR and eGFR was prescribed to be measured in two ways: 1) a 50% overlap in the confidence intervals between the migalastat and ERT treatment groups; and 2) whether the mean annualized changes for patients receiving migalastatGalafold are within 2.2 mL/min/1.73 m2/m2/yr of patients receiving ERT. We pre-specified that these renal function outcomes would be analyzed in patients with GLP HEK amenable mutations.

 

In August 2014, we announced positive 18-month data from the Study 012.  A summaryData from Study 012 were also presented to the scientific community at the American Society of the 18-month results areNephrology (“ASN”) in November 2014 and WORLDSymposium in February 2015.  Highlights were as follows:

 

·                  MigalastatGalafold had a comparable effect to ERT on patients’ kidney function as measured by the change in eGFR and mGFR.mGFR from baseline to month 18.

·                  Levels of plasma lyso-Gb3, an important biomarker of disease, remained low and stable in patients with amenable mutations who switched from ERT to migalastat.Galafold.

·                  There was a statistically significant decrease in LVMi from baseline to month 18 in patients who switched from ERT to Galafold.

Migalastat·                  Measures of pain and quality of life from the Brief Pain Inventory (“BPI”) and Short Form 36 (“SF36”) remained stable when patients switched from ERT to Galafold.

·                  Galafold was generally safe and well-tolerated.

·Of 48 patients

During the first quarter of 2015, we met with GLP HEK-amenable mutations who completed Study 012, 46 (96%) electedregulatory authorities in Europe and the United States to continue withdiscuss the 12-month treatment extension and 45 remain on migalastat todayapproval pathways for Galafold as their only treatmenta monotherapy for Fabry disease.patients who have amenable mutations. In June 2015, the European Medicines

Agency (“EMA”) validated our Marketing Authorization Application (“MAA”) submission for Galafold and the Centralized Procedure has begun under Accelerated Assessment. The Committee for Medicinal Products for Human Use (“CHMP”) may shorten the MAA review period from 210 days, under standard review, to 150 days under Accelerated Assessment. The CHMP opinion is then reviewed by the European Commission, which generally issues a final decision on EU approval within three months. The MAA submission will be reviewed in the Centralized Procedure, which if authorized, provides a marketing license valid in all 28 EU member states. Once authorized, Amicus would then begin the country-by-country reimbursement approval process.

 

WeIn the United States, we plan onto conduct a pre-NDA meeting with the EMEAFDA and to submit a New Drug Application (“NDA”) for Galafold under Subpart H (accelerated approval) in the fourth quartersecond half of 2014 and2015. Following the US FDAMAA validation, the Company is also initiating the regulatory submission process in early 2015 as we work to make migalastat available for all amenable Fabry patients as quickly as possible.several additional geographies.

 

Migalastat HCl Combination Programs for Fabry Disease

 

UsingIn support of our CHART platform,Fabry Franchise strategy to develop migalastat in combination with ERT for Fabry patients with non-amenable mutations, we plan to initiate a longer-term Phase 2 Fabry co-administration study in 2015. In parallel, we are internally developing our own Fabry cell line for co-formulation with migalastat as a next-generation ERT for Fabry disease. We previously completed an open-label Phase 2 safety and pharmacokinetics study (Study 013)(“Study 013”) that investigated two oral doses of migalastat (150 mg and 450 mg) co-administered with Fabrazyme® (agalsidase beta)agalsidase beta or Replagal® (agalsidase alfa)agalsidase alfa in males with Fabry disease.  Unlike Study 011 and Study 012, patients in Study 013 were not required to have alpha-Gal A mutations amenable to chaperone therapy because, when co-administered with ERT, migalastat is designed to bind to and stabilize the exogenous enzyme in the circulation in any patient receiving ERT. Each patient received their current dose and regimen of ERT at one infusion. A single oral dose of migalastat (150 mg or 450 mg) was co-administered two hours prior to the next infusion of the same ERT at the same dose and regimen. Preliminary results from Study 013 showed increased levels of active alpha-Gal A enzyme levels in plasma and increased alpha-Gal A enzyme in skin following co-administration compared to ERT alone. In parallel, we and GSK completed preclinical studies to evaluate migalastat co-formulated with a proprietary investigational ERT (JR-051, recombinant human alpha-Gal A enzyme). Based on these results, we plan to advance migalastat co-formulated with ERT for Fabry disease. We conducted a Phase 1study in healthy volunteers to investigate the PK of IV migalastat and identify optimal dosings of migalastat to use in a Phase 1/2 clinical study of migalastat co-formulated with ERT in Fabry patients. We are currently evaluating a long-term strategy for supplying late-stage clinical and commercial ERT, which may include developing or in-licensing a recombinant alpha-Gal A enzyme.  Upon finalization of a long term ERT supply agreement, we plan to initiate a Phase 1/2 clinical study of migalastat co-formulated with ERT in Fabry patients.

 

Next-Generation ERT for Pompe Disease

 

We are leveraging our biologics capabilities and CHART platform to develop a next-generation Pompe ERT. This ERT consists of a uniquely engineered recombinant human acid alpha-glucosidase (“rhGAA”) enzyme (designated “ATB200”) with an optimized carbohydrate structure to enhance uptake, administered in combination with a pharmacological chaperone to improve activity and stability. We acquired ATB200 as well as our enzyme targeting technology through our purchase of Callidus Biopharma.

Clinical studies of pharmacological chaperones in combination with currently marketed ERTs have established initial human proof-of-concept that a chaperone can stabilize enzyme activity and potentially improve ERT tolerability.  In preclinical studies, ATB200 demonstrated greater tissue enzyme levels and further substrate reduction compared to the currently approved ERT for Pompe disease (alglucosidase alfa), which were further improved with the addition of a chaperone.  In 2013, we completed a Phase 2 safety and pharmacokinetics study (Study 010)(“Study 010”) that investigated single ascending oral doses of a pharmacological chaperone AT2220 (50 mg, 100 mg, 250 mg, and 600 mg) co-administered with Myozyme® or

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Table of Contents

Lumizyme® (alglucosidasealglucosidase alfa or recombinant human GAA enzyme, rhGAA) marketed by Genzyme, in patients with Pompe disease. Each patient received one infusion of ERT alone, and then a single oral dose of AT2220the pharmacological chaperone just prior to the next ERT infusion. Results from this study showed an increase in GAA enzyme activity levels in plasma and muscle following co-administration compared to ERT alone.

 

We are utilizing our CHART platformTaken together, these clinical results support further development of ATB200 in combination with our uniquely-engineered, proprietary recombinant human acid-alpha glucosidase (rhGAA, designated ATB200) to develop a next-generation ERT for Pompe disease. We acquired ATB200 as well as our enzyme targeting technology through our purchase of Callidus Biopharma. ATB200 is differentiated from other Pompe ERTs by its unique carbohydrate structure.

In preclinical studies, ATB200 was shown to have superior uptake and activity in disease-relevant tissues that correlated with clearance of accumulated glycogen substrate when compared to current standard of care. ATB200 may be further improved through the application of the Company’s proprietary conjugation technology to attach vIGF2 (a variant of the insulin-like growth factor 2) to further enhance lysosomal drug targeting. Preclinical results have shown that ATB200 and ATB200 conjugated with vIGF-2 were better than Lumizyme for clearing glycogen in skeletal muscles in Gaa knock-out mice. These studies also demonstrated that ATB200 and ATB200+vIGF-2 co-formulated with a pharmacological chaperone can lead to even further glycogen reduction.as a next-generation Pompe ERT. The initiation of a Phase 1/2 clinical study is expected in the second half of 2015.

 

These results taken together with data from our clinical and preclinical studies of pharmacological chaperones in combination with ERT, support our further development of a next-generation ERT for Pompe disease  We are currently investigating ATB200, with and without a pharmacological chaperone, and with and without the vIGF-2 tag in preclinical studies to determine the optimal product to bring forward into clinical studies in Pompe patients.

Collaboration with GSK

In November 2013, we entered into the Revised Agreement (the Revised Agreement) with GlaxoSmithKline plc  (GSK), pursuant to which we have obtained global rights to develop and commercialize migalastat as a monotherapy and in combination with ERT for Fabry disease.  Under the Revised Agreement, Amicus received a payment of $1.9 million to reimburse development costs between November 19, 2013 and December 31, 2013, in December 2013, and $0.8 million for reimbursement of development costs for the period August 1, 2013 to November 18, 2013 in January 2014, according to the earlier Expanded Agreement.  The Revised Agreement amends and replaces in its entirety the Expanded Collaboration Agreement entered into between Amicus and GSK in July 2012. Under the terms of the Revised Agreement, there is no upfront payment from Amicus to GSK. For the next-generation Fabry ERT (migalastat co-formulated with ERT), GSK is eligible to receive single-digit royalties on net sales in eight major markets outside the U.S. For migalastat monotherapy, GSK is eligible to receive post-approval and sales-based milestones, as well as tiered royalties in the mid-teens in eight major markets outside the U.S.

Under the terms of the Revised Agreement, GSK will no longer jointly fund development costs for all formulations of migalastat.

Collaboration with Biogen

 

In September 2013, we entered into a collaboration agreement with Biogen Idec (Biogen)(“Biogen”) to discover, develop and commercialize novel small molecules that target the glucocerobrosidase (GCase)(“GCase”) enzyme for the treatment of Parkinson’s disease. In September 2014, Amicus and Biogenwe concluded theirour research collaboration.  Amicus’collaboration with Biogen.  Our most advanced Parkinson’s candidate is AT3375, which was developed outside the collaboration and is wholly-owned by Amicus.us.

Other Potential Alliances and Collaborations

We continually evaluate other potential collaborations and business development opportunities that would bolster our ability to develop therapies for rare and orphan diseases including licensing agreements and acquisitions of businesses and assets. We believe such opportunities may be important to the advancement of our current product candidate pipeline, the expansion of the development of our current technology, gaining access to new technologies and in our transformation to a commercial biotechnology company.

 

Acquisition of Callidus Biopharma, Inc.

 

In November 2013, we entered into the Merger Agreementa merger agreement (the “Merger Agreement”) with Callidus Biopharma, Inc. (“Callidus”), a privately held biotechnology company. Callidus was engaged in developing a next-generation Pompe ERT and complementary enzyme targeting technologies.

 

In connection with our acquisition of Callidus, we agreed to issue an aggregate of 7.2 million shares of our common stock to the former stockholders of Callidus.  In addition, we will be obligated to make additional payments to the former stockholders of Callidus upon the achievement of certain clinical milestones of up to $35 million and regulatory approval milestones of up to $105 million set forth in the merger agreement, provided that the aggregate merger consideration shall not exceed $130 million. We may, at our election, satisfy certain milestone payments identified in the merger agreement aggregating $40 million in shares of our common stock.  The milestone payments not permitted to be satisfied in common stock (as well as any payments that we are permitted to, but choosechooses not to, satisfy in common stock), as a result of the terms of the merger agreement, will be paid in cash.

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Table of Contents

Other Potential Alliances and Collaborations

We continually evaluate other potential collaborations and business development opportunities that would bolster our ability to develop therapies for rare and orphan diseases including licensing agreements and acquisitions of businesses and assets. We believe such opportunities may be important to the advancement of our current product candidate pipeline, the expansion of the development of our current technology, gaining access to new technologies and in our transformation from a development stage company to a commercial biotechnology company.

Financial Operations Overview

We have generated significant losses to date and expect to continue to generate losses as we continue the clinical and preclinical development of our drug candidates. These activities are budgeted to expand over time and will require further resources if we are to be successful. For the nine months ended September 30, 2014, we accumulated a loss of $47.7 million. As we have not yet generated commercial sales revenue from any of our product candidates, our losses will continue and are likely to be substantial in the near term.

Revenue

Biogen

In September 2013, we entered into collaboration with Biogen to discover, develop and commercialize novel small molecules for the treatment of Parkinson’s disease. For the three and nine months ended September 30, 2014, we recognized $0.3 million and $1.2 million, respectively, as Research Revenue for reimbursed research and development costs.

GSK

In July 2012, we entered into the Expanded Collaboration Agreement with GSK. Due to a change in the accounting for revenue recognition for the Expanded Collaboration Agreement, all revenue recognition was suspended until the total arrangement consideration becomes fixed and determinable. As a result, we no longer recognize any revenue related to Collaboration and Milestone Revenue or Research Revenue as of the date of the Expanded Collaboration Agreement. There is no cash effect of this change in accounting, and there is no scenario where we would have to refund any of its upfront payments, milestone payments, or research reimbursement payments.

In November 2013, we entered into a Revised Agreement with GSK, which amended and replaced in its entirety the Expanded Collaboration Agreement.  Although there were changes to the terms of the agreement, for accounting purposes, it remains substantively the same. As such the accounting policy determined for the Expanded Agreement continued to be applied in the Revised Agreement for both the research and development reimbursements and the contingent milestone payments. Similar to our evaluations under the Expanded Collaboration Agreement, any payments received from GSK are recorded as deferred reimbursements on the balance sheet and any future contingent payments to GSK under the Revised Agreement would be recorded against the deferred reimbursement account. GSK will no longer jointly fund development costs for all formulations of migalastat as a result of the Revised Agreement.

Research and Development Expenses

We expect to continue to incur substantial research and development expenses as we continue to develop our product candidates and explore new uses for our pharmacological chaperone technology.  Research and development expense consists of:

·internal costs associated with our research and clinical development activities;

·payments we make to third party contract research organizations, contract manufacturers, investigative sites, and consultants;

·technology license costs;

·manufacturing development costs;

·personnel-related expenses, including salaries, benefits, travel, and related costs for the personnel involved in drug discovery and development;

·activities relating to regulatory filings and the advancement of our product candidates through preclinical studies and clinical trials; and

·facilities and other allocated expenses, which include direct and allocated expenses for rent, facility maintenance, as well as laboratory and other supplies.

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Table of Contents

We have multiple research and development projects ongoing at any one time.  We utilize our internal resources, employees and infrastructure across multiple projects.  We record and maintain information regarding external, out-of-pocket research and development expenses on a project specific basis.

We expense research and development costs as incurred, including payments made to date under our license agreements.  We believe that significant investment in product development is a competitive necessity and plan to continue these investments in order to realize the potential of our product candidates. For the nine months ended September 30, 2014, we incurred research and development expense in the aggregate of $32.0 million.

The following table summarizes our principal product development programs, including the related stages of development for each product candidate in development, and the out-of-pocket, third party expenses incurred with respect to each product candidate (in thousands).

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

Projects 

 

2013

 

2014

 

2013

 

2014

 

Third party direct project expenses

 

 

 

 

 

 

 

 

 

Monotherapy Studies

 

 

 

 

 

 

 

 

 

Migalastat HCl (Fabry Disease — Phase 3)

 

$

2,644

 

$

3,141

 

$

6,996

 

$

8,961

 

Afegostat tartrate (Gaucher Disease — Phase 2*)

 

4

 

2

 

78

 

10

 

 

 

 

 

 

 

 

 

 

 

Combination Studies

 

 

 

 

 

 

 

 

 

Fabry CHART (Fabry Disease — Phase 2)

 

30

 

284

 

568

 

902

 

Pompe CHART (Pompe Disease — Phase 2)

 

929

 

2,455

 

2,973

 

4,080

 

Gaucher CHART (Gaucher Disease — Preclinical)

 

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

Neurodegenerative Diseases (Preclinical)

 

57

 

35

 

100

 

265

 

 

 

 

 

 

 

 

 

 

 

Total third party direct project expenses

 

3,664

 

5,917

 

10,736

 

14,218

 

 

 

 

 

 

 

 

 

 

 

Other project costs (1)

 

 

 

 

 

 

 

 

 

Personnel costs

 

4,610

 

4,361

 

16,087

 

12,811

 

Other costs (2)

 

1,836

 

1,771

 

6,001

 

4,990

 

Total other project costs

 

6,446

 

6,132

 

22,088

 

17,801

 

 

 

 

 

 

 

 

 

 

 

Total research and development costs

 

$

10,110

 

$

12,049

 

$

32,824

 

$

32,019

 


(1) Other project costs are leveraged across multiple projects.

(2) Other costs include facility, supply, overhead, and licensing costs that support multiple projects.

*    We do not plan to advance afegostat tartrate monotherapy program into Phase 3 development at this time.

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Table of Contents

General and Administrative Expense

General and administrative expense consists primarily of salaries and other related costs, including stock-based compensation expense, for persons serving in our executive, finance, accounting, legal, information technology and human resource functions.  Other general and administrative expense includes facility-related costs not otherwise included in research and development expense, promotional expenses, costs associated with industry and trade shows, and professional fees for legal services, including patent-related expense and accounting services.  For the nine months ended September 30, 2014, we spent $15.2 million on general and administrative expense.

Interest Income and Interest Expense

Interest income consists of interest earned on our cash and cash equivalents and marketable securities.  Interest expense consists of interest incurred on our secured loan agreement.

 

Critical Accounting Policies and Significant Judgments and Estimates

 

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles.GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

There were no significant changes during the quarter ended SeptemberJune 30, 20142015 to the items that we disclosed as our significant accounting policies and estimates described in Note 2 to the Company’s financial statements as contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.2014.  However, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.

 

Revenue RecognitionResearch and Development Expenses

 

We recognize revenue when amounts are realized or realizable and earned.  Revenue is considered realizable and earned when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the price is fixed or determinable; and (4) collection of the amounts due are reasonably assured.

In multiple element arrangements, revenue is allocatedexpect to each separate unit of accounting and each deliverable in an arrangement is evaluatedcontinue to determine whether it represents separate units of accounting. A deliverable constitutes a separate unit of accounting when it has standalone value and there is no general right of return for the delivered elements. In instances when the aforementioned criteria are not met, the deliverable is combined with the undelivered elements and the allocation of the arrangement consideration and revenue recognition is determined for the combined unit as a single unit of accounting. Allocation of the consideration is determined at arrangement inception on the basis of each unit’s relative selling price. In instances where there is determined to be a single unit of accounting, the total consideration is applied as revenue for the single unit of accounting and is recognized over the period of inception through the date where the last deliverable within the single unit of accounting is expected to be delivered.

Our current revenue recognition policies, which were applied in fiscal 2010, provide that, when a collaboration arrangement contains multiple deliverables, such as license andincur substantial research and development services,expenses as we allocate revenuecontinue to each separate unit of accounting based on a selling price hierarchy. The selling price hierarchydevelop our product candidates and explore new uses for a deliverable is based on: (i) its vendor specific objective evidence (VSOE) if available, (ii) third party evidence (TPE) if VSOE is not available, or (iii) best estimated selling price (BESP) if neither VSOE nor TPE is available. We would establish the VSOE of selling price using the price charged for a deliverable when sold separately. The TPE of selling price would be established by evaluating largely similarour pharmacological chaperone technology. Research and interchangeable competitor products or services in standalone sales to similarly situated customers. The BESP would be established considering internal factors such as an internal pricing analysis or an income approach using a discounted cash flow model.

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Table of Contents

We also consider the impact of potential future payments we make in our role as a vendor to our customers and evaluate if these potential future payments could be a reduction of revenue from that customer. If the potential future payments to the customer are:development expense consists of:

 

·                  a payment for an identifiable benefit,internal costs associated with our research and

clinical development activities;

·                  the identifiable benefit is separable from the existing relationship between uspayments we make to third party contract research organizations, contract manufacturers, investigative sites, and our customer, and

consultants;

·                  the identifiable benefit can be obtained from a party other than the customer, and

technology license costs;

·                  manufacturing development costs;

·                  personnel related expenses, including salaries, benefits, travel, and related costs for the fair valuepersonnel involved in drug discovery and development;

·                  activities relating to regulatory filings and the advancement of the identifiable benefit can be reasonably estimated,our product candidates through preclinical studies and clinical trials; and

·                  facilities and other allocated expenses, which include direct and allocated expenses for rent, facility maintenance, as well as laboratory and other supplies.

 

then the payments are accounted for separately from the revenue received from that customer. If, however, all these criteria are not satisfied, then the payments are treated asWe have multiple research and development projects ongoing at any one time. We utilize our internal resources, employees and infrastructure across multiple projects. We record and maintain information regarding external, out-of-pocket research and development expenses on a reduction of revenue from that customer.project-specific basis.

If we determine that any potential future payments to our customers are to be considered as a reduction of revenue, we must evaluate if the total amount of revenue to be received under the arrangement is fixed and determinable. If the total amount of revenue is not fixed and determinable due to the uncertain nature of the potential future payments to the customer, then any customer payments cannot be recognized as revenue until the total arrangement consideration becomes fixed and determinable.

The reimbursements forWe expense research and development costs as incurred, including payments made to date under collaboration agreementsour license agreements. We believe that meetsignificant investment in product development is a competitive necessity and plan to continue these investments in order to realize the criteriapotential of our product candidates.

The following table summarizes our principal product development programs, including the related stages of development for revenue recognition are includedeach product candidate in Research Revenuedevelopment, and the costs associatedout-of-pocket, third party expenses incurred with these reimbursable amounts are included in research and development expenses.respect to each product candidate (in thousands):

 

In order to determine the revenue recognition for contingent milestones, we evaluate the contingent milestones using the criteria as provided by the Financial Accounting Standards Board (FASB) guidance on the milestone method of revenue recognition at the inception of a collaboration agreement. The criteria requires that: (i) we determine if the milestone is commensurate with either our performance to achieve the milestone or the enhancement of value resulting from our activities to achieve the milestone, (ii) the milestone be related to past performance, and (iii) the milestone be reasonable relative to all deliverable and payment terms of the collaboration arrangement. If these criteria are met then the contingent milestones can be considered as substantive milestones and will be recognized as revenue in the period that the milestone is achieved.

 

 

Three Months ended June 30,

 

Six Months ended June 30,

 

Projects

 

2015

 

2014

 

2015

 

2014

 

Third party direct project expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Monotherapy Studies

 

 

 

 

 

 

 

 

 

Galafold™ (Fabry Disease — Phase 3)

 

$

3,325

 

$

2,906

 

$

7,938

 

$

5,820

 

 

 

 

 

 

 

 

 

 

 

Combination (CHART) Studies

 

 

 

 

 

 

 

 

 

ATB200 + chaperone (Pompe Disease - Preclinical)

 

4,390

 

649

 

7,980

 

1,625

 

Migalastat + chaperone (Fabry Disease — Preclinical)

 

1,023

 

445

 

1,126

 

618

 

 

 

 

 

 

 

 

 

 

 

Neurodegenerative Diseases (Preclinical)

 

2

 

181

 

3

 

230

 

Total third party direct project expenses

 

8,740

 

4,181

 

17,047

 

8,293

 

 

 

 

 

 

 

 

 

 

 

Other project costs (1)

 

 

 

 

 

 

 

 

 

Personnel costs

 

5,964

 

4,156

 

11,534

 

8,450

 

Other costs (2)

 

2,530

 

1,641

 

4,766

 

3,227

 

Total other project costs

 

8,494

 

5,797

 

16,300

 

11,677

 

Total research and development costs

 

$

17,234

 

$

9,978

 

$

33,347

 

$

19,970

 

 

Nonqualified Cash Deferral Plan

In July 2014, the Board of Directors approved the Deferral Plan, which provides certain key employees and other service providers as selected by the Compensation Committee, with an opportunity to defer the receipt of such Participant’s base salary, bonus and director’s fees, as applicable. The Deferral Plan is intended to be a nonqualified deferred compensation plan that complies with the provisions of Section 409A of the Code.

As of September 30, 2014, the amounts deferred under the Deferral Plan have not been invested. The investments are expected to be made in the fourth quarter of fiscal year 2014. All of the investments held in the Deferral Plan will be classified as investments held-to-maturity and recorded at fair value with changes in the investments’ fair value recognized as earnings in the period they occur. The corresponding liability for the Deferral Plan is included in other non-current liability in our consolidated balance sheets.

Equity Incentive Plan

In June 2014, our shareholders approved the Amended and Restated 2007 Equity Incentive Plan (the Plan). The amendment to the Plan makes an additional 6.0 million shares of our common stock available for issuance and increases the maximum number of shares within the Plan that may be issued as restricted stock, restricted stock units (RSUs), stock grants and any other similar awards from 1.1 million to 1.5 million shares. As of September 30, 2014, awards issued under the Plan include both stock options and RSUs.

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Table of Contents(1)   Other project costs are leveraged across multiple projects.

(2)   Other costs include facility, supply, overhead, and licensing costs that support multiple projects.

Stock Option Grants

 

In accordance with the applicable guidance, we measure stock-based compensation at a fair value which is determined by measuring the cost of employee services received in exchange for an award of equity instruments based upon the grant date fair value of the award. We chose the “straight-line” attribution method for allocating compensation costs and recognized the fair value of each stock option on a straight-line basis over the vesting period of the related awards.

 

We use the Black-Scholes option pricing model when estimating the value for stock-based awards. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility was calculated based on a blended weighted average of historical information of our stock and the weighted average of historical information of similar public entities for which historical information was available. We will continue to use a blended weighted average approach using our own historical volatility and other similar public entity volatility information until our historical volatility is relevant to measure expected volatility for future option grants.since our initial public offering in May 2007.  The average expected life was determined using a “simplified”the simplified method of estimating the expected exercise termas described in ASC Topic 718, “Accounting for Stock Compensation”, which is the mid-pointmidpoint between the vesting date and the end of the contractual term. As our stock price volatility has been over 75% and we have experienced significant business transactions, we believe that we do not have sufficient reliable exercise data in order to justify a change from the use of the “simplified” method of estimating the expected exercise term of employee stock option grants. The risk-free interest rate iswas based on the U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumedyield in effect at the date of grant.  Forfeitures are estimated based on expected turnover as well as a historical analysis of actual option forfeitures.

 

The fair value ofweighted average assumptions used in the stock options granted is estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

 

 

Three Months

 

Nine Months

 

 

 

Ended September 30,

 

Ended September 30,

 

 

 

2013

 

2014

 

2013

 

2014

 

Expected stock price volatility

 

81.7

%

81.0

%

82.0

%

81.3

%

Risk free interest rate

 

1.8

%

1.9

%

1.3

%

1.9

%

Expected life of options (years)

 

6.25

 

6.25

 

6.25

 

6.25

 

Expected annual dividend per share

 

$

0.00

 

$

0.00

 

$

0.00

 

$

0.00

 

A summary of option activities related to the our stock options for the six months ended September 30, 2014 isare as follows:

 

 

 

Number of
Shares
(in thousands)

 

Weighted
Average Exercise
Price

 

Weighted
Average
Remaining
Contractual Life

 

Aggregate Intrinsic
Value

(in millions)

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2013

 

9,041.1

 

$

5.65

 

 

 

 

 

Options granted

 

2,894.1

 

$

2.87

 

 

 

 

 

Options exercised

 

(594.4

)

$

3.53

 

 

 

 

 

Options forfeited

 

(1,012.3

)

$

5.82

 

 

 

 

 

Balance at September 30, 2014

 

10,328.5

 

$

4.97

 

6.9 years

 

$

17.6

 

Vested and unvested expected to vest, September 30, 2014

 

9,649.5

 

$

5.10

 

6.8 years

 

$

15.6

 

Exercisable at September 30, 2014

 

5,551.1

 

$

6.40

 

5.2 years

 

$

4.9

 

 

 

Three Months

 

Six Months

 

 

 

Ended June 30,

 

Ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Expected stock price volatility

 

74.3

%

81.3

%

75.6

%

81.4

%

Risk free interest rate

 

1.7

%

1.9

%

1.7

%

2.0

%

Expected life of options (years)

 

6.25

 

6.25

 

6.25

 

6.25

 

Expected annual dividend per share

 

$

0.00

 

$

0.00

 

$

0.00

 

$

0.00

 

 

As of September 30, 2014, the total unrecognized compensation cost related to non-vested stock options granted was $8.3 million and is expected to be recognized over a weighted average period of 2.4 years.

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Table of Contents

Restricted Stock Units

 

In April 2014 and 2015 the Compensation Committee made awards of restricted stock units (“RSUs”) to certain employees of the Company.  The RSUs were awarded under the Plan and are generally subject to graded vesting of 50% of the RSUs on the 13th month anniversary of the grant date and the remaining 50% of the RSUs on the 20th month anniversary of the grant date, in each case, contingent on suchan employee’s continued service on such date.

RSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. We expense the cost of the RSUs, which is determined to be the fair market value of the shares of common stock underlying the RSUs at the date of grant, ratably over the period during which the vesting restrictions lapse.

 

A summary of non-vested RSU activity under the plan for the nine months ended September 30, 2014 is as follows:

 

 

Number of
Shares
(in thousands)

 

Weighted
Average Grant
Date Fair
Value

 

Weighted
Average
Remaining Years

 

Aggregate Intrinsic
Value
(in millions)

 

Non-vested units as of December 31, 2013

 

 

$

 

 

 

 

 

Granted

 

975

 

$

2.28

 

 

 

 

 

Vested

 

 

$

 

 

 

 

 

Forfeited

 

(20

)

$

2.15

 

 

 

 

 

Non-vested units as of September 30, 2014

 

955

 

$

2.28

 

1.0

 

$

3.5

 

For the nine months ended September 30, 2014, there were no RSUs that vested and all non-vested units are expected to vest over their normal term. As of September 30, 2014, there was $1.5 million of total unrecognized compensation cost related to unvested RSUs with service-based vesting conditions. These costs are expected to be recognized over a weighted average period of 1.0 year.

In April 2014, theour Board of Director approved the Company’s Restricted Stock Unit Deferral Plan (the Deferred“Deferred Compensation Plan)Plan”), which provides selected employees with an opportunity to defer receipt of RSUs until the first to occur of termination of the employee’s employment or a date selected by the employee.  Any RSUs deferred under the Deferred Compensation Plan would be fully vested once the original vesting conditions of the RSUs were satisfied. In June 2015, 0.4 million RSU’s vested.

 

Compensation Expense Related to Equity Awards

The following table summarizes information related to compensation expense recognized in the statements of operations related to the equity awards (in thousands):

 

 

Three Months

 

Nine Months

 

 

 

Ended September 30,

 

Ended September 30,

 

 

 

2013

 

2014

 

2013

 

2014

 

Stock compensation expense recognized in:

 

 

 

 

 

 

 

 

 

Research and development expense

 

$

824

 

$

698

 

$

2,634

 

$

1,950

 

General and administrative expense

 

693

 

953

 

2,040

 

2,448

 

Total stock compensation expense

 

$

1,517

 

$

1,651

 

$

4,674

 

$

4,398

 

Warrants

 

The warrants issued in connection with the March 2010 registered direct offeringour November 2013 securities and purchase agreement (“SPA”) were being classified as equity. As part of the SPA, a liability.total of 7.5 million common shares and 1.6 million warrants were issued at $2.00 per share, for total cash received of $15 million. The warrants were included in stockholder’s equity and were initially measured at fair value of the warrants liability was evaluated at each balance sheet date$1.0 million using the Black-ScholesBlack Scholes valuation model. AnyThese warrants were fully exercised in June 2015 resulting in net proceeds of $4.0 million during the quarter.

Nonqualified Cash Deferral Plan

In July 2014, our Board of Directors approved the Cash Deferral Plan (the “Deferral Plan”), which provides certain key employees and other service providers as selected by the Compensation Committee, with an opportunity to defer the receipt of such Participant’s base salary, bonus and director’s fees, as applicable. The Deferral Plan is intended to be a nonqualified deferred compensation plan that complies with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

The amounts deferred under the Deferral Plan are included in the non-current assets within the accompanying consolidated balance sheet. All of the investments held in the Deferral Plan are classified as trading securities and recorded at fair value with changes in the investments’ fair value of the warrants liability were recognized in the period they occur. The corresponding liability for the Deferral Plan is included in other non-current liability in our consolidated statement of operations.  The warrants expired on March 2, 2014.

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Table of Contents

Basic and Diluted Net Loss Attributable to Common Stockholders per Common Share

We calculated net loss per share as a measurement of the Company’s performance while giving effect to all dilutive potential common shares that were outstanding during the reporting period.  We had a net loss for all periods presented; accordingly, the inclusion of common stock options and warrants would be anti-dilutive.  Therefore, the weighted average shares used to calculate both basic and diluted earnings per share are the same.

The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net loss attributable to common stockholders per common share and pro forma net loss attributable to common stockholders per common share:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

(In thousands, except per share amounts)

 

2013

 

2014

 

2013

 

2014

 

Historical

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders per common

 

$

(14,589

)

$

(17,149

)

$

(47,396

)

$

(47,706

)

 

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding — basic and diluted

 

49,621,188

 

78,889,346,

 

49,621,188

 

70,216,251

 

Dilutive common stock equivalents would include the dilutive effect of common stock options, restricted stock units and warrants for common stock equivalents.  Potentially dilutive common stock equivalents were excluded from the diluted earnings per share denominator for all periods because of their anti-dilutive effect. The table below presents potential shares of common stock that were excluded from the computation as they were anti-dilutive using the treasury stock method (in thousands):

 

 

As of September 30,

 

 

 

2013

 

2014

 

Options to purchase common stock

 

10,112

 

10,329

 

Outstanding warrants, convertible to common stock

 

1,404

 

1,600

 

Unvested restricted stock units

 

 

955

 

Total number of potentially issuable shares

 

11,516

 

12,884

 

33



Table of Contentsbalance sheets.

 

Results of Operations

 

Three Months Ended SeptemberJune 30, 20142015 Compared to Three Months Ended SeptemberJune 30, 20132014

 

Revenue.In September 2013, we entered into a collaboration agreement with Biogen to discover, develop and commercialize novel small molecules for the treatment of Parkinson’s disease. This collaboration was ended in September 2014. For the three months ended SeptemberJune 30, 2014,2015 and September 30, 2013,2014, we recognized $293 thousand$0 and $39 thousand,$0.5 million, respectively as Research Revenue for reimbursed research and development costs.

 

Research and Development Expense.Research and development expense was $12.0$17.2 million during the three months ended June 30, 2015, representing an increase of $7.2 million or 72.0% from $10.0 million for the three months ended SeptemberJune 30, 2014, representing an increase of $1.9 million or 19.0% from $10.1 million for the three months ended September 30, 2013.2014. The increase in research and development costs was due primarily to increases in contract research and manufacturing, as well as increase in personnel costs of $2.3$1.8 million. Contract research increased by $2.0 million and contract manufacturing by $2.9 million arising from the timing of studies and changes in research plans. These research plans included increased spending in the Pompe CHART programs, FabryATB200 + chaperone program, migalastat + chaperone program and Fabry CHART programs. This was partially offset by a decrease in personnel costs for $0.2 million.the Galafold program.

 

General and Administrative Expense.General and administrative expense was $5.3$8.3 million for the three months ended SeptemberJune 30, 2014,2015, representing an increase of $0.7$3.5 million or 15.0%72.9% from $4.6$4.8 million for the three months ended SeptemberJune 30, 2013.2014. The main driversincrease includes pre-commercial organization costs of the$2.5 million, and increases werein personnel costs of $0.3$1.3 million, recruitment of $1.1 million and legalconsulting fees of $0.2$0.9 million. These increases were partially offset by decreases in legal expenses of $0.1 million.

 

Changes in Fair Value of Contingent Consideration Payable. For three months ended June 30, 2015, we recorded expense of $0.1 million representing an increase of $0.4 million or 132.8% from ($0.3) million for the three months ended SeptemberJune 30, 2014, we recorded income of $0.6 million representing a decrease2014.  Changes in the fair value of contingent acquisition consideration payable which was relatedresult from updates to the Callidus acquisition.estimated probability of achievement or assumed timing of milestones and adjustments to the discount periods and rates.

Loss from extinguishment of debt: We recognized a loss of $1.0 million in the second quarter of 2015 arising from the early extinguishment of the $15 million secured loan. No such loss was recorded in the second quarter of 2014.

 

Restructuring Charges. Restructuring charges were recorded in 2013 dueIncrease to the corporate restructuring implemented in the fourth quarterliability was $26 thousand for three months ended June 30, 2015 as compared to a reduction of 2013. For$81 thousand for the three months ended SeptemberJune 30, 2014, we recorded a $15 thousand increaseand was due to the liability to reflect the change in fair value of future minimum lease payments.

Depreciation.  Depreciation expense was $0.4 million for the net future discounted cash flows ofthree months ended June 30, 2015 and for the San Diego office lease.three months ended June 30, 2014.

 

Interest Income.Interest income was $55 thousand$0.2 million for the three months ended SeptemberJune 30, 2014,2015, representing an increase of $19 thousand$0.1 million or 53.0%341.7% from $36 thousand for the three months ended SeptemberJune 30, 2013.2014.  The increase in interest income was due to the overall higher average cash and investment balances as a result of ATM sales and cash received from option exercises.our financing transactions.

 

Interest Expense.Interest expense was approximately $377 thousand$0.3 million for the three months ended SeptemberJune 30, 20142015, as compared to $7 thousand$0.4 million for the three months ended SeptemberJune 30, 2013.2014. Interest expense was higher due toincurred on the $15 million loan secured in December 2013.

Change in Fair Value of Warrant Liability.   In connection with the sale of our common stock and warrants from the registered direct offering in March 2010, we recorded the warrants as a liability at their fair value using a Black-Scholes model and re-measure the fair value at each reporting date until exercised or expired. Changes in the fair value of the warrants are reported in the statements of operations as non-operating income or expense. As these warrants expired in March 2014, for the three months ended September 30, 2014, there The interest expense was no expense or income as compared to an income of $0.5 million relatedlower due to the decreasepayment of principal beginning in fair valuesecond quarter of these warrants for the three months ended September 30, 2013.2015.

 

Other Income/Expense.Other income/expenses for the three months ended SeptemberJune 30, 2015 and June 30, 2014 included charges of $11was $10 thousand for increase in theand primarily included fair value changes of the success fee payable which was related to the $15 million secured loan, and fair value changes to deferred compensation assets. The $15 million term loan was paid in 2013. There was no other income/expense forfull during the three months ended September 30, 2013.second quarter of 2015.

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Table of Contents

Results of Operations

NineSix Months Ended SeptemberJune 30, 20142015 Compared to NineSix Months Ended SeptemberJune 30, 20132014

 

Revenue.In September 2013, we entered into a collaboration agreement with Biogen to discover, develop and commercialize novel small molecules for the treatment of Parkinson’s disease. This collaboration was ended in September 2014. For the ninesix months ended SeptemberJune 30, 2015 and 2014, we recognized $1.2$0 and $0.9 million, respectively, as Research Revenue for reimbursed research and development costs, compared to $39 thousand for the nine months ended September 30, 2013.costs.

 

Research and Development Expense.Research and development expense was $32.0$33.3 million during the six months ended June 30, 2015, representing an increase of $13.3 million or 66.5% from $20.0 million for the ninesix months ended September 30, 2014, representing a decrease of $0.8 million or 2.0% from $32.8 million for the nine months ended SeptemberJune 30, 2014. The decreaseincrease in research and development costs was due primarily to a decreaseincreases in contract research and manufacturing, as well as increase in personnel costs of $3.3 million, consultants $3.1 million, recruitment fees of $0.2million. Contract research increased by $4.3 million and facilities costs of $0.3 million. This was partially offset by an increase in contract manufacturing and research costs. Contract research and manufacturing costs increased by $3.2$4.9 million due toarising from the timing of studies and changes in research plans. These research plans included increased spending in the FabryATB200 + chaperone program, migalastat + chaperone program Fabry CHART programs and the Pompe CHART programs.Galafold program. The Galafold program also saw increased spending due to the Revised Agreement where we were responsible for 100% of the program costs in 2015 as compared to 40% for the months ended March 31, 2014.

 

General and Administrative Expense.General and administrative expense was $15.2$14.7 million for the ninesix months ended SeptemberJune 30, 2014,2015, representing an increase of $0.9$4.8 million or 6.0%48.5% from $14.3$9.9 million for the ninesix months ended SeptemberJune 30, 2013.2014. The variance was primarily due to higher legalincrease includes commercial organizational costs of $3.1 million, and accountingincreases in consulting fees associated with the Callidus acquisitionof $1.7 million, personnel costs of $1.6 million and the ATM equity program.recruitment of $1.3 million.

 

Changes in Fair Value of Contingent Consideration Payable. For the ninesix months ended SeptemberJune 30, 2014,2015, we recorded incomeexpense of $0.4$1.1 million representing a decreasean increase of $0.9 million or 4.5% from $0.2 million for the six months ended June 30, 2014.  Changes in the fair value of contingent acquisition consideration payable which was relatedresult from updates to the Callidus acquisition.estimated probability of achievement or assumed timing of milestones and adjustments to the discount periods and rates.

Loss from extinguishment of debt: We recognized a loss of $1.0 million in the six months ended June 30, 2015 arising from the early extinguishment of the $15 million secured loan. No such loss was recorded in the six months ended June 30, 2014.

 

Restructuring Charges. Restructuring charges were recordedIncrease to the restructuring liability was $36 thousand for six months ended June 30, 2015 as compared to a reduction in 2013the liability of $89 thousand for the six months ended June 30, 2014 and was due to the corporate restructuring implemented in the fourth quarter of 2013. For the nine months ended September 30, 2014, we recorded a $0.1 million adjustment to the liability to reflect the change in fair value of future minimum lease payments.

Depreciation.  Depreciation expense was $0.9 million for the net future discounted cash flowssix months ended June 30, 2015, representing an increase of $0.1 million or 12.5% as compared to $0.8 million for the San Diego office lease.six months ended June 30, 2014. The change was due to an increase in the amount of property, plant and equipment.

 

Interest Income.Interest income was $0.3 million for the six months ended June 30, 2015, representing an increase of $0.2 million or 200% from $0.1 million for the ninesix months ended SeptemberJune 30, 20142014.  The increase in interest income was due to the overall higher average cash and September 30, 2013.investment balances as a result of our financing transactions.

 

Interest ExpenseExpense.  . Interest expense was approximately $1.1$0.7 million for the ninesix months ended SeptemberJune 30, 2014 compared to $26 thousand for the nine months ended September2015 and June 30, 2013.2014. Interest expense was higher due toincurred on the $15 million loan secured in December 2013.

Change in Fair Value of Warrant Liability.   In connection with the sale of our common stock and warrants from the registered direct offering in March 2010, we recorded the warrants as a liability at their fair value using a Black-Scholes model and remeasure the fair value at each reporting date until exercised or expired. Changes in the fair value of the warrants are reported in the statements of operations as non-operating income or expense. As these warrants expired in March 2014, for the nine months ended September 30, 2014, there The interest expense was no expense or income as compared to an income of $0.9 million relatedlower due to the decreasepayment of principal beginning in fair valuesecond quarter of these warrants for the nine months ended September 30, 2013.2015.

 

Other Income/Expense.Expenses.  Other income/ expenses for the ninesix months ended SeptemberJune 30, 20142015 included charges of $30$39 thousand as compared to $19 thousand for increase in the six months ended June 30, 2014. The change was primarily from fair value changes of the success fee payable, which was related to the $15 million secured loan that was fully paid off in 2013.There was no other income/expense for the nine months ended September 30, 2013.June 2015 and from fair value changes to deferred compensation assets.

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Table of Contents

Liquidity and Capital Resources

 

Source of Liquidity

 

In MarchJune 2015, the Company issued a total of 19.5 million shares through a public offering at a price of $13.25 per share. The offering generated gross proceeds of $258.8 million. After deducting underwriting fees of $15.5 million and other offering expenses of $0.1 million, which included legal fees, the net proceeds of the offering were approximately $243.2 million. The Company expects to use the net proceeds of the offering for investment in the global commercialization infrastructure for Galafold (migalastat) for Fabry disease, the continued clinical development of its product candidates and for other general corporate purposes.

In November 2014, we entered intosold a Sales Agreement with Cowentotal of 15.9 million shares of our common stock at a public offering price of $6.50 per share. The offering generated gross proceeds of $103.5 million. After deducting the underwriting fee of $6.2 million and other offering expenses of $0.1 million, which included legal fees, the net proceeds of the offering were approximately $97.2 million. We expect to use the net proceeds of the offering for investment in the global commercialization infrastructure for Galafold monotherapy for Fabry disease, the continued clinical development of its product candidates and for other general corporate purposes.

In July 2014, the Company LLC (Cowen) to create an at-the-market (ATM)completed a $40 million at the market (“ATM”) equity programoffering under which we would from time to time may offer and sellthe Company sold shares of ourits common stock, par value $0.01 per share, having an aggregate offering price of up to $40 million (ATM Shares) through Cowen. Upon delivery of a placement noticeshares with Cowen and subject to the terms and conditions ofCompany LLC as sales agent.  Under the ATM agreement, Cowen used its commercially reasonable efforts to sellequity program the ATM Shares, based upon our instructions. We provided Cowen with customary indemnification rights, and Cowen was entitled to a commission at a fixed commission rate of up to 3.0% of the gross proceeds per Share sold. Sales of the Shares under the Agreement were made in transactions that were deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers’ transactions, including on The NASDAQ Global Market, at market prices or as otherwise agreed with Cowen. We began the sales of ATM Shares in May 2014 andCompany sold 14.3 million shares of common stock resulting in net proceeds of $38.7 million, which included Cowen’s commission of $1.1 million and legal fees of $0.1$38.6 million. All sales under the ATM equity program have been completed.

 

As a result of our significant research and development expenditures and the lack of any approved products to generate product sales revenue, we have not been profitable and have generated operating losses since we were incorporated in 2002. We have funded our operations principally with $148.7 million of proceeds from redeemable convertible preferred stock offerings, $75.0 million of gross proceeds from our IPO in June 2007, $18.5 million of gross proceeds from our Registered Direct Offering in March 2010, $65.6$576.3 million of gross proceeds from our stock offering in March 2012, $52.9offerings, $130.0 million from GSK’s investments in the Company in October 2010,  July 2012by collaborators and November 2013, $40.0 million of gross proceeds from ATM sales and $80.0 million from non-refundable license fees from those collaborations.

 

In December 2013, we entered into a credit and security agreement with a lending syndicate which providesprovided an aggregate of $25 million.million credit available.  We drew $15 million of the aggregate principal amount in December 2013.2013 and paid the outstanding balance of the loan in the second quarter of 2015.

 

As of SeptemberJune 30, 2014,2015, we had cash and cash equivalents and marketable securities of $85.2$361.4 million. We invest cash in excess of our immediate requirements with regard to liquidity and capital preservation in a variety of interest-bearing instruments, including obligations of U.S. government agencies and money market accounts. Wherever possible, we seek to minimize the potential effects of concentration and degrees of risk. Although we maintain cash balances with financial institutions in excess of insured limits, we do not anticipate any losses with respect to such cash balances.

 

Net Cash Used in Operating Activities

 

Net cash used in operations for the ninesix months ended SeptemberJune 30, 20132015 was $37.7$43.6 million, due primarily to the net loss for the ninesix months ended SeptemberJune 30, 20132015 of $47.4$51.4 million and non-cash items such as stock based compensation of $4.2 million, the change in fair value of the contingent consideration of $1.1 and the loss on the extinguishment of debt of $1.0 million.  In addition there was change in operating assets and liabilities of $0.7 million. The change in operating assets and liabilities was due to an increase in other non-current assets of $0.5 million, partially offset by decreases in prepaid assets of $0.6 million and decreases in accounts payable and accrued expenses of $0.5 million.

Net cash used in operations for the six months ended June 30, 2014 was $22.0 million, due primarily to the net loss for the six months ended June 30, 2014 of $30.6 million and the change in operating assets and liabilities of $4.6 million. The change in operating assets and liabilities consisted of a decrease in receivables from collaboration agreement of $1.1million; a decrease of $0.6 million in prepaid assets primarily related to prepaid rent, service contracts and interest paid on investment; an increase in deferred revenue of $3.6 million related to the recognition of the upfront payment from GSK for the collaboration agreement and a decrease in accounts payable and accrued expenses of $0.7 million related to program expenses.

Net cash used in operations for the nine months ended September 30, 2014 was $37.2 million, due primarily to the net loss for the nine months ended September 30, 2014 of $47.7 million and the change in operating assets and liabilities of $5.3$4.7 million. The change in operating assets and liabilities consisted of a decrease in receivables from collaboration agreements of $0.8$0.6 million; a decrease of $3.4$4.2 million in prepaid assets primarily related to Net Operating Loss (NOL)(“NOL”) receivable; an increasea decrease in accounts payable and accrued expenses of $1.2$0.2 million mainly related to program expenses as well as reclass of success fee from noncurrent liability to a current liability.expenses.

 

Net Cash Provided by/ (Used in)by Investing Activities

 

Net cash provided by investing activities for the ninesix months ended SeptemberJune 30, 20132015 was $34.0$31.3 million.  Net cash provided by investing activities reflects $68.3$63.1 million for the sale and redemption of marketable securities, partially offset by $33.7$30.4 million for the purchase of marketable securities and $0.6$1.4 million for the acquisition of property and equipment.

 

Net cash used inprovided by investing activities for the ninesix months ended September,June 30, 2014 was $27.3$2.1 million.  Net cash used inprovided by investing activities reflects $75.1$31.1 million from the sale and redemption of marketable securities, partially offset by $28.8 million for the purchase of marketable securities and $0.2$0.1 million for the acquisition of property and equipment, partially offset by $48.0 million from the sale and redemption of marketable securities.equipment.

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Table of Contents

Net Cash (Used in)/ Provided by Financing Activities

 

Net cash used inprovided by financing activities for the ninesix months ended SeptemberJune 30, 20132015 was $0.3$237.2 million. Net cash provided by financing activities reflects $243.2 million consistingfrom issuance of payments on ourcommon stock, $6.9 million from exercise of stock options and $4.0 million from exercise of warrants, partially offset by $15.3 million from paying off the secured loan agreement.and $1.6 million from vesting of RSU’s.

 

Net cash provided by financing activities for the ninesix months ended SeptemberJune 30, 2014 was $40.5$18.2 million. Net cash provided reflects $38.7$18.3 million in net proceeds from sales of common stock under our ATM agreement with Cowen, $2.1 million from stock option exercises, partially offset by $0.3$0.2 million for the payments of our secured loan agreement.

 

Funding Requirements

 

We expect to incur losses from operations for the foreseeable future primarily due to research and development expenses, including expenses related to conducting clinical trials.  Our future capital requirements will depend on a number of factors, including:

 

·                  the progress and results of our clinical trials of our drug candidates, including migalastat;Galafold;

·                  the cost of manufacturing drug supply for our clinical and preclinical studies, including the significant cost of new ERT cell line development and manufacturing as well as the cost of manufacturing the vIGF-2 peptide tag;Pompe ERT;

·                  the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our product candidates including those testing the use of pharmacological chaperones co-formulated and co-administered with ERT and for the treatment of lysosomal storage diseases;disorders;

·                  the costs, timing and outcome of regulatory review of our product candidates;

·                  the number and development requirements of other product candidates that we pursue;

·                  the costs of commercialization activities, including product marketing, sales and distribution;

·                  the emergence of competing technologies and other adverse market developments;

·                  the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property relatedproperty-related claims;

·                  the extent to which we acquire or invest in businesses, products or technologies; and

·                  our ability to establish collaborations and obtain milestone, royalty or other payments from any such collaborators.

 

We do not anticipate that we will generate revenue from commercial sales until at least 2016, if at all.  In the absence of additional funding, we expect our continuing operating losses to result in increases in our cash used in operations over the next several quarters and years. We may seek additional funding through public or private financings of debt or equity. Including the net proceeds from the completed ATM equity program, weWe believe that our existing cash and cash equivalents and short-term investments will be sufficient to fund the current operating plan into 2016.2017.

 

Financial Uncertainties Related to Potential Future Payments

 

Milestone Payments / Royalties

 

Under our license agreements, if we owe royalties on net sales for one of our products to more than one licensor, then we have the right to reduce the royalties owed to one licensor for royalties paid to another. The amount of royalties to be offset is generally limited in each license and can vary under each agreement.

 

Under the Revised Collaboration Agreement, GSK is eligible to receive post-approval and sales-based milestones, as well as tiered royalties in the mid-teens in eight major markets outside the U.S.United States for migalastat.Galafold.  In addition, because we reacquired worldwide rights to migalastat,Galafold, we are no longer eligible to receive any milestones or royalties we would have been eligible to receive under the Original Collaboration Agreement.  We will owe royalties to Mt. Sinai School of Medicine (MSSM) in addition to those owed to GSK.

For duvoglustat, we will owe royalties only to MSSM.

We have acquired rights to develop and commercialize afegostat through licenses granted by various parties. Two agreements related to afegostat require us to make milestone payments if certain specified pre-commercialization events occur. Upon the satisfaction of certain milestones and assuming successful development of afegostat, we may be obligated, under the agreements that we have in place, to make future milestone payments aggregating up to approximately $7.9 million. However, such potential milestone payments are subject to many uncertain variables that would cause such payments, if any, to vary in size. We will owe royalties to MSSM, NovoNordisk and University of Maryland, Baltimore County.

 

To date, we have not made any royalty payments on sales of our products.

Recent Accounting Pronouncements

 

37Please refer to the section “Recent Accounting Pronouncements” under Footnote 2. Summary of Significant Accounting Policies, under our Notes to Consolidated Financial Statements.



Table of Contents

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

 

Market risk is the risk of change in fair value of a financial instrument due to changes in interest rates, equity prices, creditworthiness, financing, exchange rates or other factors. Our primary market risk exposure relates to changes in interest rates in our cash, cash equivalents and marketable securities.  We place our investments in high-quality financial instruments, primarily money market funds, corporate debt securities, asset backed securities and U.S. government agency notes with maturities of less than one year, which we believe are subject to limited interest rate and credit risk.  The securities in our investment portfolio are not leveraged, are classified as available-for-sale and, due to the short-term nature, are subject to minimal interest rate risk.  We currently do not hedge interest rate exposure and consistent with our investment policy, we do not use derivative financial instruments in our investment portfolio.  At SeptemberJune 30, 2014,2015, we held $85.2$361.4 million in cash, cash equivalents and available for sale securities and due to the short-term maturities of our investments, we do not believe that a 10% change in average interest rates would have a significant impact on the fair value of our investments.  Our outstanding debt has a fixed interest rate and therefore, we have no exposure to interest rate fluctuations.

 

We have operated primarily in the U.S.,United States, although we do conduct some clinical activities outside the U.S.United States.  While most expenses are paid in U.S. dollars, there are minimal payments made in local foreign currency.  If exchange rates undergo a change of 10%, we do not believe that it would have a material impact on our results of operations or cash flows.

 

ITEM 4. CONTROLS AND PROCEDURES

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was carried out under the supervision of our Principal Executive Officer and Principal Financial Officer, with the participation of our management.  Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

During the fiscal quarter covered by this report, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Table of Contents

PART II.  OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not a party to any material legal proceedings.

 

ITEM 1A.  RISK FACTORS

 

ThereWe have been noidentified the following material changes with respect to the Risk Factorsrisk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.2014 (the “2014 Annual Report”).  The risk factors listed below should be read in conjunction with the risk factors set forth in the 2014 Annual Report

Even if we are able to commercialize Galafold or any other product candidate that we develop, the product may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which. would harm our business.

The regulations and practices that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

Our ability to commercialize Galafold or any other product candidate successfully also will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the EU and U.S. healthcare industries and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that coverage and reimbursement will be available for Galafold or any other product that we commercialize and, if coverage and reimbursement are available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining reimbursement for Galafold may be particularly difficult because of the higher prices typically associated with drugs directed at smaller populations of patients. In addition, third-party payors are likely to impose strict requirements for reimbursement of a higher priced drug. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.

There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the applicable regulatory authority. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs, and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. In the United States, third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. In the European Union, reference pricing systems and other measures may lead to cost containment and reduced prices. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

If the FDA does not grant accelerated approval for Galafold, the timing and approval of the NDA will be significantly delayed.

We plan to submit an NDA for accelerated approval (Subpart H) of Galafold with the FDA in the second half of 2015. Under the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening disease or condition that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA has broad discretion over whether to grant approval based on a surrogate endpoint. Accordingly, even though we believe Galafold will meet the criteria for accelerated approval, the FDA may disagree and may determine not to grant such approval. If the FDA does not grant accelerated approval of Galafold, we will need to complete a Phase 3 clinical trial and will need to expend significantly more capital to obtain approval of Galafold.

If Galafold is approved by the FDA under the accelerated approval regulations, it will be subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint, which should be underway at the time of approval, and FDA review of all promotional materials prior to their dissemination. If we fail to promptly conduct required post-approval studies, do not confirm a clinical benefit during post-marketing studies, other evidence shows that Galafold is not shown to be safe or effective under the conditions of use, or we disseminate promotional materials relating to Galafold that are found by the FDA to be false and misleading, the FDA could withdraw Galafold from the market on an expedited basis.

A variety of risks associated with international operations could materially adversely affect our business.

If Galafold is approved for commercialization in Europe, we intend to market it in certain jurisdictions outside the United States. We expect that we will be subject to additional risks related to international operations or entering into international business relationships, including:

·                                          different regulatory requirements for maintaining approval of drugs in foreign countries;

·                                          reduced protection for contractual and intellectual property rights in some countries;

·                                          unexpected changes in tariffs, trade barriers and regulatory requirements;

·                                          economic weakness, including inflation, or political instability in particular foreign economies and markets;

·                                          compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

·                                          foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

·                                          workforce uncertainty in countries where labor unrest is more common than in the United States;

·                                          noncompliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-bribery and anticorruption laws in other jurisdictions;

·                                          tighter restrictions on privacy and the collection and use of patient data; and

·                                          business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.

We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both the European Union and many of the individual countries in Europe with which we will need to comply. Many U.S.-based biopharmaceutical companies have found the process of marketing their own products in Europe to be very challenging.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Recent Sales of Unregistered Securities

 

None.

 

Issuer Purchases of Equity Securities

 

The Company did not purchase any sharesfollowing table sets forth purchases of itsour common stock for the three months ended September 30, 2014.June, 2015:

Period

 

(a) Total number
of shares
purchased

 

(b) Average
Price Paid
per Share

 

(c) Total number of
shares purchased as
part of publicly
announced plans or
programs

 

(d) Maximum number of shares
that may yet be
purchased under the plans or
programs

 

April 1, 2015 – April 30, 2015

 

 

 

 

 

May 1, 2015 - May 31, 2015

 

149,776

 

$

10.80

 

 

255,224

 

June 1, 2015 – June 30, 2015

 

 

 

 

 

Total

 

149,776

 

 

 

 

 

 

Pursuant to a restricted stock award dated April 10, 2014 between Amicus Therapeutics and certain employee recipients, certain employees were granted 405,000 restricted stock units, 50% of which vested on May 10, 2015.  The remaining stock units vest on December 10, 2015, subject generally to the employee’s continued employment with the Company.  In order to comply with the minimum statutory federal tax withholding rate of 25%, 1.45% for Medicare plus 6.2% for Social Security where applicable, the employees surrendered to us a portion of their vested shares on the vesting date, representing between 26.45-32.65% of the total value of the shares then vested.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

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Table of Contents

ITEM 6. EXHIBITS

 

Exhibit
Number

 

Description

 

 

 

1.1(1)

Underwriting Agreement dated June 11, 2015, by and amount Amicus Therapeutics, Inc., J.P. Morgan Securities LLC and Goldman, Sachs & Co., as representatives of the several underwriters set forth on Schedule I therto.

3.1 (1)

 

Restated Certificate of Incorporation

 

 

 

3.2

Certificate of Amendment to the Company’s Restated Certificate of Incorporation, as amended.

3.3 (2)

 

Amended and Restated By-laws

 

 

 

10.1 (3)

 

First Amendment to Credit and Security Agreement, dated April 27, 2015 by and among Amicus Therapeutics, Inc. Cash Deferral Plan

10.2 (4)

Amendment No.1and the other entities shown as signatories thereto as a Borrower, the financial institutions or other entities from time to the Amicus Therapeutics, Inc. Cash Deferral Plantime parties as lenders, and Midcap Funding III Trust, as agent.

 

 

 

31.1

 

Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended

 

 

 

31.2

 

Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended

 

 

 

32.1

 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101

 

The following financial information from this Quarterly Report on Form 10-Q for the three months ended SeptemberJune 30, 2014,2015, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Loss; (iv) the Consolidated Statements of Cash Flows; (v) and the Notes to the Consolidated Financial Statements.

 


(1)

Incorporated by reference to Exhibit 3.11.1 to our AnnualCurrent Report on Form 10K8-K filed on February 28, 2012.June 12, 2015.

 

 

(2)

Incorporated by reference to Exhibit 3.4 to our Registration Statement on Form S-1.

 

 

(3)

Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 2, 2014

(4)

Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed October 16, 2014.April 28, 2015.

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Table of Contents

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

AMICUS THERAPEUTICS, INC.

 

 

 

Date: November 6, 2014August 5, 2015

By:

/s/ John F. Crowley

 

 

John F. Crowley

 

 

Chairman and Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

 

Date: November 6, 2014August 5, 2015

By:

/s/ William D. Baird III

 

 

William D. Baird III

 

 

Chief Financial Officer

 

 

(Principal Financial Officer)

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Table of Contents

INDEX TO EXHIBITS

Exhibit
Number

 

Description

 

 

 

3.1 (1)

 

Restated Certificate of Incorporation

 

 

 

3.2 (2)

 

Amended and Restated By-laws

10.1 (3)

Amicus Therapeutics, Inc. Cash Deferral Plan

10.2 (4)

Certificate of Amendment No.1 to the Amicus Therapeutics, Inc. Cash Deferral PlanCompany’s Restated Certificate of Incorporation, as amended.

 

 

 

31.1

 

Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended

 

 

 

31.31.2

 

Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended

 

 

 

32.1

 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101

 

The following financial information from this Quarterly Report on Form 10-Q for the three months ended SeptemberJune 30, 2014,2015, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Loss; (iv) the Consolidated Statements of Cash Flows; (v) and the Notes to the Consolidated Financial Statements.

 


(1)

Incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10K filed on February 28, 2012.

(2)

Incorporated by reference to Exhibit 3.4 to our Registration Statement on Form S-1.

(3)

Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 2, 2014.

(4)

Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed October 16, 2014.

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