Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x

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

 

For the quarterly period ended June 30, 20152016

 

OR

 

o

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 ox

 

Accelerated filer xo

 

 

 

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 July 29, 20152016 was 118,618,119142,139,451 shares.

 

 

 



Table of Contents

 

AMICUS THERAPEUTICS, INC.

 

Form 10-Q for the Quarterly Period Ended June 30, 20152016

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

4

 

 

Item 1.

Financial Statements (unaudited)

4

 

 

 

 

Consolidated Balance Sheets as of June 30, 20152016 and DecDecember 31, 20142015

4

 

 

 

 

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 20152016 and 20142015

5

 

 

 

 

Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 20152016 and 20142015

6

 

 

 

 

Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 20152016 and 20142015

7

 

 

 

 

Notes to Consolidated Financial Statements

8

 

 

 

Item 2.

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

2026

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

3037

 

 

 

Item 4.

Controls and Procedures

3037

 

 

 

PART II.

OTHER INFORMATION

3137

 

 

Item 1.

Legal Proceedings

3137

 

 

 

Item 1A.

Risk Factors

3138

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

3339

 

 

 

Item 3.

Defaults Upon Senior Securities

3339

 

 

 

Item 4.

Mine Safety Disclosures

3339

 

 

 

Item 5.

Other Information

3339

 

 

 

Item 6.

Exhibits

3440

 

 

 

SIGNATURES

3541

 

 

 

INDEX TO EXHIBITS

3642

 

We have registered or filed applications to register certain trademarks in the United StatesU.S. and abroad, including AMICUS™Amicus Therapeutics® and designs, At the forefront of therapies for rare and orphan diseases™, AMICUS THERAPEUTICS™ (and design)Zorblisa™, GALAFOLD™ and CHART™ (and design)Galafold™.

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- lookingforward-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 (“Galafold™”);candidates;

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

·                                     the future results of on-going or later clinical trials for SD-101, including our ability to obtain regulatory approvals and commercialize SD-101 and obtain market acceptance of SD-101;

·                                     the future results of on-going preclinical and later clinical trials for cyclin-dependent kinase-like 5 (“CDKL5”), including our ability to obtain regulatory approvals and commercialize CDKL5 and obtain market acceptance for CDKL5;

·                                     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;migalastat HCI;

·                                     our ability to commercialize Galafoldobtain market acceptance of migalastat HCl in the European Union;Union (the “EU”);

·                                     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 and technologies;

·                                     our ability to successfully integrate our recent acquisition of Scioderm, Inc. (“Scioderm”) and its products and technology into our business, including the possibility that the expected benefits of the transaction will not be fully realized by us or may take longer to realize than expected; 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, 20142015, 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 documentsdocument that we reference herein. We do not assume any obligation to update any forward-looking statements.

PART I.          FINANCIAL INFORMATION

 

Item 1.             Financial Statements (unaudited)

 

Amicus Therapeutics, Inc.

Consolidated Balance Sheets (Unaudited)

(Unaudited)

(in thousands, except share and per share amounts)

 

 

June 30,
2015

 

December 31,
2014

 

 

June 30,
2016

 

December 31,
2015

 

Assets:

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

249,023

 

$

24,074

 

 

$

63,656

 

$

69,485

 

Investments in marketable securities

 

112,396

 

127,601

 

 

150,494

 

144,548

 

Inventories

 

194

 

 

Prepaid expenses and other current assets

 

3,578

 

2,902

 

 

3,330

 

2,568

 

Total current assets

 

364,997

 

154,577

 

 

217,674

 

216,601

 

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

 

Property and equipment, less accumulated depreciation of $14,284 and $13,353 at June 30, 2016 and December 31, 2015, respectively

 

10,178

 

6,178

 

In-process research & development

 

23,000

 

23,000

 

 

486,700

 

486,700

 

Goodwill

 

11,613

 

11,613

 

 

197,797

 

197,797

 

Other non-current assets

 

924

 

502

 

 

1,657

 

1,108

 

Total Assets

 

$

403,913

 

$

209,967

 

 

$

914,006

 

$

908,384

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

16,901

 

$

16,345

 

 

$

23,828

 

$

32,216

 

Current portion of secured loan

 

 

3,840

 

Contingent consideration payable, current portion

 

56,000

 

41,400

 

Other current liabilities

 

631

 

 

Total current liabilities

 

16,901

 

20,185

 

 

80,459

 

73,616

 

 

 

 

 

 

 

 

 

 

 

Deferred reimbursements

 

36,620

 

36,620

 

 

35,756

 

35,756

 

Secured loan, less current portion

 

 

10,510

 

Contingent consideration payable

 

11,800

 

10,700

 

Due to related party

 

43,443

 

41,601

 

Unsecured notes payable

 

21,851

 

 

Contingent consideration payable, less current portion

 

220,300

 

232,677

 

Deferred tax liability

 

9,186

 

9,186

 

 

176,219

 

176,219

 

Other non-current liability

 

504

 

588

 

Other non-current liabilities

 

1,735

 

681

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

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

 

Common stock, $.01 par value, 250,000,000 authorized, 134,408,526 shares issued and outstanding at June 30, 2016, 250,000,000 shares authorized, 125,027,034 shares issued and outstanding at December 31, 2015

 

1,399

 

1,306

 

Additional paid-in capital

 

826,582

 

568,743

 

 

990,032

 

917,454

 

Accumulated other comprehensive income

 

(52

)

(132

)

Accumulated other comprehensive loss:

 

 

 

 

 

Foreign currency translation adjustment, less tax benefit of $453 at June 30, 2016

 

842

 

 

Unrealized gain/ (loss) on available-for securities

 

201

 

(115

)

Warrants

 

16,076

 

8,755

 

Accumulated deficit

 

(498,869

)

(447,448

)

 

(674,307

)

(579,566

)

Total stockholders’ equity

 

328,902

 

122,178

 

 

334,243

 

347,834

 

Total Liabilities and Stockholders’ Equity

 

$

403,913

 

$

209,967

 

 

$

914,006

 

$

908,384

 

 

See accompanying notes to consolidated financial statements

Amicus Therapeutics, Inc.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share amounts)

 

 

Three Months

 

Six Months

 

 

Three Months

 

Six Months

 

 

Ended June 30,

 

Ended June 30,

 

 

Ended June 30,

 

Ended June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

2016

 

2015

 

2016

 

2015

 

Revenue:

 

 

 

 

 

 

 

 

 

Research revenue

 

 

$

475

 

 

$

931

 

Total revenue

 

 

475

 

 

931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

17,234

 

$

9,978

 

$

33,347

 

$

19,970

 

 

$

18,281

 

$

17,234

 

$

41,706

 

$

33,347

 

General and administrative

 

8,278

 

4,753

 

14,705

 

9,929

 

 

19,300

 

8,278

 

35,001

 

14,705

 

Changes in fair value of contingent consideration payable

 

100

 

(305

)

1,100

 

200

 

 

10,186

 

100

 

13,338

 

1,100

 

Restructuring charges

 

26

 

(81

)

36

 

(89

)

 

8

 

26

 

58

 

36

 

Loss on extinguishment of debt

 

952

 

 

952

 

 

 

 

952

 

 

952

 

Depreciation

 

353

 

396

 

861

 

808

 

 

767

 

353

 

1,440

 

861

 

Total operating expenses

 

26,943

 

14,741

 

51,001

 

30,818

 

 

48,542

 

26,943

 

91,543

 

51,001

 

Loss from operations

 

(26,943

)

(14,266

)

(51,001

)

(29,887

)

 

(48,542

)

(26,943

)

(91,543

)

(51,001

)

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

158

 

36

 

329

 

78

 

 

331

 

158

 

638

 

329

 

Interest expense

 

(338

)

(374

)

(710

)

(729

)

 

(1,055

)

(338

)

(2,000

)

(710

)

Other expense

 

(10

)

(10

)

(39

)

(19

)

 

(2,237

)

(10

)

(2,289

)

(39

)

 

 

 

 

 

 

 

 

 

Loss before income tax benefit

 

(51,503

)

(27,133

)

(95,194

)

(51,421

)

Income tax benefit

 

453

 

 

453

 

 

Net loss

 

$

(27,133

)

$

(14,614

)

$

(51,421

)

$

(30,557

)

 

(51,050

)

(27,133

)

(94,741

)

(51,421

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common shares — basic and diluted

 

$

(0.27

)

$

(0.22

)

$

(0.53

)

$

(0.46

)

 

$

(0.40

)

$

(0.27

)

$

(0.75

)

$

(0.53

)

Weighted-average common shares outstanding — basic and diluted

 

99,994,125

 

67,212,764

 

97,888,573

 

65,799,059

 

 

129,122,175

 

99,994,125

 

127,160,943

 

97,888,573

 

 

See accompanying notes to consolidated financial statements

Amicus Therapeutics, Inc.

Consolidated Statements of Comprehensive Loss

(Unaudited)

(in thousands)

 

 

 

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.

 

 

Three Months

 

Six Months

 

 

 

Ended June 30,

 

Ended June 30,

 

 

 

2016

 

2015

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(51,050

)

$

(27,133

)

$

(94,741

)

$

(51,421

)

 

 

 

 

 

 

 

 

 

 

Other comprehensive gain /(loss)

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, net of tax $453

 

907

 

 

842

 

 

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

 

87

 

(17

)

316

 

80

 

Other comprehensive gain /(loss)

 

$

994

 

$

(17

)

$

1,158

 

$

80

 

Comprehensive loss

 

$

(50,056

)

$

(27,150

)

$

(93,583

)

$

(51,341

)

 

See accompanying notes to consolidated financial statements

Amicus Therapeutics, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(Unaudited)

(in thousands)

 

Six Months

 

 

Six Months

 

 

Ended June 30

 

 

Ended June 30,

 

 

2015

 

2014

 

 

2016

 

2015

 

Operating activities

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(51,421

)

$

(30,557

)

 

$

(94,741

)

$

(51,421

)

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

 

 

 

 

 

 

 

 

 

 

Non-cash interest expense

 

136

 

115

 

 

1,014

 

136

 

Depreciation

 

861

 

808

 

 

1,440

 

861

 

Stock-based compensation

 

4,191

 

2,748

 

 

8,748

 

4,191

 

Restructuring charges

 

36

 

(89

)

 

58

 

36

 

Loss on extinguishment of debt

 

952

 

 

 

 

952

 

Loss on disposal of asset

 

17

 

 

Non-cash changes in the fair value of derivative liability

 

346

 

 

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

 

1,100

 

200

 

 

13,338

 

1,100

 

Foreign currency remeasurement loss

 

1,892

 

 

Non-cash income tax benefit

 

(453

)

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Receivable due from collaboration agreements

 

 

607

 

Inventories

 

(207

)

 

Prepaid expenses and other current assets

 

641

 

4,245

 

 

(865

)

641

 

Other non-current assets

 

(482

)

25

 

 

(549

)

(482

)

Accounts payable and accrued expenses

 

459

 

(155

)

 

(8,244

)

459

 

Non-current liabilities

 

(84

)

14

 

 

535

 

(84

)

Net cash used in operating activities

 

(43,611

)

(22,039

)

 

(77,671

)

(43,611

)

Investing activities

 

 

 

 

 

 

 

 

 

 

Sale and redemption of marketable securities

 

63,163

 

31,114

 

 

121,283

 

63,163

 

Purchases of marketable securities

 

(30,414

)

(28,849

)

 

(126,914

)

(30,414

)

Purchases of property and equipment

 

(1,429

)

(132

)

 

(4,608

)

(1,429

)

Net cash provided by investing activities

 

31,320

 

2,133

 

Net cash (used in)/ provided by investing activities

 

(10,239

)

31,320

 

Financing activities

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

243,216

 

18,344

 

 

57,818

 

243,216

 

Proceeds from unsecured note agreement

 

30,000

 

 

Payments of secured loan agreement

 

(15,291

)

(199

)

 

 

(15,291

)

Payment of capital lease

 

(47

)

 

Payment of contingent consideration

 

(5,000

)

 

Proceeds from exercise of stock options

 

6,932

 

25

 

 

647

 

6,932

 

Purchase of vested restricted stock units

 

(1,617

)

 

 

(657

)

(1,617

)

Proceeds from exercise of warrants

 

4,000

 

 

 

 

4,000

 

Net cash provided by financing activities

 

237,240

 

18,170

 

 

82,761

 

237,240

 

Net increase/(decrease) in cash and cash equivalents

 

224,949

 

(1,736

)

Effect of exchange rate changes on cash and cash equivalents

 

(680

)

 

Net (decrease)/ increase in cash and cash equivalents

 

(5,829

)

224,949

 

Cash and cash equivalents at beginning of period

 

24,074

 

43,640

 

 

69,485

 

24,074

 

Cash and cash equivalents at end of period

 

$

249,023

 

$

41,904

 

 

$

63,656

 

$

249,023

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

605

 

$

537

 

 

$

276

 

$

605

 

Contingent consideration resolution in shares

 

$

6,115

 

$

 

Capital expenditures funded by capital lease borrowings

 

$

850

 

$

 

 

See accompanying notes to consolidated financial statements

Amicus Therapeutics, Inc.

 

Notes to Consolidated Financial Statements

 

Note 1. Description of Business

 

Corporate Information, Status of Operations, and Management Plans

 

Amicus Therapeutics, Inc. (the “Company,” “we,” “us,” or “our”) was incorporated on February 4, 2002 in Delaware and is a biopharmaceuticalglobal patient-focused biotechnology company focused onengaged in the discovery, development, and commercialization of next-generation medicinesa diverse set of novel treatments for a range ofpatients living with devastating rare and orphan diseases, with a focus on improved therapies for lysosomal storage disorders (“LSDs”).diseases. The Company’s lead product candidate, is the pharmacological chaperone migalastat HCl (“Galafold”),is a small molecule that can be used as a monotherapy and in combination with enzyme replacement of therapy (“ERT”) for Fabry disease.  SD-101, a product candidate in late-stage development, is a potential first-to-market therapy for the chronic, rare connective tissue disorder Epidermolysis Bullosa (“EB”). The Company’s development programsCompany is also include next-generation ERTsleveraging its biologics and Chaperone-Advanced Replacement Therapy (“CHART™”) platform technologies to develop novel ERT products for LSDs, includingPompe disease, Fabry disease, Pompe disease and Mucopolysaccharidosis Type Ipotentially other lysosomal storage disorders (“MPS I”LSDs”). The Company’s activities since inception have consisted principallyCompany is also investigating preclinical and discovery programs in other rare and devastating diseases including CDKL5 deficiency. The Company believes that the platform technologies and advanced product pipeline uniquely position the Company at the forefront of raising capital, establishing facilities,advanced therapies to treat a range of devastating rare and performing research and development.orphan diseases.

 

OurThe Company’s Fabry franchise strategy is to develop Galafoldmigalastat HCl (which the Company may refer to as “migalastat”) for all patients with Fabry disease - as a monotherapy for patients with amenable mutations and in combination with ERT for all other patients.

During the first quarter of 2015, In May 2016, the Company met with regulatory authorities in Europe and the United States to discuss the approval pathways for migalastat 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 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 byannounced that the European Commission has granted full approval for the oral small molecule pharmacological chaperone Galafold™ (migalastat) as a first-line therapy for long-term treatment of adults and adolescents aged 16 years and older with a confirmed diagnosis of Fabry disease (alpha-galactosidase A deficiency) and who have an amenable mutation. The approved label includes 269 Fabry-causing mutations which generally issues a final decision onrepresent up to half of all patients with Fabry disease. The Company began supplying the market in Germany in May 2016 and will commence the reimbursement processes with healthcare authorities in each of the major European Union (“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,countries.

In July 2016, the Company would then beginexpanded its biologics pipeline with a new preclinical program for CDKL5 deficiency, a rare and devastating genetic neurological disease for which there is no currently approved treatment. The Company has obtained the country-by-country reimbursement approval process.rights and related intellectual property to a preclinical CDKL5 program through its acquisition of MiaMed, Inc.

On June 30, 2016, the Company entered into a Joinder to and Amendment of Note and Warrant Purchase Agreement (the “Amended Purchase Agreement”) with Redmile Capital Fund, LP and certain of its affiliates (collectively referred to as “Redmile”). Such amendment joined GCM Grosvenor Special Opportunities Master Fund, Ltd. (“GCM”) to the Note and Warrant Purchase Agreement, dated as of February 19, 2016. At closing, the Company sold (a) $30.0 million principal amount of additional notes and (b) five-year warrants to purchase 42 shares of common stock of the Company, par value $0.01 per share (“Common Stock”) for every $1,000 of the principal amount of Additional Notes purchased by each Purchaser (“Additional Warrants”), for an aggregate of approximately 1.3 million shares of Common Stock issuable under the Additional Warrants. For additional information, see “—Note 7. Debt Instruments and Related Party Transactions.”

 

In the United States,February 2016, the Company plansentered into a sales agreement (“Sales Agreement”) with Cowen and Company, LLC (“Cowen”), to conductcreate an at-the-market (“ATM”) equity program under which the Company from time to time may offer and sell shares of its Common Stock having an aggregate offering price of up to $100.0 million through Cowen as sales agent for funds to be received in an escrow, trust or similar arrangement. Cowen will be entitled to compensation at a pre-new drug application (“NDA”) meetingfixed commission rate up to 3.0% of the gross proceeds per share sold through it as sales agent under the sales agreement. Beginning in April 2016 and through June 30, 2016, the Company sold 8.2 million shares of Common Stock under the ATM sales agreement resulting in net proceeds of $57.8 million, after Cowen’s commission of $1.7 million and other expenses of $0.1 million. In July 2016, the Company sold an additional 6.8 million shares of Common Stock with a net proceeds of $39.3 million. In connection with the U.S. Food and Drug Administration (“FDA”) and to submit an NDA for Galafold under Subpart H (accelerated approval) in the second half of 2015 for accelerated approval. Following the MAA validation,July share sales, the Company is also initiatingcompleted all sales under the regulatory submission process in several additional geographies.ATM equity program.

 

In June 2015, the Company issued a total of 19.5 millionFor more details, refer to 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.“— Note 13. Subsequent Events.”

The Company had an accumulated deficit of approximately $498.9$674.3 million at June 30, 20152016 and anticipates incurring losses through the fiscal year ending December 31, 20152016 and beyond. The Company has not yet generated commercial sales revenue and has been able to fundfunded 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 and subsequent stock offerings, payments from partners during the terms of the collaboration agreements and other financing arrangements. The Company commenced commercial shipments of Galafold in the EU in the second quarter of 2016 and expects to recognize revenue in the third quarter of 2016.  The Company believes that its existing cash and cash equivalents and short-term investments will be sufficient to fund the current operating plan into the second half of 2017.

 

Note 2. Summary of Significant Accounting Policies

The consolidated financial statements include the accounts of Amicus Therapeutics, Inc. and its wholly-owned subsidiaries, after the elimination of intercompany transactions.

 

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”) 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, 2014.2015.  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, 2014.2015.

 

Foreign Currency Transactions

The functional currency for most of our foreign subsidiaries is their local currency. For our non-U.S. subsidiaries that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of exchange at the balance sheet date. Income and expense items are translated at the average foreign exchange rates for the period. Adjustments resulting from the translation of the financial statements of our foreign operations into U.S. dollars are excluded from the determination of net income and are recorded in accumulated other comprehensive income, a separate component of equity.

The Company transacts business in various foreign countries and therefore, is subject to risk of foreign currency exchange rate fluctuations. As such, in June 2016 the Company entered into one forward contract to economically hedge transactional exposure associated with commitments arising from trade accounts payable denominated in a currency other than the functional currency of the respective operating entity. The Company does not designate this forward contract as a hedging instrument under applicable accounting guidance and, therefore, changes in fair value are recorded in the Consolidated Statements of Operations.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Concentration of Credit Risk

The Company’s financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents and marketable securities. The Company maintains its cash and cash equivalents in bank accounts, which, at times, exceed federally insured limits. The Company invests its marketable securities in high-quality commercial financial instruments. The Company has not recognized any losses from credit risks on such accounts during any of the periods presented. The Company believes it is not exposed to significant credit risk on cash and cash equivalents or its marketable securities.

Significant Accounting Policies

 

There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2015,2016, 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, 2014.2015. However, the following accounting policies are the most critical in fully understanding and evaluating the Company’s financial condition and results of operations.

 

Inventories

Until regulatory approval of migalastat, the Company expensed all of its inventory costs as research and development expense. Upon regulatory approval, the Company began capitalizing costs related to the purchase and manufacture of migalastat. Inventories are stated at the lower of cost or market determined by the first-in, first-out method. The Company will analyze its inventory levels quarterly and will write down inventory that has become obsolete, or has a cost basis in excess of its expected net realizable value and inventory quantities in excess of expected requirements. Expired inventory will be disposed of and the related costs will be recognized as cost of goods sold in the Company’s Consolidated Statements of Operations.

Revenue Recognition

Net Product Sales

 

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.

The Company will record revenue on sales where migalastat is available on a reimbursed expanded access program and typically paid for by a government authority or institution. The Company will recognize revenue for these reimbursed expanded access programs on a cash basis if all other revenue recognition criteria have been met. Once the Company has established a pattern of collectability, revenue will be recognized upon shipment assuming all other revenue recognition criteria are met.

Collaboration Revenue

 

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 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”) 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. 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.

 

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”) 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.

 

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.

Contingent Liabilities

On an ongoing basis, the Company may be involved in various claims, and legal proceedings. On a quarterly basis, the Company reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the amount can be reasonably estimated, the Company will accrue a liability for the estimated loss. Because of uncertainties related to claims and litigation, accruals will be based on the Company’s best estimates based on available information. On a periodic basis, as additional information becomes available, or based on specific events such as the outcome of litigation or settlement of claims, the Company may reassess the potential liability related to these matters and may revise these estimates, which could result in a material adverse adjustments to the Company’s operating results.

 

RecentNew Accounting Pronouncements

 

In April 2015,May 2016, the FASB issued ASU 2015-05, Intangibles - Goodwill2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.Practical Expedients. The amendments in ASU 2015-05 provideaddress narrow-scope improvements to the 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 ofon collectability, noncash consideration, and completed contracts at transition. Additionally, the amendments all software licenses withinprovide a practical expedient for contract modifications at transition and an accounting policy election related to the scopepresentation of Subtopic 350-40 will be accounted for consistent withsales taxes and other licenses of intangible assets. The ASUsimilar taxes collected from customers. These amendments are effective at the same date that Topic 606 is effective. Topic 606 is effective for financial statements issuedpublic entities for fiscal yearsannual reporting periods beginning after December 15, 2015, and2017, including interim reporting 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 issuedtherein (i.e., January 1, 2018, for a calendar year entity). This Accounting Standards Update (“ASU”) 2015-03, Interest - Imputationis the final version of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.Proposed Accounting Standards Update 2015-230—Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients, which has been deleted. 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 ASUCompany 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, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going 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 our consolidated financial statements.

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 us at the beginning of our 2017 fiscal year; early adoption is not permitted. We are currently assessing the impact that this standard will have on its consolidated financial statements.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently assessing the impact that this standard will have on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. For public companies, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any organization in any interim or annual period. The Company is currently assessing the impact that this standard will have on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments relate to when another party, along with the entity, is involved in providing a good or service to a customer. Topic 606 Revenue from Contracts with Customers requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (i.e., the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (i.e., the entity is an agent). The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date and transition of these amendments is the same as the effective date and transition of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Public entities should apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). The Company is currently assessing the impact that this standard will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This update requires the recognition of lease assets and lease liabilities on the balance sheet for all lease obligations and disclosing key information about leasing arrangements. This update requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous generally accepted accounting principles. This update will be effective for the Company for all annual and interim periods beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The Company is currently assessing the impact that this standard will have on its consolidated financial statements.

Note 3.  Cash, Money Market Funds and Marketable Securities

 

As of June 30, 2015,2016, the Company held $249.0$63.7 million in cash and cash equivalents and $112.4$150.5 million of available-for-sale 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 statements 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.

 

The Company transacts business in various foreign countries and therefore, is subject to risk of foreign currency exchange rate fluctuations. As such, in June 2016 the Company entered into a forward contract to economically hedge transactional exposure associated with commitments arising from trade accounts payable denominated in a currency other than the functional currency of the respective operating entity. The Company does not designate these forward contracts as hedging instruments under applicable accounting guidance and, therefore, changes in fair value are recorded as other income (expense) in the Consolidated Statements of Operations, with the corresponding liability in current liabilities on the Consolidated Balance Sheet. For the three and six months ended June 30, 2016, the Company recognized a loss of $346 thousand related to the derivative instruments not designated as hedging instruments in other income (expense) in the Consolidated Statements of Operations and the corresponding liability of $346 thousand is recorded as other current liability in the Consolidated Balance Sheets.

Cash and available-for-sale securities are all classified as current unless indicatedmentioned otherwise and consisted of the following as of June 30, 20152016 and December 31, 20142015 (in thousands):

 

 

 

As of June 30, 2015

 

 

 

Cost

 

Unrealized
Gain

 

Unrealized
Loss

 

Fair Value

 

Cash balances

 

$

249,023

 

$

 

$

 

$

249,023

 

Corporate debt securities

 

103,101

 

2

 

(57

)

103,046

 

Commercial paper

 

8,996

 

4

 

 

9,000

 

Certificate of deposit

 

350

 

 

 

350

 

 

 

$

361,470

 

$

6

 

$

(57

)

$

361,419

 

Included in cash and cash equivalents

 

$

249,023

 

$

 

$

 

$

249,023

 

Included in marketable securities

 

112,447

 

6

 

(57

)

112,396

 

Total cash and marketable securities

 

$

361,470

 

$

6

 

$

(57

)

$

361,419

 

 

As of December 31, 2014

 

 

As of June 30, 2016

 

 

Cost

 

Unrealized
Gain

 

Unrealized
Loss

 

Fair Value

 

 

Cost

 

Unrealized
Gain

 

Unrealized
Loss

 

Fair Value

 

Cash balances

 

$

24,074

 

$

 

$

 

$

24,074

 

 

$

63,656

 

$

 

$

 

$

63,656

 

Corporate debt securities, current portion

 

115,862

 

 

(110

)

115,752

 

Corporate debt securities, non-current portion

 

17,508

 

 

(44

)

17,464

 

Corporate debt securities

 

85,475

 

$

19

 

$

(23

)

$

85,471

 

Commercial paper

 

11,477

 

22

 

 

11,499

 

 

64,468

 

$

205

 

 

$

64,673

 

Certificate of deposit

 

350

 

 

 

350

 

 

350

 

 

 

350

 

 

$

169,271

 

$

22

 

$

(154

)

$

169,139

 

 

$

213,949

 

$

224

 

$

(23

)

$

214,150

 

Included in cash and cash equivalents

 

$

24,074

 

$

 

$

 

$

24,074

 

 

$

63,656

 

$

 

$

 

$

63,656

 

Included in marketable securities

 

145,197

 

22

 

(154

)

145,065

 

 

$

150,293

 

$

224

 

$

(23

)

$

150,494

 

Total cash and marketable securities

 

$

169,271

 

$

22

 

$

(154

)

$

169,139

 

 

$

213,949

 

$

224

 

$

(23

)

$

214,150

 

 

Unrealized gains and losses are reported as a component of other comprehensive income/ (loss) in the statements of comprehensive loss.  For the six months ended June 30, 2015, unrealized holding gain of $80 thousand and for the year ended December 31, 2014, unrealized holding loss of $132 thousand, were included in the statement of comprehensive loss.

 

 

As of December 31, 2015

 

 

 

Cost

 

Unrealized
Gain

 

Unrealized
Loss

 

Fair Value

 

Cash balances

 

$

69,485

 

$

 

$

 

$

69,485

 

Corporate debt securities

 

118,627

 

1

 

(154

)

118,474

 

Commercial paper

 

25,686

 

38

 

 

25,724

 

Certificate of deposit

 

350

 

 

 

350

 

 

 

$

214,148

 

$

39

 

$

(154

)

$

214,033

 

Included in cash and cash equivalents

 

$

69,485

 

 

 

$

69,485

 

Included in marketable securities

 

144,663

 

39

 

(154

)

144,548

 

Total cash and marketable securities

 

$

214,148

 

$

39

 

$

(154

)

$

214,033

 

For the six months ended June 30, 20152016 and the year ended December 31, 2014,2015, 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, 20152016 and December 31, 20142015 reflect temporary impairments that have not been recognized and have been in a loss position for less than twelve months.months and as such are recognized in other comprehensive gain/ (loss).  The fair value of these available for sale securities in unrealized loss positions was $94.7$50.4 million and $129.2$118.5 million as of June 30, 20152016 and December 31, 2014,2015, respectively.

 

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”) in the statementsStatements of comprehensive loss.Comprehensive Loss. 

Note 4.   Inventories

Inventories consist of raw materials, work in process and finished goods related to the manufacture of Galafold.  The changes in AOCI associatedfollowing table summarizes the components of inventories at June 30, 2016 (in thousands):

(Dollars in thousands)

 

June 30, 2016

 

Raw materials

 

$

 

Work-in-process

 

137

 

Finished goods

 

57

 

Total inventories

 

$

194

 

There were no inventories expected to remain on-hand beyond one year at June 30, 2016, and there were no inventories on hand at December 31, 2015.

Note 5.  Acquisitions

Acquisition of Scioderm, Inc.

On September 30, 2015, the Company acquired Scioderm, a privately-held biopharmaceutical company focused on developing innovative therapies for treating the rare disease EB. The acquisition leverages the Scioderm development team’s EB expertise with the unrealized holding gainCompany’s global clinical infrastructure to advance SD-101 toward regulatory approvals and the Company’s commercial, patient advocacy, and medical affairs infrastructure to support a successful global launch. The acquisition of Scioderm was accounted for as a purchase of a business in accordance with FASB Accounting Standard Codification 805 Business Combinations.

The Company acquired Scioderm with cash and stock. At closing, the Company paid Scioderm stockholders, option holders, and warrant holders approximately $223.9 million, of which approximately $141.1 million was paid in cash and approximately $82.8 million was paid through the issuance of approximately 5.9 million newly issued shares of the Company. The Company had agreed to pay up to an additional $361 million to Scioderm stockholders, option holders, and warrant holders upon achievement of certain clinical and regulatory milestones, and $257 million to Scioderm stockholders, option holders, and warrant holders upon achievement of certain sales milestones. If SD-101 is approved, EB qualifies as a rare pediatric disease under The Food and Drug Administration Safety and Innovation Act (“FDSIA”) and the Company will request a Priority Review Voucher (“PRV”) under the FDSIA, if available. If the PRV is obtained and subsequently sold, the Company will pay Scioderm stockholders, option holders, and warrant holders the lesser of $100 million in the aggregate or 50% of the proceeds of such sale. If the Company obtains the PRV and has not entered into an agreement to sell or otherwise transfer to a third party the PRV within one year of its receipt, the shareholders’ agent may appoint a financial advisor to conduct a process to sell the PRV. If the Company determines in its sole discretion to use the PRV, the Company shall give the shareholders’ agent written notice thereof and shall pay to the Scioderm stockholders, option holders, and warrant holders $100 million. The inability to sell the PRV after complying with the provisions, shall not give rise to any payment.

The fair value of the contingent consideration payments on available-for-sale investments during the threeacquisition date was $259.0 million. This was an estimate based on significant inputs that are not observable in the market, referred to as Level 3 inputs. Key assumptions included a range of discount rates between 0.4% and 1.1% as interpolated from the U.S. Treasury constant maturity yield curve over the time frame for clinical and regulatory milestones and a range of discount rates between 1.0% and 2.2% for revenue-based milestones. The range of outcomes and assumptions used to develop these estimates have been updated to better reflect the probability of certain milestone outcomes and updated timelines related to clinical development and anticipated approval assumptions as of June 30, 2016 without limitation, the $5 million milestone paid in the second quarter and milestone payments projected for 2017 (See “— Note 9. Assets and Liabilities Measured at Fair Value”, for additional discussion regarding fair value measurements of the contingent acquisition consideration payable). In April 2016, while the total clinical and regulatory approval milestone payments remain unchanged at $361 million, the allocation between the clinical and regulatory approval milestone payments were revised as follows: clinical milestones of up to $81 million and regulatory approval milestones of up to $280 million.  The commercial milestone payments of up to $257 million remained unchanged. The Company determined the fair value of the contingent consideration to be $265.8 million at June 30, 2016, of which $56.0 million is payable in the next twelve months, resulting in an increase in the contingent consideration payable and related expense of $13.0 million for the six months ended June 30, 2015 and 2014, were2016. The expense is recorded in the Consolidated Statement of Operations as follows (in thousands):the change within fair value of contingent consideration payable.

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Balance, beginning

 

$

(35

)

$

2

 

$

(132

)

$

1

 

Current period changes in fair value, (a)

 

(17

)

(4

)

80

 

(3

)

Reclassification of earnings, (a)

 

 

 

 

 

Balance, ending

 

$

(52

)

$

(2

)

$

(52

)

$

(2

)

See “— Note 9. Assets and Liabilities Measured at Fair Value”, for additional discussion regarding fair value measurements of the contingent acquisition consideration payable.

 


(a) — Taxes have not been accrued onFor additional information, see “— Note 6. Goodwill and Intangible Assets.”

The purchase price allocation was subject to completion of our analysis of the unrealized gain on securitiesfair value of the assets and liabilities as of the effective date of the acquisition. The final valuation was completed as of December 31, 2015. A substantial portion of the assets acquired consisted of intangible assets related to SD-101. The Company is in a loss position for all periods presented.determined that the estimated acquisition-date fair value of the indefinite lived IPR&D related to the SD-101 was $463.7 million.

 

Note 4.   Acquisition of Callidus Biopharma, Inc.

 

In November 2013, the Company acquired Callidus a privately-held biologics company focused on developing best-in-class ERTs for LSDs with its lead ERT ATB200 for Pompe disease in late preclinical development. The acquisition of the Callidus assets and technology complements Amicus’the Company’s CHART™ platform for the development of next generationnext-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 June 30, 2015, approximately 25 thousand shares remain issuable to former Callidus 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 11.5% and various probability factors.  As of June 30, 2015,2016, the range of outcomes and assumptions used to develop these estimates has changed to better reflect the probability of certain milestone outcomes.  (seeoutcomes; see “— Note 8.9. Assets and Liabilities Measured at Fair Value”, for additional discussion regarding fair value measurements of the contingent acquisition consideration payable).payable. The Company determined the fair value of the contingent consideration to be $11.8$10.5 million at June 30, 2015, resulting2016, of which $10.1 million relates to ATB-200 Pompe program. The change in an increase in thefair value of contingent consideration payable and related expense of $0.1 million and $1.1 million for the three and six months ended June 30, 2015, respectively. The expense is recorded as part of operating expense in the Consolidated Statement of Operations. All of the contingent consideration is payable beyond the next twelve months. During the three months ended June 30, 2016, the Company reached the first clinical milestone, which was the dosing of the first patient in a Phase 1 or 2 study. The milestone for this event was $6.0 million which was paid in Company stock during the three months ended June 30, 2016, resulting in $6.1 million impact on stockholder’s equity.

 

For further information, see “— Note 5.6. Goodwill & — Note 6.and Intangible Assets.”

Note 5.6.   Goodwill and Intangible Assets

 

In connection with the acquisition of Callidus asacquisitions discussed in “—Note 4. Acquisition of Callidus Biopharma, Inc.”5. Acquisitions”, the Company has recognized goodwill of $11.6$197.8 million.  The following table represents the changes in goodwill for the six months ended June 30, 2016:

 

 

( in millions)

 

Balance at December 31, 2015

 

$

197.8

 

Change in goodwill

 

 

Balance at June 30, 2016

 

$

197.8

 

In connection with the acquisitions discussed in “—Note 5. Acquisitions,” the Company recognized IPR&D of $486.7 million.  Intangible assets related 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, they will not be amortized but will be tested for impairment on an annual basis and between annual tests if the Company becomes aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D assets below their respective carrying amounts.  The following table represents the changes in IPR&D for the six months ended June 30, 2016:

 

 

( in millions)

 

Balance at December 31, 2015

 

$

486.7

 

Change in IPR&D

 

 

Balance at June 30, 2016

 

$

486.7

 

Goodwill isand intangible assets are assessed annually for impairment on October 1 and whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that the full carrying amount of an asset is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset exceeds its fair value. During the 2014 impairment assessment, it was determined that the goodwill had not been impaired and there were no changes to the goodwill balance in 2014. For the six months ended June 30, 2015,2016, there were no indicators of impairment and the goodwill balance remained at $11.6 million.impairment.

 

Note 6.   Intangible Assets7.   Debt Instruments and Related Party Transactions

 

In connection with the acquisition of Callidus as discussed in “—Note 4. Acquisition of Callidus Biopharma, Inc.”,October 2015, the Company recognized In Process Research & Developmententered into a Note and Warrant Purchase Agreement (the “October 2015 Purchase Agreement”) with Redmile Capital Fund, LP and certain of its affiliates, whereby it sold, on a private placement basis, (a) $50.0 million aggregate principal amount of its unsecured promissory notes (“IPR&D”Notes”) and (b) five-year warrants (“Warrants”) for approximately 1.3 million shares of $23.0 million.  Intangible assets related to IPR&D assets are considered to be indefinite-lived untilCommon Stock. The payment terms under the completion or abandonmentpurchase agreement contains two installments, the first $15.0 million in October 2017 and the balance $35.0 million in October 2020. Interest was payable at 4.1% on a monthly basis over the term of the associated research and development efforts. Duringloan. The promissory notes are recorded as due to related party on the periodconsolidated balance sheets. Due to the assets are considered indefinite-lived, they will not be amortized but will be tested for impairment on an annual basis on October 1 and between annual tests ifembedded redemption (put and/or call) features in the Company becomes aware of any events occurring or changes in circumstancesnote agreement, it was determined that would indicate a reduction in the fair value of the IPR&D assets below their respective carrying amounts.  Duringwarrants should be bifurcated from the 2014 impairment assessment, itvalue of the notes payable and recorded as a debt discount. The relative fair value of the warrants and the debt discount as related to the October 2015 purchase agreement was determined to be $8.8 million.

On February 19, 2016, the Company entered into a Note and Warrant Purchase Agreement (the “February 2016 Purchase Agreement”) with Redmile for an aggregate amount of up to $75.0 million.  The Company has agreed with Redmile that in full consideration of the IPR&D had not been impairedpurchase price for the notes issued under the February 2016 Purchase Agreement, Redmile surrendered for cancellation all notes and therewarrants acquired from the October 2015 Purchase Agreement and the Company paid Redmile the interest accrued thereunder. As of June 30, 2016, Redmile beneficially owned approximately 10% of the Company’s outstanding shares of Common Stock and warrants.  As such the promissory notes are presented as due to related party on the consolidated balance sheets.

Pursuant to the February 2016 agreement, at closing, it sold, on a private placement basis (a) $50.0 million aggregate principal amount of unsecured promissory notes (“Initial Notes”) and (b) five year warrants to purchase up to 37 shares of the Company’s Common Stock for every $1,000 of the principal amount of Initial Notes purchased (“Initial Warrants”), for an aggregate of up to 1,850,000 shares of Common Stock issuable under the Initial Warrants. The payment terms contain two installments, the first $15.0 million in October 2017 and the balance $35.0 million in October 2021. The interest rate is 3.875% and payable upon of maturity. This transaction was accounted for as a debt modification in accordance with ASC 470-50. The incremental fair value between the warrants that were cancelled and the February issued warrants of $3.5 million was recorded as additional unamortized debt discount on the balance sheet and added to the prior warrant balance within equity.  The debt discount will be amortized over the life of the Initial Notes using the effective interest rate method.

On June 30, 2016, following the positive CHMP opinion for migalastat in Europe and the subsequent EC marketing approval, the Company entered into the Amended Purchase Agreement with Redmile, which joined GCM to the February 2016 Purchase

Agreement. There was no change to the previously issued debt. Pursuant to the Amended Purchase Agreement, the Company sold an additional $30.0 million unsecured promissory notes and five year warrants to purchase up to 42 shares of the Company’s Common Stock for every $1,000 of the principal amount of additional Notes purchased (“Additional Warrants”), for an aggregate of up to 1,260,000 shares of Common Stock. The $30.0 million payment is due in October 2021. The interest rate is 3.875% and payable upon of maturity.

The fair value of the IPR&D balance in 2014.  Forwarrants was determined to be $3.8 million and recorded as a debt discount. The fair value of the warrants were calculated utilizing the Black-Scholes valuation model using the following six inputs: (1) the closing price of the Company’s Common Stock on the day of evaluation of $5.46; (2) the exercise price of the warrants of $7.06; (3) the remaining term of the warrants of 5 years; (4) the volatility of the Company’s Common Stock for the five year term of 86.02%; (5) the annual rate of dividends of 0%; and (6) the risk-free rate of return of 1.01%.

The outstanding debt as of June 30, 2016 between Redmile and GCM as of June 30, 2016 is as follows (in thousands):

Creditor

 

Gross amount of
debt

 

Net unamortized
discount

 

Net carrying
value of debt

 

RedMile

 

$

55,000

 

$

(11,557

)

$

43,443

 

GCM

 

25,000

 

(3,149

)

21,851

 

Total Debt

 

$

80,000

 

$

(14,706

)

$

65,294

 

The debt discount amortization for the three and six months ended June 30, 2015, there2016 was $0.6 million and $1.0 million, respectively.

As of June 30, 2016, the total warrants were no indicators of impairment and the IPR&D balance remainedrecorded at $23.0$16.1 million. See “—Note 8. Stockholders’ Equity” for more details.

 

Note 7.8.   Stockholders’ Equity

 

Common Stock and Warrants

 

As of June 30, 2015,2016, the Company was authorized to issue 250 million shares of common stock.Common Stock. Dividends on common stockCommon Stock will be paid when, and if, declared by the board of directors. Each holder of common stockstockholder is entitled to vote on all matters that are appropriate for stockholder voting and is entitled to one vote for each share held.

 

In June 2015,February 2016, the Company issued a total of 19.5 million shares through a public offering at a price of $13.25 per share,entered into the Sales Agreement with net proceeds of $243.2 million. The Company expectsCowen 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’screate an at-the-market 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 completed a $40 million at the market (“ATM”) equity offeringprogram under which the Company soldfrom time to time may offer and sell shares of its common stock, par value $0.01 perCommon Stock, having an aggregate offering price of up to $100 million through Cowen (the “ATM Facility”).  Sales of the 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 promulgated under the Securities Act of 1933, as amended, including sales made directly on The NASDAQ Global Market, on any other existing trading market for the Common Stock or to or through a market maker. In addition, with the Company’s prior written approval, Cowen and Company LLCmay also sell shares of Common Stock by any other method permitted by law, including in negotiated transactions. Cowen will act as sales agent.  Underagent using its commercially reasonable efforts consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the ATM equity programrules of The NASDAQ Stock Market LLC. There is no arrangement for funds to be received in an escrow, trust or similar arrangement. Cowen will be entitled to compensation at a fixed commission rate up to 3.0% of the gross proceeds per share sold through it as sales agent under the sales agreement. Beginning in April 2016 and through June 30, 2016, the Company sold 14.38.2 million shares of common stockCommon Stock under the ATM sales agreement resulting in net proceeds of $38.6$57.8 million, after Cowen’s commission of $1.7 million and other expenses of $0.1 million. In July 2016, the Company sold an additional 6.8 million shares of Common Stock with net proceeds of $39.3 million after Cowen’s commission. In connection with the July share sales, the Company completed all sales under the ATM equity program.

 

In November 2013, in connection with its acquisition of Callidus,October 2015, the Company entered into the October 2015 Purchase Agreement with Redmile, whereby the Company sold, on a private placement basis, (a) $50.0 million aggregate principal amount of its Notes and (b) Warrants for 1.3 million shares of Common Stock. On February 19, 2016, the Company entered into the February 2016 Purchase Agreement with Redmile for $50.0 million in unsecured promissory notes and five-year warrants for 1.9 million shares of Common Stock. The Company agreed with Redmile to issuecancel the $50 million note and warrants issued in October 2015 and pay only the accrued interest due of $0.8 million. In accordance with ASC 470, the transactions qualified as a modification of debt.

On June 30, 2016, following the positive CHMP opinion for migalastat in Europe and the subsequent EC marketing approval, the Company entered into the Amended Purchase Agreement with Redmile. Such amendment joined GCM to the February 2016 Purchase Agreement. Pursuant to the Amended Purchase Agreement, the Company sold an additional $30.0 million unsecured

promissory notes and five-year warrants to purchase up to purchase up to 42 shares of the Company’s Common Stock, for every $1,000 of the principal amount of additional Notes purchased (“Additional Warrants”), for an aggregate of 7.2 millionup to 1,260,000 shares of its common stock, parCommon Stock issuable under the Additional Warrants. The payment is due in October 2021. The interest rate is 3.875% and payable upon of maturity.

The fair value $0.01 per share,of the warrants was determined to be $3.8 million and recorded as a debt discount. The fair value of the former stockholderswarrants were calculated utilizing the Black-Scholes valuation model using the following six inputs: (1) the closing price of Callidus. Asthe Company’s Common Stock on the day of evaluation of $5.46; (2) the exercise price of the warrants of $7.06; (3) the remaining term of the warrants of 5 years; (4) the volatility of the Company’s Common Stock for the five year term of 86.02%; (5) the annual rate of dividends of 0%; and (6) the risk-free rate of return of 1.01%.

The total outstanding warrants as of June 30, 2015, approximately 25 thousand shares remain issuable to former Callidus stockholders.2016 is as follows (in thousands):

Creditor

 

Warrant shares

 

Warrant amount

 

RedMile

 

2,060

 

$

12,927

 

GCM

 

1,050

 

3,149

 

Total warrants

 

3,110

 

$

16,076

 

The closing balance of the warrants was $16.1 million as of June 30, 2016 on the Consolidated Balance Sheet.

 

Nonqualified Cash Plan

 

In July 2014, the Board of Directors approved theThe Company’s Deferral Plan, (the “Deferral Plan”) which provides certain key employees and members of the Board of Directors 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.

 

Deferred compensation amounts under the Deferral Plan as of June 30, 20152016 were approximately $0.5$1.2 million, as compared to $0.1$0.7 million on December 31, 20142015 and are included in other long-term liabilities. As of December 31, 2014, the amounts deferred under the Deferral Plan had not been invested and the investments were subsequently made in the six months ended June 30, 2015.  Deferral Plan assets as of June 30, 20152016 were $0.5$1.2 million, as compared to $0.7 million as of  December 31, 2015 and are classified as trading securities. The Deferred Plan assets are recorded at fair value with changes in the investments’ fair value recognized in the period they occur. DuringThe income from investment and unrealized gain (loss) for the three and six months ended June 30, 2016 and 2015 income from the investments was over $6 thousand and unrealized loss was under $10 thousand.were deminimis.  

 

Equity Incentive Plan

 

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 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

 

 

 

Three months ended
June 30,

 

Six months ended
June 30,

 

 

 

2016

 

2015

 

2016

 

2015

 

Expected stock price volatility

 

81.3

%

74.3

%

81.2

%

75.6

%

Risk free interest rate

 

1.3

%

1.7

%

1.7

%

1.7

%

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 six months ended June 30, 20152016 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, 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

 

 

 

Number of
Shares
( in thousands)

 

Weighted
Average Exercise
Price

 

Weighted
Average
Remaining
Contractual Life

 

Aggregate Intrinsic
Value
( in millions)

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2015

 

11,729.2

 

$

7.11

 

 

 

 

 

Options granted

 

2,932.5

 

$

8.60

 

 

 

 

 

Options exercised

 

(165.8

)

$

3.90

 

 

 

 

 

Options forfeited

 

(224.5

)

$

8.78

 

 

 

 

 

Balance at June 30, 2016

 

14,271.4

 

$

7.42

 

7.4 years

 

$

11.2

 

Vested and unvested expected to vest June 30, 2016

 

13,363.2

 

$

7.31

 

7.3 years

 

$

10.9

 

Exercisable at June 30, 2016

 

7,049.4

 

$

6.24

 

6.0 years

 

$

7.2

 

 

As of June 30, 2015,2016, the total unrecognized compensation cost related to non-vested stock options granted was $22.3$32.7 million and is expected to be recognized over a weighted average period of 3.23 years.

Restricted Stock Units

 

A summary of non-vested Restricted Stock Units (“RSU”) activity under the Company’s Amended and Restated 2007 Equity Incentive Plan for the six months ended June 30, 20152016 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, 2014

 

955

 

$

2.28

 

 

 

 

 

Non-vested units as of December 31, 2015

 

478.5

 

$

10.38

 

 

 

 

 

Granted

 

125

 

$

11.82

 

 

 

 

 

 

25.0

 

$

8.61

 

 

 

 

 

Vested

 

(405

)

$

10.80

 

 

 

 

 

 

(181.3

)

$

6.55

 

 

 

 

 

Forfeited

 

 

$

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Non-vested units as of June 30, 2016

 

322.2

 

$

12.40

 

1.88

 

$

 

Non-vested units expected to vest at June 30, 2016

 

322.2

 

$

12.40

 

1.88

 

$

 

 

For the six months ended June 30, 2015, 0.4 million2016, 181,250 of the RSUs 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 June 30, 2015,2016, there was $1.7$2.8 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 0.69 years.1.85 year.

 

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

 

Six Months

 

 

Three Months

 

Six Months

 

 

Ended June 30,

 

Ended June 30,

 

 

Ended June 30,

 

Ended June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

2016

 

2015

 

2016

 

2015

 

Equity compensation expense recognized in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expense

 

$

1,044

 

$

702

 

$

1,991

 

$

1,252

 

 

$

1,966

 

$

1,044

 

$

3,902

 

$

1,991

 

General and administrative expense

 

1,187

 

788

 

2,200

 

1,496

 

 

2,500

 

1,187

 

4,846

 

2,200

 

Total equity compensation expense

 

$

2,231

 

$

1,490

 

$

4,191

 

$

2,748

 

 

$

4,466

 

$

2,231

 

$

8,748

 

$

4,191

 

Note 8.9.  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.

 

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 June 30, 2016, are identified in the following table (in thousands):

 

 

Level 1

 

Level 2

 

Total

 

Assets:

 

 

 

 

 

 

 

Cash/ money market funds

 

$

63,656

 

$

 

$

63,656

 

Corporate debt securities

 

 

$

85,471

 

$

85,471

 

Commercial paper

 

 

$

64,673

 

$

64,673

 

Certificate of deposit

 

 

$

350

 

$

350

 

Market exchanged mutual funds

 

 

$

1,196

 

1,196

 

 

 

$

63,656

 

$

151,690

 

$

215,346

 

 

 

Level 2

 

Level 3

 

Total

 

Liabilities:

 

 

 

 

 

 

 

Contingent consideration payable

 

 

$

276,300

 

$

276,300

 

Derivative liability

 

346

 

––

 

346

 

Deferred compensation plan liability

 

$

1,196

 

 

$

1,196

 

 

 

$

1,542

 

$

276,300

 

$

277,842

 

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, 2015, are identified in the following table (in thousands):

 

 

Level 1

 

Level 2

 

Total

 

Assets:

 

 

 

 

 

 

 

Cash/ money market funds

 

$

69,485

 

$

 

$

69,485

 

Corporate debt securities

 

 

118,474

 

118,474

 

Commercial paper

 

 

25,724

 

25,724

 

Certificate of deposit

 

 

350

 

350

 

Market exchanged mutual funds

 

 

 

658

 

658

 

 

 

$

69,485

 

$

145,206

 

$

214,691

 

 

 

Level 2

 

Level 3

 

Total

 

Liabilities:

 

 

 

 

 

 

 

Contingent consideration payable

 

 

274,077

 

274,077

 

Deferred compensation plan liability

 

667

 

 

667

 

 

 

$

667

 

$

274,077

 

$

274,744

 

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 threesix months ended June 30, 2015.2016.  No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the threesix months ended June 30, 2015.

Secured Debt2016.

 

As disclosed in “—Note 9. Short Term BorrowingsPayable to Related Party and Long Term Debt”, the Company had a loan and security agreement with Midcap Financial, Oxford Finance and Silicon Valley Bank (“Term Loan”). The Company’s secured debt was classified as Level 2 and the fair value was 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.GCM

 

In connection with the Term Loan,notes payable to Redmile, as disclosed in “—Note 9. Short Term Borrowings7. Debt Instruments and Long Term Debt”Related Party Transactions”, and Warrants as disclosed in “— Note 8. Stockholders’ Equity,” the Company recorded the notes as a contingent liability of $0.4$65.3 million related to a success fee payable within six months of trigger event, with the trigger event being regulatory acceptance of NDA or MAA submission. on an amortized cost basis.

The success fee payable to the lender was probability adjusted and discounted utilizing an appropriate discount rate and hence classified as Level 3. In June 2015, EMA validated the submission of the Company’s MAA and the success fee became payable. The Company paid the success feewarrants issued in connection with the re-paymentAmended Purchase Agreement were determined to be a component of equity based on the current accounting guidance. As such, these warrants which are considered Level 3 instruments were valued at the issuance date using the Black-Scholes valuation model using the following six inputs: (1) the closing price of the debt inCompany’s Common Stock on the day of evaluation of $5.46; (2) the exercise price of the warrants of $7.06; (3) the remaining term of the warrants of 5 years; (4) the volatility of the Company’s Common Stock for the five year term of 86.02%; (5) the annual rate of dividends of 0%; and (6) the risk-free rate of return of 1.01%. The Black-Scholes value of the warrants was $3.8 million.

As of June 2015.30, 2016, the warrants are recorded at $16.1 million and the notes at $65.3 million, net of discount of $14.7 million.

 

Contingent Consideration Payable

 

The contingent consideration payable resulted from acquisitionthe acquisitions of Scioderm and Callidus, as discussed in “—Note 4. Acquisition of Callidus Biopharma, Inc.5. Acquisitions.OurThe 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 the 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 recurring 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 the Company determined. The Company may be required to record losses in future periods. The following significant unobservable inputs were used in the valuation of the contingent consideration payable to former Scioderm stockholders:

 

Contingent
Consideration Liability

Fair value as of
June 30, 2016

Valuation
Technique

Unobservable Input

Range

Clinical and regulatory milestones

$

239.8 million

Probability weighted discounted cash flow

Discount rate 

Probability of achievement of milestones

Projected year of payments

0.4%-3.2%

66.5% -100.0%

2016-2018

Revenue-based milestones

$

26.0 million

Monte Carlo

Revenue volatility

Discount rate

Projected year of payments

58%

0.6%-1.6%

2018-2028

The following significant unobservable inputs were used in the valuation of the contingent consideration payable to former Callidus shareholders for the ATB-200 Pompe program:

Contingent
Consideration Liability

Fair value as of
June 30, 2016

Valuation Technique

Unobservable Input

Range

Clinical and regulatory milestones

$

10.1 million

Probability weighted discounted cash flow

Discount rate

Probability of achievement of milestones

Projected year of payments

10.5%

30%-43%

2018-2021

Contingent consideration liabilities are remeasured to fair value each reporting period using projected revenues, discount rates, probabilities of payment and projected payment dates. Projected contingent payment amounts related to clinical and regulatory based milestones are discounted back to the current period using a discounted cash flow model. Revenue-based payments are valued using a monte-carlo valuation model, which simulates future revenues during the earn-out-period using management’s best estimates. Projected revenues are based on our most recent internal operational budgets and long-range strategic plans. Increases in projected revenues and probabilities of payment may result in higher fair value measurements. Increases in discount rates and the time to payment may result in lower fair value measurements. Increases or decreases in any of those inputs together, or in isolation, may result in a significantly lower or higher fair value measurement. There is no assurance that any of the conditions for the milestone payments will be met.

The following table shows the change in the balance of contingent consideration payable for the six months ended June 30, 2016 and 2015, respectively (in thousands):

 

 

Three months
ended June 30,

 

Six months
ended June 30,

 

 

 

2016

 

2015

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of the period

 

$

277,229

 

$

11,700

 

$

274,077

 

$

10,700

 

Payment of contingent consideration in cash

 

(5,000

)

 

(5,000

)

 

Payment of contingent consideration in stock

 

(6,115

)

 

(6,115

)

 

Change in fair value change during the period, included in Statement of Operations

 

10,186

 

100

 

13,338

 

1,100

 

Balance, end of the period

 

$

276,300

 

$

11,800

 

$

276,300

 

$

11,800

 

Deferred 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 considers its investments in marketable securities, as available-for-sale and classifies these assets and related liability within the fair value hierarchy as Level 2 primarily utilizing broker quotes in a non-active market for valuation of these securities.

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 June 30, 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, 2014, are identified in the following table (in thousands):

 

 

Level 1

 

Level 2

 

Total

 

Assets:

 

 

 

 

 

 

 

Cash/ money market funds

 

$

24,074

 

$

 

$

24,074

 

Corporate debt securities

 

 

133,216

 

133,216

 

Commercial paper

 

 

11,499

 

11,499

 

Certificate of deposit

 

 

350

 

350

 

Deferred compensation plan assets

 

 

 

 

 

 

$

24,074

 

$

145,065

 

$

169,139

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

Contingent success fee payable

 

 

 

341

 

341

 

Contingent consideration payable

 

 

 

10,700

 

10,700

 

Deferred compensation plan liability

 

 

124

 

 

124

 

 

 

$

 

$

124

 

$

11,041

 

$

11,165

 

 

Note 9.   Short-Term Borrowings and Long-Term DebtForeign Currency Exchange Rate Exposure

 

In December 2013,The Company transacts business in various foreign countries and therefore, is subject to risk of foreign currency exchange rate fluctuations. As such, in June 2016, the Company entered into a credit and security agreementforward contract to economically hedge transactional exposure associated with commitments arising from trade accounts payable denominated in a lending syndicate consistingcurrency other than the functional currency of MidCap Funding III, LLC, Oxford Finance LLC, and Silicon Valley Bank.the respective operating entity. The Company drew $15 milliondid not designate this forward contract as a hedging instrument under applicable accounting guidance and, therefore, the change in fair value is recorded in the Consolidated Statements of Operations. The forward contract settles in monthly installments with the aggregate principal amount which bore interestfinal installment settlement in May 2017.

There were no outstanding forward contracts at a rate per annum fixed at 8.5%.  The Company made interest-only payments on the Term Loan from January 1, 2014. In June 2015, the Company paid off the outstanding balance of the term loan.December 31, 2015.

 

In connection withFor the repayment of the Term Loan, the Company paid a $0.4 million exit fee.  The Company also paid a $0.4 million success fee due to the successful acceptance of the MAA in June 2015. The net loss on extinguishment of the debt was $1.0 millionthree and is included in the statement of operations for the six months ended June 30, 2015.

Note 10.  Collaborative Agreements

GSK

In November 2013, Amicus entered into the Revised Agreement with GlaxoSmithKline (“GSK”), pursuant to which Amicus has obtained global rights to develop and commercialize Galafold as a monotherapy and in combination with ERT for Fabry disease. The Revised Agreement amends and replaces in its entirety the Expanded 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 Galafold 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 United States.

Under the terms of the Revised Agreement, GSK will no longer jointly fund development costs for all formulations of 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 further development and commercialization by Biogen.  Biogen was responsible for funding all discovery, development, and commercialization activities.  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 agreement.  As the Company has not commenced its planned principal operations (i.e. selling commercial products), 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 six months ended June 30, 2015 and 2014,2016, the Company recognized $0a loss of $346 thousand related to the derivative instruments not designated as hedging instruments in the Consolidated Statements of Operations and $0.9 million, respectively,the corresponding liability of $346 thousand is recorded as other current liability in Research Revenue for work performed under the cost sharing arrangement of the Biogen Agreement.Consolidated Balance Sheet.

 

In September 2014,The impact of gains and losses on foreign exchange contracts not designated as hedging instruments related to changes in the fair value of assets and liabilities denominated in foreign currencies are generally offset by net foreign exchange gains and losses, which are also included on the Consolidated Statements of Operations in other income (expense), net for all periods presented. When the Company enters into foreign exchange contracts not designated as hedging instruments to mitigate the impact of exchange rate volatility in the translation of foreign earnings, gains and Biogen concluded their research collaboration.  The Company’s most advanced Parkinson’s candidate is AT3375, which was developed outsidelosses will generally be offset by fluctuations in the collaboration and is wholly-owned by the Company.U.S. Dollar translated amounts of each Income Statement account in current and/or future periods.

 

Note 11.10.  Restructuring Charges

 

In December 2013, the Company initiated and completed a facilities consolidation effort, closing one of its leased locations in San Diego, CA. The Company recorded a charge of $0.7 million related to the net present value of the net future minimum lease payments at the cease-use date.

 

The following table summarizes the restructuring charges and utilization for the six months ended June 30, 20152016 (in thousands):

 

 

 

Balance as of
December 31, 2014

 

Charges

 

Cash Payments

 

Adjustments

 

Balance as of
June 30, 2015

 

Facilities consolidation

 

$

283

 

$

 

$

(130

)

$

36

 

$

189

 

 

 

Balance as of
December 31, 2015

 

Charges

 

Cash Payments

 

Fair Value
Adjustments

 

Balance as of
June 30, 2016

 

Facilities consolidation

 

$

118

 

$

 

$

(135

)

$

58

 

$

41

 

Note 11.  Basic and Diluted Net Loss 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 per common share:

(In thousands, except per share

 

Three months Ended
June 30,

 

Six months Ended
June 30,

 

amounts)

 

2016

 

2015

 

2016

 

2015

 

Historical

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(51,050

)

$

(27,133

)

$

(94,741

)

$

(51,421

)

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding — basic and diluted

 

$

129,122,175

 

$

99,994,125

 

$

127,160,943

 

$

97,888,573

 

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,

 

 

 

2016

 

2015

 

Options to purchase common stock

 

14,271

 

11,663

 

Outstanding warrants, convertible to common stock

 

3,110

 

 

Unvested restricted stock units

 

322

 

675

 

Total number of potentially issuable shares

 

17,703

 

12,338

 

Note 12. Commitments and Contingencies

Since October 1, 2015, three purported securities class action lawsuits have been commenced in the United States District Court for New Jersey, naming as defendants the Company, its Chairman and Chief Executive Officer, and in one of the actions, its Chief Medical Officer. The lawsuits allege violations of the Securities Exchange Act of 1934 in connection with allegedly false and misleading statements made by the Company related to the regulatory approval path for migalastat.  The plaintiffs seek, among other things, damages for purchasers of the Company’s Common Stock during different periods, all of which fall between March 19, 2015 and October 1, 2015. It is possible that additional suits will be filed, or allegations received from stockholders, with respect to similar matters and also naming the Company and/or its officers and directors as defendants. On May 26, 2016, the Court consolidated these lawsuits into a single action and appointed a lead plaintiff.  The lead plaintiff filed a Consolidated Amended Complaint on July 11, 2016.  Defendants’ response is due on August 25, 2016.

The Company believes that it has meritorious defenses and intends to defend the lawsuits vigorously. These lawsuits and any other related lawsuits are subject to inherent uncertainties, and the actual cost will depend upon many unknown factors. The outcome of the litigation is necessarily uncertain, the Company could be forced to expend significant resources in the defense of these lawsuits and it may not prevail.

On or about November 2, 2015, a derivative lawsuit was filed by an Amicus shareholder purportedly on Amicus’ behalf in the Superior Court of New Jersey, Middlesex County, Chancery Division, against the individuals who serve on the Amicus Board of Directors. Amicus itself was named as a nominal defendant.  The  derivative lawsuit alleged claims for breach of state law fiduciary duties, waste of corporate assets, and unjust enrichment based on allegedly false and misleading statements made by Amicus related to the regulatory approval path for migalastat HCl.  On February 19, 2016, the complaint was dismissed by the Court and plaintiffs have not refiled.

On or about March 3, 2016, a derivative lawsuit was filed by an Amicus shareholder purportedly on Amicus’ behalf in the Superior Court of New Jersey, Middlesex County, Chancery Division, against various officers and directors of the Company.  Amicus itself is named as a nominal defendant.  The derivative lawsuit alleges similar facts and circumstances as the three purported securities class action lawsuits described above and further alleges claims for breach of state law fiduciary duties, waste of corporate assets, unjust enrichment, abuse of control, and gross mismanagement based on allegedly false and misleading statements made by Amicus related to the regulatory approval path for migalastat HCl. The plaintiff seeks, among other things, to require the Amicus Board to take certain actions to reform its corporate governance procedures, including greater shareholder input and a provision to permit shareholders to nominate candidates for election to the Board, along with restitution, costs of suit and attorney’s fees. The parties have entered into a stipulation to stay the time to respond to the derivative complaint until the resolution of any motion to dismiss in the above-referenced securities action.

This lawsuit and any other related lawsuits are subject to inherent uncertainties and the actual cost will depend upon many unknown factors. The outcome of the litigation is necessarily uncertain and the Company could be forced to expend significant resources in the defense of this suit, and the Company may not prevail. The Company is not currently able to estimate the possible cost to it from this matter, as this lawsuit is currently at an early stage and the Company cannot ascertain how long it may take to resolve this matter.

Note 12.13.  Subsequent Events

 

TheOn July 5, 2016, the Company evaluated events that occurred subsequententered into a Plan of Merger (the “Merger Agreement”) with MiaMed, Inc., (“MiaMed”). MiaMed is a pre-clinical biotechnology company focused on developing protein replacement therapy for CDKL5 and related diseases. Under the terms of the Merger Agreement, the former holders of MiaMed’s capital stock received an aggregate of $6.5 million, comprised of  (i) approximately $1.8 million in cash (plus MiaMed’s cash and cash equivalents at closing and less any of MiaMed’s unpaid third-party fees and expenses related to June 30, 2015the transaction), and there were no material recognized or non-recognized subsequent events during this period.

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

The Company calculates net loss per share as a measurement(ii) 825,603 shares of the Company’s performance while giving effectCommon Stock. In addition, the Company also agreed to all dilutivepay up to an additional $ 83.0 million in connection with the achievement of certain clinical, regulatory and commercial milestones, for a potential common shares that were outstanding during the reporting period.aggregate deal value of $89.5 million.  The Company hasis currently assessing the accounting impact of the merger with MiaMed.

In July 2016, as mentioned in “—Note 1. Description of Business,” the Company sold through the ATM program, an additional 6.8 million shares of Common Stock with a net loss forproceeds of $39.3 million. In connection with the July share sales, the Company completed all periods presented; accordingly,sales under 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.ATM equity program.

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 biopharmaceuticalglobal patient-focused biotechnology company focused onengaged in the discovery, development and commercialization of next-generation medicinesa diverse set of novel treatments for a range ofpatients living with devastating rare and orphan diseases, with a focus on improved therapies for lysosomal storage disorders (“LSDs”).diseases. Our lead product candidate, migalastat HCl is a small molecule that can be used as a monotherapy and in combination with enzyme replacement therapy (“ERT”) for Fabry disease. OurSD-101, a product candidate in late-stage development, programsis a potential first-to-market therapy for the chronic, rare connective tissue disorder Epidermolysis Bullosa (“EB”). We are also include next-generation ERTsleveraging our Chaperone-Advanced Replacement Therapy (“CHART™”) platform technologies to develop novel ERT products for LSDs, includingPompe disease, Fabry disease, and potentially other lysosomal storage disorders (“LSDs”). We are also investigating preclinical and discovery programs in other rare and devastating diseases including cyclin-dependent kinase-like 5 (“CDKL5”) deficiency. We believe that our platform technologies and our advanced product pipeline uniquely position us at the forefront of advanced therapies to treat a range of devastating rare and orphan diseases.

Program Status

We have completed two global Phase 3 registration studies of our lead product candidate, migalastat HCl, an orally administered small molecule pharmacological chaperone for the treatment of Fabry disease, an LSD. On May 31, 2016, we announced that we had received full European Commission approval for migalastat HC1, under the product name Galafold™, as a first-line therapy for long-term treatment of adults and adolescents aged 16 years and older with a confirmed diagnosis of Fabry disease and who have an amenable mutation. The label includes 269 Fabry-causing mutations, which represent up to half of all patients with Fabry disease. In the U.S., discussions with the U.S. Food and Drug Administration (FDA) have been initiated and we expect to provide a U.S. regulatory update in the third quarter of 2016. For patients with non-amenable mutations, we are leveraging our CHART™ technology and advanced biologics capabilities to move forward with a proprietary Fabry ERT cell line for co-formulation with migalastat. Master cell banking has been completed and process development work has commenced. We intend to provide an update on the development of this novel ERT in Fabry disease in the second half of 2016.

We are also in Phase 3 clinical development of a novel topical cream, SD-101, for the treatment of the genetic connective tissue disorder EB, for which no other pharmacological therapies are currently approved. We have also initiated a clinical study in patients with Pompe disease, another LSD, to investigate our novel treatment paradigm that consists of ATB200, a uniquely engineered recombinant human acid alpha-glucosidase (“rhGAA”) enzyme with an optimized carbohydrate structure to enhance uptake, co-administered with a pharmacological chaperone, AT2221, to improve activity and Mucopolysaccharidosis Type Istability. Leveraging our biologics capabilities and platform technologies, we are also investigating preclinical and discovery programs in other rare and devastating diseases including cyclin-dependent kinase-like 5 (“MPS I”CDKL5”). deficiency. We believe that our platform technologies and our advanced product pipeline uniquely position us at the forefront of developing therapies to potentially address significant unmet needs for devastating rare and orphan diseases.

 

Migalastat for Fabry Disease

Overview

Our personalized medicine approach consistsmost advanced technology, migalastat, is a small molecule pharmacological chaperone for the treatment of Fabry disease that has been approved for use in the European Union (“EU”) under the brand name Galafold™ for patients with Fabry disease with an amenable mutation. Outside of the EU, migalastat is an investigational product. As an orally administered monotherapy, migalastat is designed to bind to and stabilize an endogenous alpha-galactosidase A (“alpha-Gal A”) enzyme in those patients with genetic mutations identified as amenable in a GLP cell-based amenability assay. We are also developing the use of migalastat in combination with a novel Fabry ERT for patients who have non-amenable genetic mutations.

Patients with the fatal, x-linked Fabry disease have an inherited deficiency of the alpha-Gal A enzyme that would normally degrade the lipid substrate globotriaosylceramide in the lysosome. As with all LSDs, genetic mutations that cause changes in the amino acid sequence of alpha-Gal A result in an unstable enzyme that does not efficiently fold into its correct three-dimensional shape and cannot be trafficked properly in the cell, even if it has the potential for biological activity. Migalastat is 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 ofThis is considered 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.

Our Fabry franchise strategy is to develop the pharmacological chaperoneprecision medicine because migalastat HCl for all patients with Fabry disease - as a monotherapy for patients withtargets only amenable mutations (“Galafold™”) and in combination with ERT for all other patients.mutations.

Galafold for Fabry Disease as a Monotherapy

We have completed two Phase 3 global registration studies (Study 011 and Study 012) of Galafold and plan to submit marketing applications in the United State and Europe in 2015.migalastat monotherapy. We have reported Phase 3 data in both treatment-naïve patients (“Study 011” or “FACETS”) and enzyme replacement therapy (“ERT”) switchERT-switch patients (“Study 012” or “ATTRACT”). Positive resultsResults from these studies have shown that treatment with Galafold has resultedmigalastat results in reductions in disease substrate, stability of kidney function, reductions in cardiac mass, and improvement in gastrointestinal symptoms in patients with amenable 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 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 Galafoldmutations 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 human embryonic kidney (“HEK”) cell-based in vitro assay that was available at study initiation (“clinical trial assay”). Following the completion of enrollment, a GLP-validated HEK assay was developed with a third party to measure the criteria forvalidated GLP amenability with more quality control and rigor (“GLP HEK 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”) in the interstitial capillaries of the kidney following treatment with oral Galafold (150 mg every other day). The study also measured clinical outcomes, including renal function, as secondary endpoints.

As previously reported, patients on Galafold 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 unbinding 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 Galafold 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 Galafold.

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

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

Throughout 2014 and in early 2015, we announced positive 12- and 24-month data from Study 011 and longer-term data from Study 041 in patients with amenable 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 Galafold after month 6 demonstrated a statistically significant reduction in disease substrate, or kidney interstitial capillary GL-3, at month 12 (p=0.013). 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”) and iohexol measured GFR (“mGFR”), remained stable following 18-24 months of treatment with Galafold in Study 011. Kidney function, as measured by eGFR, continued to remain stable in patients receiving migalastat in Study 011 for at least 18 months and continuing Galafold treatment in Study 041 for an average of 32 months. mGFR was not collected in Study 041.

·                  Reduction in cardiac mass, as measured by left ventricular mass index (“LVMi”), was statistically significant following treatment with migalastat for up to 36 months (average of 22 months) in patients in Study 011 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, was a randomized, open-label 18-month study that investigated the safety and efficacy of oral Galafold (150 mg, every other day) compared to standard-of-care infused ERTs (agalsidase beta and agalsidase alfa). The study also included a 12-month open-label Galafold extension phase.  The study enrolled a total of 60 patients (males and females) with Fabry disease and genetic mutations identified as amenable to Galafold in the clinical trial assay. Subjects were randomized 1.5:1 to switch to Galafold 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 mGFR and eGFR for Galafold 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 Galafold are within 2.2 mL/min/1.73 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.  Data from Study 012 were also presented to the scientific community at the American Society of Nephrology (“ASN”) in November 2014 and WORLDSymposium in February 2015.  Highlights were as follows:

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

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

·                  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.

During the first quarter of 2015, we met with regulatory authorities in Europe and the United States to discuss the approval pathways for Galafold as a monotherapy for Fabry 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.

In the United States, we plan to conduct a pre-NDA meeting with the FDA and to submit a New Drug Application (“NDA”) for Galafold under Subpart H (accelerated approval) in the second half of 2015. Following the MAA validation, the Company is also initiating the regulatory submission process in several additional geographies.

Migalastat in Combination Programswith ERT for Fabry Disease

 

In support of our Fabry Franchise strategy to develop migalastat in combination with ERT for FabryFor patients with non-amenable mutations, we planare leveraging our CHART™ technology and advanced biologics capabilities to initiatemove forward with a longer-term Phase 2proprietary Fabry co-administration study in 2015. In parallel, we are internally developing our own FabryERT cell line for co-formulation with migalastat as a next-generation ERT for Fabry disease.migalastat. Master cell banking has been completed and process development work has commenced. We previously completed an open-label Phase 2 safety and pharmacokinetics study (“Study 013”) that investigated two oral doses of migalastat (150 mg and 450 mg) co-administered with agalsidase beta or agalsidase alfa in males with Fabry disease. Unlike Study 011Migalastat is an oral precision medicine intended to treat Fabry disease in patients who have amenable genetic mutations, and Study 012, patientsit is not intended for concomitant use with ERT.

SD-101 for EB

We are also in Study 013 were not required to have alpha-Gal A mutations amenable to chaperonePhase 3 development of a novel, late-stage, proprietary topical cream, SD-101, a potentially first-to-market therapy because, when co-administeredfor the treatment of skin blistering and lesions associated with ERT, migalastatall major types of EB.  ESSENCE, a Phase 3 registration-directed study, was initiated in March of 2015. ESSENCE is a randomized, double-blind, placebo-controlled study being conducted at multiple sites worldwide that is designed to bindevaluate the safety and efficacy of SD-101 6% in up to and stabilize150 patients with the exogenous enzyme inthree major types of EB, who are at least one-month old. Participants are being randomized 1:1 to two treatment groups receiving either SD-101 6% or placebo applied over their entire body once daily for three months.

We also held a series of discussions with the circulation in any patient receiving ERT. Each patient received their current dose and regimenDermatology Division of ERT at one infusion. A single oral dose of migalastat (150 mg or 450 mg) was co-administered two hours priorthe U.S. FDA regarding proposed revisions to the next infusionstatistical analysis plan (SAP) while remaining blinded to the Phase 3 ESSENCE study. Based on conversations with FDA and written communication received from the agency, the FDA has agreed to our proposed revisions. Importantly, the FDA agreed that “Time to Target Wound Closure” may be elevated from a secondary endpoint to a co-primary endpoint (together with the previously specified primary endpoint “Proportion of Patients with Target Wound Closure”). Based on this feedback, we believe that study success could potentially be based on achievement of one or both co-primary endpoints, assuming appropriate analytical methodology, and that the same ERT at the same dose and regimen. Preliminary results from Study 013 showed increased levelsoverall likelihood of active alpha-Gal A enzyme levels in plasma and skin following co-administration compared to ERT alone.study success has been improved.

 

Next-GenerationSD-101 for EB: Regulatory Pathway

SD-101 was one of the first therapies to receive Breakthrough Therapy designation by the FDA in 2013, following the completion of the Phase 2a initial human proof-of-concept study. The FDA and EMA each have also reviewed the Phase 2b study results and are aligned on the design of the current Phase 3 study and the global regulatory pathway forward for SD-101 based on a single Phase 3 registration-directed study. The FDA agreed to a rolling NDA in the U.S., which was initiated in the fourth quarter of 2015. Following the Phase 2b study, our Paediatric Committee of the EMA has issued a positive opinion on our Paediatric Investigation Plan (“PIP”) for SD-101. A PIP is part of the EMA approval process and must be accepted prior to a submission of an MAA in the EU. Results from the Phase 3 study are anticipated in late 2016 or early 2017 to support marketing applications for SD-101 in the U.S., EU, and other regions.

Novel ERT for Pompe Disease

 

We are leveraging our biologics capabilities and CHARTCHART™ platform to develop a next-generation Pompe ERT. This ERT consists of a uniquely engineered recombinant human acid alpha-glucosidase (“rhGAA”)rhGAA enzyme (designated “ATB200”) with an optimized carbohydrate structure to enhance uptake, administered in combination with a pharmacological chaperone AT2221 to improve activity and stability. We acquired ATB200 as well as our enzyme targeting technology through our purchase of Callidus Biopharma.Biopharma, Inc. (“Callidus”).

In the fourth quarter of 2015, we initiated the Phase 1/2 clinical study ATB200-02 to investigate our novel Pompe disease treatment paradigm in Pompe disease patients. The key features of this Phase 1/2 study include:

 

Clinical studies·                                     Open-label, dose-escalation to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of pharmacological chaperonesintravenous ATB200 co-administered with oral AT2221;

·                                     Subjects in combination withthe first cohorts will be adult Pompe disease patients switched from currently marketed ERTsERT;

·                                     Primary treatment period will be 18 weeks, with all patients eligible to enroll in an open-label extension study; and Interim data from this study are anticipated in 2016.

Following a positive data safety monitoring board (DSMB) review of the safety data in the initial group of ambulatory ERT-switch patients (Cohort 1), we have establishedbeen cleared to enroll non-ambulatory ERT-switch and naïve patients (Cohorts 2-3). Data in Cohort 1 are on track by year-end 2016. Additional ATB200-02 study data in Cohorts 2-3, as well as initial human proof-of-conceptextension-study data on ambulatory ERT-switch patients, are anticipated throughout first half of 2017.

CDKL5

We are researching a potential first-in-class protein replacement therapy approach for CDKL5 deficiency in preclinical studies. CDKL5 (cyclin-dependent kinase-like 5) is a gene on the X-chromosome encoding the CDKL5 protein that a chaperone can stabilize enzyme activityregulates the expression of several essential proteins for normal brain development. Genetic mutations in the CDKL5 gene result in CDKL5 protein deficiency and potentially improve ERT tolerability.  the disorder manifests clinically as persistent seizures starting in infancy, followed by severe impairment in neurological development. Most children affected by CDKL5 deficiency cannot walk or care for themselves and may also suffer from scoliosis, visual impairment, sensory issues, and gastrointestinal complications.

Acquisitions

Scioderm, Inc.

In preclinical studies, ATB200 demonstrated greater tissue enzyme levels and further substrate reduction compared to the currently approved ERT for Pompe disease (alglucosidase alfa)September 2015, we acquired Scioderm, Inc., (“Scioderm”), which were further improvedstrengthens our pipeline significantly with the addition of a chaperone.  Innovel, late-stage, proprietary topical cream and potential first-to-market therapy for EB (SD-101). This investigational product was granted FDA breakthrough therapy designation in 2013, we completed abased on results from Phase 2 safety and pharmacokinetics study (“Study 010”) that investigated single ascending oral doses of a pharmacological chaperone co-administered with alglucosidase alfa marketed by Genzyme, in patients with Pompe disease. Each patient received one infusion of ERT alone, and then a single oral dose of the pharmacological chaperone just prior to the next ERT infusion. Results from this study showed increase GAA enzyme activity levels in plasma and muscle following co-administration compared to ERT alone.

Taken together, these clinical results support further development of ATB200 in combination with a pharmacological chaperone as a next-generation Pompe ERT. The initiation of a Phase 1/2 clinical study is expected in the second half of 2015.

Collaboration with Biogen

In September 2013, we entered into a collaboration agreement with Biogen Idec (“Biogen”) to discover, develop and commercialize novel small molecules that target the glucocerobrosidase (“GCase”) enzymestudies for the treatment of Parkinson’s disease. In September 2014, we concluded our research collaborationlesions in patients suffering with Biogen.  Our most advanced Parkinson’s candidateEB. SD-101 is AT3375, whichcurrently being investigated in a Phase 3 study to support global regulatory submissions and was developed outside the collaboration and is wholly-owned by us.

Other Potential Alliances and Collaborationsfirst-ever treatment in EB clinical studies to show improvements in wound closure across all major EB subtypes.

 

We continually evaluate other potential collaborationsacquired Scioderm in a cash and business development opportunities that would bolster our abilitystock transaction. At closing, the Company paid Scioderm stockholders, option holders and warrant holders approximately $223.9 million, of which approximately $141.1 million was paid in cash and approximately $82.8 million was paid through the issuance of 5.9 million newly issued Amicus shares. We agreed to develop therapies forpay up to an additional $361 million to Scioderm stockholders, option holders and warrant holders upon achievement of certain clinical and regulatory milestones and $257 million upon achievement of certain sales milestones. If SD-101 is approved, EB qualifies as a rare pediatric disease and orphan diseases including licensing agreementswe will request a Priority Review Voucher. If the Priority Review Voucher is obtained and acquisitionssubsequently sold, we will pay Scioderm stockholders, option holders and warrant holders the lesser of businesses and assets. We believe such opportunities may be important to$100 million in the advancement of our current product candidate pipeline, the expansionaggregate or 50% of the developmentproceeds of our current technology, gaining access to new technologies and in our transformation to a commercial biotechnology company.such sale.

 

AcquisitionDuring the three months ended June 30, 2016, we reached the first event-based milestone, which was the 50% enrollment of patients. The milestone payment for this event was $5.0 million which was paid in cash during the second quarter of 2016.

Callidus Biopharma, Inc.

 

In November 2013, we entered into a 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 chooses not to, satisfy in common stock), as a result of the terms of the merger agreement, will be paid in cash.

During the three months ended June 30, 2016, the Company reached the first clinical milestone, which was the dosing of the first patient in a Phase 1 or 2 study. The milestone payment for this event was $6.0 million, which was paid in common stock of the Company, par value $0.01 per share (“Common Stock”), during the second quarter of 2016.

 

Critical Accounting Policies, and Significant Judgments and Estimates and Business Combinations

 

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. 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 June 30, 20152016 to the items that we disclosed as our significant accounting policies and estimates described in “—Note 22. Summary of Significant Accounting Policies” to the Company’s financial statements as contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.2015.  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.

 

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 relatedpersonnel-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.

 

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.

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 June 30,

 

Six Months ended June 30,

 

 

Three months ended June 30,

 

Six months ended June 30,

 

Projects

 

2015

 

2014

 

2015

 

2014

 

 

2016

 

2015

 

2016

 

2015

 

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

 

 

 

 

 

 

 

 

 

 

Migalastat (Fabry Disease — Phase 3)

 

$

2,830

 

$

3,325

 

$

6,777

 

$

7,938

 

SD-101 (EB-Epidermolysis Bullosa— Phase 3)

 

1,861

 

 

3,476

 

 

Combination Studies

 

 

 

 

 

 

 

 

 

ATB200 + AT2221 (Pompe Disease — Phase 2)

 

799

 

4,390

 

6,589

 

7,980

 

Fabry CHART™ (Fabry Disease — Preclinical)

 

37

 

1,023

 

191

 

1,126

 

Neurodegenerative Diseases (Preclinical)

 

2

 

181

 

3

 

230

 

 

 

2

 

 

3

 

Total third party direct project expenses

 

8,740

 

4,181

 

17,047

 

8,293

 

 

$

5,527

 

$

8,740

 

$

17,033

 

$

17,047

 

 

 

 

 

 

 

 

 

 

Other project costs (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

5,964

 

4,156

 

11,534

 

8,450

 

 

9,149

 

5,964

 

17,568

 

11,534

 

Other costs (2)

 

2,530

 

1,641

 

4,766

 

3,227

 

 

3,605

 

2,530

 

7,105

 

4,766

 

Total other project costs

 

8,494

 

5,797

 

16,300

 

11,677

 

 

$

12,754

 

$

8,494

 

$

24,673

 

$

16,300

 

Total research and development costs

 

$

17,234

 

$

9,978

 

$

33,347

 

$

19,970

 

 

$

18,281

 

$

17,234

 

$

41,706

 

$

33,347

 

 


(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 based on our historical volatility since our initial public offering in May 2007.  The expected life was determined using the simplified method as described in ASC Topic 718, “Accounting for Stock Compensation”, which is the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate was based on the U.S. Treasury yield 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 weighted average assumptions used in the Black-Scholes option pricing model are as follows:

 

 

Three Months

 

Six Months

 

 

Three Months

 

Six Months

 

 

Ended June 30,

 

Ended June 30,

 

 

Ended June 30,

 

Ended June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

2016

 

2015

 

2016

 

2015

 

Expected stock price volatility

 

74.3

%

81.3

%

75.6

%

81.4

%

 

81.3

%

74.3

%

81.2

%

75.6

%

Risk free interest rate

 

1.7

%

1.9

%

1.7

%

2.0

%

 

1.3

%

1.7

%

1.7

%

1.7

%

Expected life of options (years)

 

6.25

 

6.25

 

6.25

 

6.25

 

 

6.25

 

6.25

 

6.25

 

6.25

 

Expected annual dividend per share

 

$

0.00

 

$

0.00

 

$

0.00

 

$

0.00

 

 

$

0.00

 

$

0.00

 

$

0.00

 

$

0.00

 

 

Restricted Stock Units

 

InBeginning in 2014, and 2015 the Compensation Committee made awards of restricted stock units (“RSUs”) to certain employees of the Company.our employees. 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,are contingent on an 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 stockCommon Stock underlying the RSUs at the date of grant, ratably over the period during which the vesting restrictions lapse.

In April 2014, our Board of Director 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 RSUs were satisfied. In June 2015, 0.4 million RSU’s vested.

Warrants

 

TheOn February 19, 2016, we entered into a Note and Warrant Purchase Agreement (the “February 2016 Purchase Agreement”) with Redmile Capital fund, LP and certain funds and accounts managed or advised by it (collectively referred to as “Redmile”) whereby we sold, on a private placement basis, (a) $50 million aggregate principal amount of unsecured promissory notes and (b) five-year  warrants issued in connection withto purchase up to 37 shares of our November 2013 securities and purchase agreement (“SPA”) were classified as equity. As partCommon Stock for every $1,000 of the SPA,principal amount of notes purchased by each purchaser, for an aggregate of up to 1,850,000 shares of Common Stock issuable under the warrants.  We agreed with Redmile that in full consideration of the purchase price for the notes issued under the October 2015 Purchase Agreement, Redmile surrendered for cancellation all notes and warrants acquired from the October 2015 Purchase Agreement and we paid Redmile any unpaid interest accrued thereunder. As of June 30, 2016, Redmile beneficially owned approximately 10% of the outstanding shares of Common Stock and warrants.  As such the promissory notes are presented as due to related party on the consolidated balance sheets.

On June 30, 2016, following the positive CHMP opinion for migalastat in Europe and the subsequent EC marketing approval, we entered into a totalJoinder to and Amendment of 7.5Note and Warrant Purchase Agreement (the “Amended Purchase Agreement”) with Redmile. Such amendment joined GCM Grosvenor Special Opportunities Master Fund, Ltd (“GCM”) to the February 2016 Purchase Agreement. There were no changes to the previously issued debt. Pursuant to the Amended Purchase Agreement, we sold an additional $30 million commonunsecured promissory notes and five year warrants to purchase up to 42 shares of the our Common Stock for every $1,000 of the principal amount of additional Notes purchased, for an aggregate of up to 1,260,000 shares of Common Stock issuable under the additional warrants. The payment is due in October 2021. The interest rate is 3.875% and 1.6 million warrants were issued at $2.00 per share, for total cash receivedpayable upon 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. These warrants were fully exercised in June 2015 resulting in net proceeds of $4.0 million during the quarter.maturity.

 

Nonqualified Cash Deferral Plan

 

In July 2014, our Board of Directors approved theOur 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’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 of 1986, as amended (the “Code”).amended.

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 recognized in the period they occur. The corresponding liability for the Deferral Plan is included in other non-current liability in our consolidated balance sheets.

 

Foreign Currency Transactions and Derivative Financial Instruments

We transact business in various foreign countries and therefore we are subject to risk of foreign currency exchange rate fluctuations. As such, in June 2016, we entered into a forward contract to economically hedge transactional exposure associated with commitments arising from trade accounts payable denominated in a currency other than the functional currency of the respective operating entity. We did not designate this forward contract as a hedging instrument under applicable accounting guidance and, therefore, the change in fair value is recorded in the other income/(expense) line in the Consolidated Statements of Operations, with the corresponding liability in other current liability on the Consolidated Balance Sheet.

The forward contract as of June 30, 2016 will settle in May 2017.

There were no outstanding forward contracts at December 31, 2015.

The loss recognized in other income/ (expense) related to foreign currency forward contract not designated as hedging instruments was $346 thousand for the three and six months ended year ended June 30, 2016.

Results of Operations

 

Three Monthsmonths Ended June 30, 20152016 Compared to Three Monthsmonths Ended June 30, 20142015

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 June 30, 2015 and 2014, we recognized $0 and $0.5 million, respectively as Research Revenue for reimbursed research and development costs.

 

Research and Development Expense.  Research and development expense was $17.2$18.3 million during the three months ended June 30, 2015,2016, representing an increase of $7.2$1.1 million or 72.0%6.4% from $10.0$17.2 million for the three months ended June 30, 2014.2015. The increase in research and development costs was primarily due primarily to increases in contractclinical research and manufacturing, as well as increase in personnel costs of $1.8$0.3 million due to the continual progress of our programs, primarily the EB program, through the clinical development process and external program support of $1.4 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 ATB200 + chaperone program, migalastat + chaperone program and the Galafold program.

 

General and Administrative Expense.  General and administrative expense was $8.3$19.3 million for the three months ended June 30, 2015,2016, representing an increase of $3.5$11.0 million or 72.9%132.5% from $4.8$8.3 million for the threesix months ended June 30, 2014.2015. The increase includes pre-commercial organization costs of $2.5 million, and increases inwas due to personnel costs of $1.3 million, recruitment of $1.1$4.7 million and consultingprofessional fees of $0.9 million. These increases were partially offset by decreases$5.0 million in legal expensessupport of $0.1 million.the commercial organization for the launch of Galafold.

 

Changes in Fair Value of Contingent Consideration Payable. For the three months ended June 30, 2015,2016, we recorded expense of $0.1$10.2 million representing an increase of $0.4$10.1 million or 132.8% from ($0.3)the $0.1 million of expense for the three months ended June 30, 2014.  Changes2015. The change in the fair value resulted primarily from an increase in the Scioderm contingent consideration of $10.9 million, partially offset by a decrease in the Callidus contingent acquisition consideration payable result fromof $0.8 million. The change in the fair value was impacted by updates to the estimated probability of achievement, or assumed timing of milestones and adjustments to the discount periods, discount rates and rates.changes in the allocation of the contingent milestones. In the second quarter of 2016, we made milestone payments of $11.1 million.

 

LossLoss from Extinguishment of Debt: For the three months ended June 30, 2016, we did not recognize a loss from extinguishment of debt: We recognized a loss ofdebt, as compared to $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. IncreaseRestructuring charges arose from the corporate restructuring implemented in the fourth quarter of 2013. This measure was intended to reduce costs and to align our resources with our key strategic priorities. The increase to the restructuring liabilityexpense was $26$8 thousand for three months ended June 30, 20152016, as compared to a reduction of $81$26 thousand for the three months ended June 30, 2014,2015, and was due to the change in fair value of the future minimum lease payments.

 

Depreciation.  Depreciation ExpenseDepreciation expense was $0.8 million for the three months ended June 30, 2016, representing an increase of $0.4 million as compared to $0.4 million for the three months ended June 30, 2015 and for the three months ended June 30, 2014.2015. Depreciation was higher due to increased asset acquisitions, resulting in a higher depreciation base in 2016.

 

Interest Income. Interest income was $0.3 million for the three months ended June 30, 2016, representing an increase of $0.1 million from $0.2 million for the three months ended June 30, 2015, representing an increase of $0.1 million or 341.7% from $36 thousand for the three months ended June 30, 2014.2015.  The increase in interest income was due to the overall higher average cash and investment balances as a result of our financing transactions.

 

Interest Expense.  Interest expense was approximately $1.0 million for three months ended June 30, 2016, representing an increase of $0.7 million from $0.3 million for the three months ended June 30, 2015, as compared to $0.4 million for the three months ended June 30, 2014.2015. Interest expense was incurred onhigher due to the $50 million notes payable secured in October 2015 and the related revised agreement in February 2016, partially offset by the early retirement of the $15 million secured loan secured in December 2013. The interest expense was lower due to the payment of principal beginning in second quarter ofJune 2015.

 

Other Income/Expense.  Other income/expenses for the three months ended June 30, 2015 and2016 was $2.2 million, as compared to other expenses of $10 thousand for the three months ended June 30, 20142015. The change was $10 thousandprimarily from losses on foreign exchange transactions of $1.9 million and primarily included$0.4 million related to fair value changes in the forward contract.

Tax benefit: For the three months ended June 30, 2016, the Company recorded a discrete income tax benefit of the success fee payable$0.5 million related to the $15 million loan, and fair value changesreduction in its valuation allowances to deferred compensation assets. The $15 million term loanreflect the income tax associated with the gain on foreign currency translation recorded in the Consolidated Statements of Comprehensive loss. A corresponding income tax benefit was paidalso recorded in full during the second quarterConsolidated Statements of 2015.Operations.

Six Months Ended June 30, 20152016 Compared to Six Months Ended June 30, 20142015

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 six months ended June 30, 2015 and 2014, we recognized $0 and $0.9 million, respectively, as Research Revenue for reimbursed research and development costs.

 

Research and Development Expense.  Research and development expense was $33.3$41.7 million during the six months ended June 30, 2015,2016, representing an increase of $13.3$8.4 million or 66.5%25.1% from $20.0$33.3 million for the six months ended June 30, 2014.2015. The increase in research and development costs was primarily due primarily to increases in contractclinical research and manufacturing, as well as increase incosts of $1.3 million, due to the continual progress of our programs, primarily the EB program, through the clinical development process, personnel costs of $3.1 million. Contract research increased by $4.3$6.0 million and contract manufacturing by $4.9 million arising from the timingexternal program support of studies and changes in research plans. These research plans included increased spending in the ATB200 + chaperone program, migalastat + chaperone program and the 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.$2.6 million.

 

General and Administrative Expense.  General and administrative expense was $35.0 million for the six months ended June 30, 2016, representing an increase of $20.3 million or 138.1% from $14.7 million for the six months ended June 30, 2015, representing an increase of $4.8 million or 48.5% from $9.9 million for the six months ended June 30, 2014.2015. The increase includes commercial organizational costs of $3.1 million, and increases in consulting fees of $1.7 million,was due to personnel costs of $1.6$8.9 million and recruitmentprofessional fees of $1.3$7.2 million. Also included within the overall increase was $2.3 million related to pre-commercial organization costs.

 

Changes in Fair Value of Contingent Consideration Payable.For the six months ended June 30, 2015,2016, we recorded expense of $1.1$13.3 million representing an increase of $0.9$12.2 million or 4.5% from $0.2the $1.1 million of expense for the six months ended June 30, 2014.  Changes2015. The change in the fair value resulted primarily from an increase in the Scioderm contingent consideration of $13.0 million, partially offset by decrease in Callidus contingent acquisition consideration payable result fromof $0.8 million. The change in the fair value is impacted by updates to the estimated probability of achievement, or assumed timing of milestones and adjustments to the discount periods, discount and rates.changes in the allocation of the contingent milestones. In the second quarter of 2016, we made milestone payment of $11.1 million.

 

Loss from Extinguishment of Debt. In the six months ended June 30, 2016, we did not recognize a loss from extinguishment of debt: We recognized a loss ofdebt, as compared to $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. IncreaseRestructuring charges arose from the corporate restructuring implemented in the fourth quarter of 2013. This measure was intended to reduce costs and to align our resources with our key strategic priorities. The increase to the restructuring liabilityexpense was $36$58 thousand for six months ended June 30, 20152016 as compared to a reduction in the liability of $89$36 thousand for the six months ended June 30, 20142015, and was due to the change in fair value of the future minimum lease payments.

 

Depreciation.  Depreciation ExpenseDepreciation expense was $1.4 million for the six months ended June 30, 2016, representing an increase of $0.6 million as compared to $0.9 million for the six months ended June 30, 2015, representing an increase of $0.1 million or 12.5% as compared to $0.8 million for the six months ended June 30, 2014. The change2015. Depreciation was higher due to an increaseincreased asset acquisitions, resulting in the amount of property, plant and equipment.a higher depreciation base in 2016.

 

Interest Income. Interest income was $0.6 million for the six months ended June 30, 2016, representing an increase of $0.3 million from $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 six months ended June 30, 2014.2015.  The increase in interest income was due to the overall higher average cash and investment balances as a result of our financing transactions.

 

Interest Expense.  Interest expense was approximately $2.0 million for six months ended June 30, 2016, representing an increase of $1.3 million from $0.7 million for the six months ended June 30, 2015 and June 30, 2014.2015. Interest expense was incurred onhigher due to the $50 million notes payable secured in October 2015 and the related revised agreement in February 2016, partially offset by the early retirement of the $15 million secured loan secured in December 2013. The interest expense was lower due to the payment of principal beginning in second quarter ofJune 2015.

 

Other Expenses.Expense.  Other expenses for the six months ended June 30, 2015 included charges of $39 thousand2016 was $2.3 million, as compared to $19$39 thousand for the six months ended June 30, 2014.2015. The change was primarily from losses on foreign exchange transactions of $2.3 million, including $0.4 million related to fair value changes in the forward contract.

Tax benefit: For the six months ended June 30, 2016, the Company recorded a discrete income tax benefit of the success fee payable,$0.5 million related to the $15 million loan thatreduction in its valuation allowances to reflect the income tax associated with the gain on foreign currency translation recorded in the Consolidated Statements of Comprehensive loss. A corresponding income tax benefit was fully paid offalso recorded in June 2015 and from fair value changes to deferred compensation assets.the Consolidated Statements of Operations.

Liquidity and Capital Resources

 

Source of Liquidity

 

In June 2015,On February 26, 2016, we entered into 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 sold a total 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 completed a $40 million at the market (“ATM”Sales Agreement (the “Sales Agreement”) equity offering under which the Company sold shares of its common stock, par value $0.01 per shares with Cowen and Company, LLC (“Cowen”) to create an at-the-market equity program under which we from time to time may offer and sell shares of our Common Stock, having an aggregate offering price of up to $100 million through Cowen (the “ATM Facility”).  Sales of the ATM Facility shares under the Sales Agreement may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made directly on The NASDAQ Global Market, on any other existing trading market for the Common Stock or through a market maker. In addition, with our prior written approval, Cowen may also sell shares of Common Stock by any other method permitted by law, including in negotiated transactions. Cowen will act as sales agent.  Underagent using its commercially reasonable efforts consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the ATM equity programrules of The NASDAQ Stock Market LLC. There is no arrangement for funds to be received in an escrow, trust or similar arrangement. Cowen will be entitled to compensation at a fixed commission rate up to 3.0% of the Companygross proceeds per share sold 14.3through it as sales agent under the Sales Agreement. Beginning in April 2016 and through June 30, 2016, we sold 8.2 million shares of common stockCommon Stock under the ATM sales agreement resulting in net proceeds of $38.6$57.8 million, after Cowen’s commission of $1.7 million and other expenses of $0.1 million. In July 2016, we sold an additional 6.8 million shares of Common Stock with a net proceeds of $39.3 million after Cowen’s commission. In connection with the July share sales, we completed all sales under the ATM equity program.

On June 30, 2016, following the positive CHMP opinion for migalastat in Europe and the subsequent EC marketing approval, we entered into the Amended Purchase Agreement with Redmile. Such amendment joined GCM to the February 2016 Purchase Agreement. Pursuant to the Amended Purchase Agreement, we sold an additional $30 million unsecured promissory notes and five year warrants to purchase up to purchase up to 42 shares of our Common Stock, par value $0.01 per share for every $1,000 of the principal amount of additional notes purchased, for an aggregate of up to 1,260,000 shares of Common Stock issuable under the Additional warrants. The payment is due in October 2021. The interest rate is 3.875% and payable upon of maturity.

 

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, $576.3$652.7 million of gross proceeds from our stock offerings, $130.0 million from investments by collaborators and non-refundable license fees from those collaborations.

 

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

As of June 30, 2015,2016, we had cash and cash equivalents and marketable securities of $361.4$214.2 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 six months ended June 30, 2016 was $77.7 million, due primarily to the net loss for the six months ended June 30, 2016 of $94.7 million and the change in operating assets and liabilities of $9.3 million. The change in operating assets and liabilities was primarily due to decrease in accounts payable and accrued expenses of $8.2 million, partially offset by increases in prepaid assets of $0.9 million and inventory of $0.2 million.

 

Net cash used in operations for the six months ended June 30, 2015 was $43.6 million, due primarily to the net loss for the six months ended June 30, 2015 of $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)/ Provided by Investing Activities

Net cash used in operationsinvesting activities for the six months ended June 30, 20142016 was $22.0$10.2 million due primarily to the net lossand reflects $126.9 million for the six months ended June 30, 2014purchase of $30.6marketable securities, $4.6 million for the acquisition of property and equipment, partially offset by $121.3 million for the change in operating assetssale and liabilitiesredemption of $4.7 million. The change in operating assets and liabilities consisted of a decrease in receivables from collaboration agreements of $0.6 million; a decrease of $4.2 million in prepaid assets primarily related to Net Operating Loss (“NOL”) receivable; a decrease in accounts payable and accrued expenses of $0.2 million related to program expenses.marketable securities.

Net Cash Provided by Investing Activities

Net cash provided by investing activities for the six months ended June 30, 2015 was $31.3 million. Net cash provided by investing activities reflects $63.1 million for the sale and redemption of marketable securities partially offset by $30.4 million for the purchase of marketable securities and $1.4 million for the acquisition of property and equipment.

 

Net Cash Provided by Financing Activities

Net cash provided by investingfinancing activities for the six months ended June 30, 20142016 was $2.1$82.8 million. Net cash provided by investingfinancing activities reflects $31.1$57.8 million from issuance of Common Stock under the saleATM program, $30.0 million as proceeds from the Amended Purchase agreement and redemption$0.6 million from exercise of marketable securities,stock options, partially offset by $28.8$5.0 million for the purchasepaid to Scioderm as contingent consideration and $0.7 million from vesting of marketable securities and $0.1 million for the acquisition of property and equipment.

Net Cash Provided by Financing ActivitiesRSUs.

 

Net cash provided by financing activities for the six months ended June 30, 2015 was $237.2 million. Net cash provided by financing activities reflects $243.2 million from issuance of common stock,Common 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 and $1.6 million from vesting of RSU’s.

Net cash provided by financing activities for the six months ended June 30, 2014 was $18.2 million. Net cash provided reflects $18.3 million in net proceeds from sales of common stock under our ATM agreement with Cowen, partially offset by $0.2 million for the payments of our secured loan agreement.RSUs.

 

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 Galafold;migalastat HCl;

·                  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 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 disorders;diseases;

·                  the future results of ongoing or later clinical trials for SD-101, including our ability to obtain regulatory approvals and commercialize SD-101 and market acceptance of SD-101;

·                  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;

·                  our ability to successfully incorporate Scioderm and its products and technology into our business, including the possibility that the expected benefits of the transaction will not be fully realized by us or may take longer to realize than expected; 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 third quarter of 2016.  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. We believe that our existing cash and cash equivalents and short-term investments will be sufficient to fund the current operating plan into the second half of 2017.

Financial Uncertainties Related to Potential Future Payments

 

Milestone Payments / Royalties

We acquired exclusive worldwide patent rights to develop and commercialize migalastat and other pharmacological chaperones for the prevention or treatment of human diseases or clinical conditions by increasing the activity of wild-type and mutant enzymes pursuant to a license agreement with Mt. Sinai School of Medicine (“MSSM”). This agreement expires upon expiration of the last of the licensed patent rights, which will be in 2018 in the U.S. and 2019 in Europe and Japan for monotherapy. If we develop a product for combination therapy of specific pharmacological chaperone such as migalastat plus an ERT for certain Lysosomal Storage Disorders such as Fabry disease and a patent issues from the pending MSSM applications covering such a combination therapy(ies) expiration for the combination product(s) will be 2024. Under this agreement, to date we have paid no upfront or annual license fees and has no milestone or future payments other than royalties on net sales.

 

Under our license agreements, if we owe royalties on net sales for one of our products to more than one licensor,of the above licensors, 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. For migalastat, we will owe royalties only to MSSM and will owe no milestone payments.

 

UnderIn November 2013, we entered into the Revised Agreement with GlaxoSmithKline (“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. The Revised Agreement amends and replaces in its entirety the Expanded Agreement entered into between us and GSK in July 2012. Under the terms of the Revised Agreement, there was no upfront payment from us to GSK. For migalastat 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 United States for Galafold.U.S. In addition, because we reacquired worldwide rights to Galafold,migalastat, 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 in addition to those owed to GSK.

 

As part of the merger agreement with Scioderm, we have agreed to pay up to an additional $361 million to Scioderm stockholders, option holders, and warrant holders upon achievement of certain clinical and regulatory milestones, and $257 million to Scioderm stockholders, option holders, and warrant holders upon achievement of certain sales milestones. If SD-101 is approved, EB qualifies as a rare pediatric disease and we will request a Priority Review Voucher. If the Priority Review Voucher is obtained and subsequently sold, we will pay Scioderm stockholders, option holders and warrant holders the lesser of $100 million in the aggregate or 50% of the proceeds of such sale. In April 2016, while the total clinical and regulatory approval milestone payments remain unchanged at $361 million, the allocation between the clinical and regulatory approval milestone payments were revised as follows: clinical milestones of up to $81 million and regulatory approval milestones of up to $280 million.  The commercial milestone payments of up to $257 million remained unchanged. During the three months ended June 30, 2016, we reached the first event based milestone for Scioderm, which was the 50% enrollment of patients in the phase 3 study. The milestone payment for this event was $5.0 million which was paid in cash during the second quarter of 2016.

As part of the acquisition of Callidus, we 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. We may, at our election, satisfy certain milestone payments identified in the merger agreement aggregating $40 million in shares of our 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 Select Market for the ten 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  we are permitted to, but choose not to, satisfy in Common Stock), as a result of the terms of the merger agreement, the rules of The NASDAQ Global Select Market, or otherwise, will be paid in cash. During the three months ended June 30, 2016, we reached the first clinical milestone for Callidus, which was the dosing of the first patient in a Phase 1 or 2 study. The milestone payment for this event was $6.0 million which was paid in the Company’s stock during the three months ended June 30, 2016.

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

Recent Accounting Pronouncements

 

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

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 June 30, 2015,2016, we held $361.4$214.2 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.interest income. At June 30, 2016, our cash, cash equivalents and available for sale securities were all due on demand or within one year. Our outstanding debt has a fixed interest rate and therefore, we have no exposure to interest rate fluctuations.

 

We have operated primarily in the United States, although weU.S. with international operations increasing since the last quarter of 2015.  We do conduct some clinical activities with vendors outside the United States.U.S. While most expenses are paid in U.S. dollars, therewe now have increased transactions of expenses and cash flows in foreign currencies that are minimal payments madeexposed to changes in local foreign currency.  If exchange rates undergo a change of 10%, we docurrency rates. Foreign currency forward contracts used to offset these exposures are not believe that it would have a material impact on our results of operations or cash flows.designated as hedges.

 

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.

PART II.  OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Since October 1, 2015, three purported securities class action lawsuits have been commenced in the United States District Court for the District of New Jersey, naming as defendants the Company, its Chairman and Chief Executive Officer, and in one of the actions, its Chief Medical Officer. The lawsuits allege violations of the Securities Exchange Act of 1934 in connection with allegedly false and misleading statements made by the Company related to the regulatory approval path for migalastat.  The plaintiffs seek, among other things, damages for purchasers of the Company’s Common Stock during different periods, all of which fall between March 19, 2015 and October 1, 2015. It is possible that additional suits will be filed, or allegations received from stockholders, with respect to similar matters and also naming the Company and/or its officers and directors as defendants. On May 26, 2016, the Court consolidated these lawsuits into a single action and appointed a lead plaintiff.  The lead plaintiff filed a Consolidated Amended Complaint on July 11, 2016.  Defendants’ response is due on August 25, 2016.

We believe that we have meritorious defenses and intend to defend the lawsuits vigorously. These lawsuits and any other related lawsuits are subject to inherent uncertainties, and the actual cost will depend upon many unknown factors. The outcome of the litigation is necessarily uncertain, we could be forced to expend significant resources in the defense of these lawsuits and we may not prevail.

On or about November 2, 2015, a partyderivative lawsuit was filed by an Amicus shareholder purportedly on Amicus’ behalf in the Superior Court of New Jersey, Middlesex County, Chancery Division, against the individuals who serve on the Amicus Board of Directors. Amicus itself was named as a nominal defendant.  The  derivative lawsuit alleged claims for breach of state law fiduciary duties, waste of corporate assets, and unjust enrichment based on allegedly false and misleading statements made by Amicus related to the regulatory approval path for migalastat HCl.  On February 19, 2016, the complaint was dismissed by the Court and plaintiffs have not refiled.

On or about March 3, 2016, a derivative lawsuit was filed by an Amicus shareholder purportedly on Amicus’ behalf in the Superior Court of New Jersey, Middlesex County, Chancery Division, against various officers and directors of the Company.  Amicus itself is named as a nominal defendant.  The derivative lawsuit alleges similar facts and circumstances as the three purported securities class action lawsuits described above and further alleges claims for breach of state law fiduciary duties, waste of corporate assets, unjust enrichment, abuse of control, and gross mismanagement based on allegedly false and misleading statements made by Amicus related to the regulatory approval path for migalastat HCl. The plaintiff seeks, among other things, to require the Amicus Board to take certain actions to reform its corporate governance procedures, including greater shareholder input and a provision to permit shareholders to nominate candidates for election to the Board, along with restitution, costs of suit and attorney’s fees. The parties have entered into a stipulation to stay the time to respond to the derivative complaint until the resolution of any material legal proceedings.motion to dismiss in the above-referenced securities action.

These lawsuits and any other related lawsuits are subject to inherent uncertainties, and the actual cost will depend upon many unknown factors.  The outcome of the litigation is necessarily uncertain, we could be forced to expend significant resources in the defense of these lawsuits and we may not prevail.

 

ITEM 1A.  RISK FACTORS

 

WeThere have identified the followingbeen no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 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.2015.

 

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 thanCompany has operations in the United States. InKingdom and other member countries of the European Union. On June 23, 2016, voters in the United States, third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. InKingdom approved an advisory referendum to withdraw from the European Union, reference pricing systemsUnion. The specifics of how the UK will exit the EU will be the subject of negotiations for at least the next two years. This political uncertainty may further exacerbate many of the Company’s risks 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 foruncertainties. There can be no assurance that any approved products that we develop couldor all of these events will not have a material adverse effect on our operatingbusiness operations, results our ability to raise capital needed to commercialize productsof operations 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 following table sets forth purchases of our common stockCommon Stock for the threesix months ended June 2015:30, 2016:

 

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

 

 

 

 

 

 

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

 

May 1, 2016 to May 31, 2016

 

13,632

 

6.57

 

 

23,868

 

Total

 

13,632

 

 

 

 

 

23,868

 

There were no purchases of our Common Stock during the periods April 1, 2016 to April 30, 2016 and June 1, 2016 to June 30, 2016.

 

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%RSUs. Some of whichthe RSUs that vested on May 10, 2015.in 2015 were released in the six months ended June 30, 2016. The remaining stock unitsremainder of the RSUs will vest on December 10, 2015,in July 2016, 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, and state tax withholding of 9.9%, the employeesemployee surrendered to us a portion of theirthe vested shares on the vesting date, representing between 26.45-32.65%36.40-42.60% of the total value of the shares then vested.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

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.

3.13.1(1)

 

Restated Certificate of Incorporation

 

 

 

3.23.2(2)

 

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

 

 

 

3.3 (2)(3)

 

Amended and Restated By-laws

 

 

 

10.1 (3)(4)

 

FirstManagement Bonus Program Summary

10.2 (5)

Amended and Restated Amicus Therapeutics, Inc. 2007 Equity Incentive Plan

10.3 (6)

Joinder to and Amendment to Creditof Note and SecurityWarrant Purchase Agreement dated April 27, 2015 by and among Amicus Therapeutics, Inc., Amicus Therapeutics UK Limited, Amicus Therapeutics International Holding LTD and the other entities shownpurchasers identified on the signature pages thereto, dated as signatories thereto as a Borrower, the financial institutions or other entities from time to time parties as lenders, and Midcap Funding III Trust, as agent.of June 30, 2016

 

 

 

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 threesix months ended June 30, 2015,2016, 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.Statements

 


(1)

Incorporated by reference to Exhibit 1.13.1 to our CurrentQuarterly Report on Form 8-K10-Q filed on June 12,August 5, 2015.

 

 

(2)

Incorporated by reference to Exhibit 3.43.2 to our Quarterly Report on Form 10-Q filed on August 5, 2015.

(3)

Incorporated by reference to Exhibit 3.3 to our Registration Statement on Form S-1.

 

 

(3)(4)

Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 28, 2015.June 9, 2016.

(5)

Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 13, 2016.

(6)

Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 1, 2016.

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: August 5, 2015

9, 2016

By:

/s/ John F. Crowley

 

 

John F. Crowley

 

 

Chairman and Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

Date: August 5, 2015

9, 2016

By:

/s/ William D. Baird III

 

 

William D. Baird III

 

 

Chief Financial Officer

 

 

(Principal Financial Officer)

Exhibit
Number

 

Description

3.1

Restated Certificate of Incorporation

3.2

Certificate of Amendment to the Company’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

 

 

 

31.2

 

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 threesix months ended June 30, 2015,2016, 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.

 

3642