| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation— The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S., or GAAP, and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Updates, or ASU, of the Financial Accounting Standards Board, or FASB. Use of Estimates— The preparation of the consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies in developing the estimates and assumptions that are used in the preparation of the financial statements. Management must apply significant judgment in this process. Management’s estimation process often may yield a range of potentially reasonable estimates and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: gross-to-net, or GTN, adjustments; recoverability of inventories, including those produced in preparation for product launches; accrued expenses; stock option valuations; valuation allowance for deferred tax assets and research and development expenses. Revenue recognition— In June 2022, AMX0035 received marketing authorization with conditions as ALBRIOZA by Health Canada for the treatment of ALS, and the Company launched ALBRIOZA in Canada in July 2022. In September 2022, AMX0035 received approval as RELYVRIO by the FDA for the treatment of ALS in adults, and the Company launched RELYVRIO in the U.S. in October 2022. The Company enters into arrangements with wholesalers, specialty pharmacies and specialty distributors, or Customers, to distribute ALBRIOZA, RELYVRIO and future approved products. In accordance with ASC Topic 606 - Revenue from Contracts with Customers , or Topic 606, revenue is recognized when the customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the Company will collect the consideration the Company expects to be entitled to in exchange for the goods or services the Company transfers to its customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Product Revenue, Net The Company sells its approved products to its Customers. These Customers subsequently resell our products to specialty pharmacy providers, specialty distributors, health care providers, certain medical centers or hospitals, and patients. In addition to agreements with the Customers, the Company enters into arrangements with specialty pharmacies, health care providers and payors that provide for government mandated and/or privately negotiated rebates with respect to the purchase of our products. The Company’s customer identification process considers a number of factors, including contractual and legal factors, and who controls the Company’s product and bears inventory risk. The Company evaluates these factors on a customer-by-customer basis to determine the appropriate customer for revenue recognition purposes. In some cases, the Company may use a third-party logistics providers to deliver the Company’s product to its customers, but the Company recognizes revenue upon delivery to the customer, as its determined that the third-party logistics provider is acting as our agent. Changes in these factors or our assumptions regarding these factors could impact our revenue recognition The Company recognizes revenue on product sales when the Customer obtains control of our product, which occurs at a point in time (upon delivery). Product revenues are recorded net of applicable GTN adjustments, which are described below. If taxes should be collected from Customers relating to product sales and remitted to governmental authorities, they will be excluded from revenue. The Company expenses incremental costs of obtaining a contract when incurred, if the expected amortization period of the asset that the Company would have recognized is one year or less. However, no such costs were incurred during the years ended December 31, 2023, 2022 and 2021. GTN Adjustments Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration related to certain GTN adjustments. Components of GTN adjustments include trade discounts and allowances, product returns, third-party payor rebates, and other allowances that are offered within contracts between the Company, its Customers and payors relating to the sale of our products. These GTN adjustments, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable (if the amount is payable to the Customer) or a current liability (if the amount is payable to a party other than a Customer). These estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in Topic 606 for relevant factors such as historical experience, payer channel mix (e.g., Medicare or Medicaid), current contract prices under applicable programs, unbilled claims and processing time lags and inventory levels in the distribution channel. In certain circumstances, the Company applies the most likely method in Topic 606. The determination to use the expected value method or the most likely method is based on the type of GTN adjustment and what method better predicts the amount of consideration we expect to be entitled to. Overall, these GTN adjustments reflect in the transaction price the amount of consideration to which the Company expects to be entitled to in exchange for transferring promised goods or services to its Customers. The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, the Company will adjust these estimates, which would affect product revenue, net and earnings in the period such variances become known. Trade Discounts and Allowances The Company generally provides Customers with prompt payment discounts and pay fees for distribution services and for certain data that distributors provide to us that are explicitly stated in our contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. Payment from Customers is typically due within 30 calendar days of the invoice date, without consideration to the prompt payment discounts. Product Returns Consistent with industry practice, the Company generally offers Customers a limited right of return for product that has been purchased from the Company based on the product’s expiration date, which is set to lapse within a specified period stated in the contract. Additionally, our limited right of return policy allows for eligible returns from Customers in circumstances where product was shipped in error or was damaged in shipping, or product was returned pursuant to an official drug recall. The Company estimates the amount of product sales that may be returned by our Customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized, as well as reductions to accounts receivable, net on the consolidated balance sheets. The Company currently estimates returns using quantitative and qualitative information including, but not limited to, historical experience with returns, projected demand, levels of inventory in the distribution channel, product dating and expiration period, and whether products have been discontinued, among others. The Company has received an immaterial amount of returns to date and believes that returns of product in future periods will be minimal. Provider Chargebacks and Discounts Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from the Company. Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These GTN adjustments are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable, net. GTN adjustments for chargebacks consist of credits that Customers have not claimed, but for which we expect to issue for units that remain in the distribution channel inventories at each reporting period-end that we expect will be sold to qualified healthcare providers, and chargebacks that Customers have claimed, but for which we have not yet issued a credit. Payor Rebates The Company contracts with certain government and private payor organizations, primarily government and commercial health insurance companies, for the payment of rebates with respect to utilization of our products. The Company is subject to discount obligations under state Medicaid programs and Medicare. These GTN adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities on the consolidated balance sheets. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom it will owe an additional liability under the Medicare Part D program. The Company's liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period. Other Incentives Other incentives which the Company offers include voluntary patient assistance programs, such as its co-pay assistance program, which are intended to provide financial assistance to qualified commercially-insured patients with prescription drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with product that has been recognized as revenue for each reporting period. The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included as a component of accrued expenses and other current liabilities on the consolidated balance sheets. Comprehensive Loss— Comprehensive loss includes net loss, as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. Comprehensive loss is composed of net loss and other comprehensive (loss) income. Other comprehensive (loss) income consists of unrealized gains and losses on marketable securities and foreign currency translation. Cash and Cash Equivalents— The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents represent funds invested in readily available checking and money market funds. Restricted Cash Equivalents— Restricted cash equivalents consist of $ 0.2 million of cash serving as collateral for a letter of credit issued for the Company’s office space, and $ 0.5 million as collateral for a corporate credit card program. As of December 31, 2023 and 2022, the Company’s restricted cash equivalents balance was $ 0.7 million and $ 0.7 million , respectively. Accounts receivable, net— The Company’s accounts receivable consists of amounts due from Customers related to product sales and have standard payment terms. The Company analyzes accounts that are past due for collectability and provides reserves against accounts receivable for expected credit losses that may result from a customer’s inability to pay. Amounts determined to be uncollectible are written-off against the established reserve. As of December 31, 2023 and 2022 , the credit profiles for the Company’s customers were deemed to be in good standing and expected credit losses were not material. Short-Term Investments— Short-term investments are composed of U.S. treasury notes and bills, corporate debt securities, commercial paper and agency bonds with maturities of less than one year from the balance sheet date. The Company classifies all of its short-term investments as available-for-sale. Accordingly, these investments are recorded at fair value, which is determined based on quoted market prices. Unrealized gains and losses on available-for-sale securities are included as a separate component of other accumulated comprehensive loss. The cost of short-term investments is adjusted for amortization of premiums and accretion of discounts until maturity. Such amortization and accretion are included in interest income. Realized gains and losses are included in other expense, net. The Company evaluates short-term investments for other-than-temporary impairment at the balance sheet date. Declines in fair value, if any, determined to be other than temporary-than-temporary are also included in other income, net. When assessing short-term investments for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, and the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. As of December 31, 2023 and 2022 , there were no impairment charges on short-term investments. Concentrations of Credit Risk— Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable, net. The Company maintains its cash in financial institutions that it believes have high credit quality. The Company has not experienced any losses on such accounts, and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The Company’s accounts receivable, net represents amounts due to the Company from customers. Amylyx performs ongoing credit evaluations of its customers and generally does not require collateral. The Company monitors its exposure and records a reserve against uncollectible amounts as necessary. Three and four customers individually accounted for approximately 81 % and 97 % of total gross product revenue in 2023 and 2022 , respectively. No revenue was recognized in 2021. Three and three customers individually accounted for approximately 81 % and 98 % of total accounts receivable, net as of December 31, 2023 and 2022 , respectively. Fair Value Measurements— Assets and liabilities recorded at fair value on a recurring basis on the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows: • Level 1 —Quoted prices in active markets for identical assets or liabilities. • Level 2 —Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. • Level 3 —Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s financial instruments consist of cash, cash equivalents, restricted cash equivalents, short-term investments, accounts receivable, net, accounts payable and accrued expenses. The Company’s short-term investments are carried at fair value, determined according to Level 1 and Level 2 inputs to the fair value hierarchy described above. The Company’s 2021 Notes (as defined in Note 8) were carried at fair value, determined according to Level 3 inputs in the fair value hierarchy described above. The remaining financial instruments are stated at their respective carrying amounts, which approximate fair value due to the short-term nature of these assets and liabilities. Inventories— The Company values its inventories at the lower of cost or estimated net realizable value. The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. The Company classifies inventory as long-term when consumption or sale of the inventory is expected beyond its normal operating cycle of twelve months. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and it writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded within cost of sales. The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required which would be recorded as cost of sales in the consolidated statements of operations. The Company capitalizes inventory costs associated with the Company’s products after regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized. Inventory acquired prior to receipt of regulatory approval of a product candidate is expensed as research and development expense as incurred. Inventory that can be used in either the production of clinical or commercial product is initially capitalized and subsequently expensed as research and development expense when identified for use in the manufacture of drugs still in development. Property and Equipment, net— Property and equipment are stated at cost, net of accumulated depreciation. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs that do not improve or extend the life of the assets are expensed when incurred. Upon sale or retirement of assets, the cost and accumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss is reflected in the consolidated statements of operations in the period realized. The range of useful lives of property and equipment is as follows:
Estimated Useful Life
Leasehold improvements Lesser of the estimated life or remaining lease term
Furniture and fixtures 4 years
Computer hardware and software 3 years
Construction in progress Not depreciated Impairment of Long-Lived Assets— The Company evaluates assets for potential impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the book values of the assets to the expected future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book values of the assets exceed their fair value. The Company has no t recognized any impairment losses in the years ended December 31, 2023 and 2022 . Research and Development— Research and development expenses include costs directly attributable to the conduct of research and development activities. Expenditures relating to research and development are expensed in the period incurred. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. In addition, research and development-related salaries and benefits, facility, and overhead costs, supplies and other related costs are included in research and development expense. Sales and Marketing Costs— Sales and marketing expenses consist primarily of wages and benefits for sales and marketing personnel, professional and consulting fees, administrative travel expenses, and marketing and advertising costs such as marketing literature, promotional activities, conferences and seminars and branding. Sales and marketing, and advertising costs are expensed as incurred and included in selling, general and administrative expenses in the accompanying consolidated statements of operations. The Company considers advertising costs as expenses related to the promotion of the Company's commercial products. For the years ended December 31, 2023 and 2022, advertising costs were $ 9.5 million and $ 4.4 million , respectively. The Company did not have commercial products in 2021. Patent-Related Costs— Patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as selling, general and administrative expenses in the accompanying consolidated statements of operations. Stock-Based Compensation Expense— Stock-based compensation is recognized in the consolidated statements of operations based on their fair values on the date of grant over the requisite service period, which is generally equal to the vesting period of the respective award. Forfeitures are accounted for as they occur. Generally, the Company issues stock option awards with only service-based vesting conditions and records the expense for these awards using the straight-line method. The Company classifies stock-based compensation expense in the same manner in which the awards recipient’s payroll or service provider’s costs are classified. The fair value of each restricted common stock award is estimated on the date of grant based on the fair value of the Company’s common stock on that same date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the award, the risk-free interest rate, and expected dividends. The Company estimates its expected stock price volatility based on the historical volatility of publicly traded peer companies. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. There is no expected dividend yield since the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future. The stock price of the Company is based on the closing price on the date of grant. Prior to the IPO, as there was no public market for the Company’s common stock, the estimated fair value of common stock was determined by the Company’s Board of Directors as of the date of each option grant, with input from management, considering third-party valuations of its common stock as well as the Company’s Board of Directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent third-party valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation . Contingencies— From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues for loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability on the Company’s consolidated balance sheets. The Company does not accrue for contingent losses that, in its judgement, are considered to be reasonably possible, but not probable; however, it discloses the range of reasonably possible losses. There were no loss or gain contingencies recorded in the Company’s consolidated financial statements as of and during the years ended December 31, 2023 and 2022 . Leases— The Company adopted the FASB, ASC 842, Leases, or ASC 842, on January 1, 2022. ASC 842 allows the Company to elect a package of practical expedients, which include: (i) an entity need not reassess whether any expired or existing contracts are or contain leases; (ii) an entity need not reassess the lease classification for any expired or existing leases; and (iii) an entity need not reassess any initial direct costs for any existing leases. Another practical expedient allows the Company to use hindsight in determining the lease term when considering lessee options to extend or terminate the lease and to purchase the underlying asset. The Company has elected to utilize this package of practical expedients and has not elected the hindsight methodology in its implementation of ASC 842. The Company leases its offices, and may from time to time, enter into other lease agreements in conducting its business. The Company determines if an arrangement includes a lease at the inception of the agreement. For each of the Company’s lease arrangements, the Company records a right-of-use asset representing the Company’s right to use an underlying asset for the lease term and a lease liability representing the Company’s obligation to make lease payments. Operating lease right-of-use assets and operating lease liabilities are recognized at the lease commencement date based on the net present value of the remaining future minimum lease payments over the lease term. If the interest rate implicit in the Company’s leases is not readily determinable, in determining the weighted-average discount rate used to calculate the net present value of lease payments, the Company utilizes an estimate of its incremental borrowing rate based on market sources including interest rates for companies with similar credit quality for agreements of similar duration, determined by class of underlying asset, to discount the lease payments. Lease expense for the Company’s operating leases is recognized on a straight-line basis over the lease term and variable lease costs are expensed as incurred. The Company did not have financing leases as of December 31, 2023 and 2022. The Company elected the practical expedient not to apply the recognition and measurement requirements to short-term leases, which is any lease with a term of one year or less as of the lease commencement date. The lease may require the Company to pay additional amounts for maintenance and other expenses, which are generally referred to as non-lease components. The Company has elected the practical expedient to combine lease and non-lease components. If a lease includes options to extend the lease term, the Company does not assume the option will be exercised in its initial lease term assessment unless there is reasonable certainty that the Company will renew based on an assessment of economic factors present as of the lease commencement date. Prior to the adoption of ASC 842, at the inception of each lease, the Company evaluated the lease agreement to determine whether the lease was an operating or capital lease in accordance with ASC 840, Leases (ASC 840) . When any one of the four test criteria in ASC 840 was met, the lease then qualified as a capital lease. If the lease agreements contained renewal options, tenant improvement allowances, rent holidays or rent escalation clauses, the Company recorded a deferred rent asset or liability equal to the difference between the rent expense and future minimum lease payments due. The rent expense related to operating leases was recognized on a straight-line basis in the statements of operations over the term of each lease. Income Taxes— The Company accounts for income taxes using the asset and liability approach. Deferred tax assets and liabilities represent future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities and for loss carryforwards using enacted tax rates expected to be in effect in the years in which the differences reverse. A valuation allowance is established to reduce deferred tax assets to the amounts expected to be realized. The Company also recognizes a tax benefit from uncertain tax positions only if it is “more likely than not” that the position is sustainable based on its technical merits. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. To date, the Company |
