Filed by Bowne Pure Compliance
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2008
OR
     
o   TRANSITION 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
Incorporation or Organization)
  (I.R.S. Employer
Identification Number)
6 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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller-reporting company. See definition of “large accelerated filer,” accelerated filer” and “smaller-reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer o   Accelerated filer o   Non-accelerated filer þ   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 þ
The number of shares outstanding of the registrant’s common stock, $.01 par value per share, as of July 31, 2008 was 22,549,465 shares.
 
 

 

 


 

AMICUS THERAPEUTICS, INC
Form 10-Q for the Quarterly Period Ended June 30, 2008
         
    Page  
 
       
    4  
 
       
    4  
 
       
    4  
 
       
    5  
 
       
    6  
 
       
    7  
 
       
    12  
 
       
    20  
 
       
    21  
 
       
    21  
 
       
    21  
 
       
    21  
 
       
    21  
 
       
    22  
 
       
    23  
 
       
    23  
 
       
    24  
 
       
    25  
 
       
    26  
 
       
 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32.1
We have filed applications to register certain trademarks in the United States and abroad, including AMICUSTM, AMICUS THERAPEUTICSTM (and design), AMIGALTM and PLICERATM.

- 2 -


Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this quarterly report on Form 10-Q regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this quarterly report on Form 10-Q include, among other things, statements about:
    our plans to develop and commercialize Amigal, Plicera and AT2220;
    our ongoing and planned discovery programs, preclinical studies and clinical trials;
    our ability to enter into selective collaboration arrangements;
    the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;
    the rate and degree of market acceptance and clinical utility of our products;
    our ability to quickly and efficiently identify and develop product candidates;
    the extent to which our scientific approach may potentially address a broad range of diseases across multiple therapeutic areas;
    our commercialization, marketing and manufacturing capabilities and strategy;
    our intellectual property position;
    our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;
    our belief about our ability to fund our operating expenses; and
    our eligibility to receive milestone payments under our collaboration agreement with Shire Pharmaceuticals Ireland Ltd.
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 of the Annual Report on Form 10-K for the year ended December 31, 2007 that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations or investments we may make.
You should read this quarterly report on Form 10-Q in conjunction with the documents that we reference herein. We do not assume any obligation to update any forward-looking statements.

 

- 3 -


Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Amicus Therapeutics, Inc.
(a development stage company)
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share amounts)
                 
    December 31,     June 30,  
    2007     2008  
Assets:
               
Current assets:
               
Cash and cash equivalents
  $ 44,188     $ 12,315  
Investments in marketable securities
    117,339       132,635  
Prepaid expenses and other current assets
    1,513       1,671  
 
           
Total current assets
    163,040       146,621  
 
               
Property and equipment, less accumulated depreciation and amortization of $2,793 and $3,421 at December 31, 2007 and June 30, 2008, respectively
    3,790       4,195  
Other non-current assets
    267       267  
 
           
Total Assets
  $ 167,097     $ 151,083  
 
           
 
               
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Accounts payable and accrued expenses
  $ 10,465     $ 10,745  
Current portion of deferred revenue
    3,801       3,295  
Current portion of capital lease obligations
    1,527       1,258  
 
           
Total current liabilities
    15,793       15,298  
 
               
Deferred revenue, less current portion
    46,813       45,424  
Capital lease obligations, less current portion
    1,194       695  
 
               
Commitments and contingencies
               
 
               
Stockholders’ equity:
               
Common stock, $.01 par value, 50,000,000 shares authorized, 22,408,731 shares issued and outstanding at December 31, 2007, 50,000,000 shares authorized, 22,514,822 shares issued and outstanding at June 30, 2008
    285       285  
Additional paid-in capital
    227,438       230,922  
Accumulated other comprehensive income
    408       318  
Deficit accumulated during the development stage
    (124,834 )     (141,859 )
 
           
Total stockholders’ equity
    103,297       89,666  
 
           
Total Liabilities and Stockholders’ Equity
  $ 167,097     $ 151,083  
 
           
See accompanying notes to consolidated financial statements

 

- 4 -


Table of Contents

Amicus Therapeutics, Inc.
(a development stage company)
Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share amounts)
                                         
                                    Period from  
                                    February 4,  
                                    2002  
    Three Months Ended     Six Months Ended     (inception)  
    June 30,     June 30,     to June 30,  
    2007     2008     2007     2008     2008  
Revenue:
                                       
Research revenue
  $     $ 3,113     $     $ 5,579     $ 6,954  
Collaboration revenue
          694             1,389       1,797  
 
                             
Total revenue
        $ 3,807           $ 6,968     $ 8,751  
 
                             
 
                                       
Operating Expenses:
                                       
Research and development
  $ 6,783     $ 8,848     $ 13,867     $ 15,789     $ 105,667  
General and administrative
    3,189       5,118       6,040       10,305       48,374  
Impairment of leasehold improvements
                            1,030  
Depreciation and amortization
    312       332       609       653       3,447  
In-process research and development
                            418  
 
                             
Total operating expenses
    10,284       14,298       20,516       26,747       158,936  
 
                             
Loss from operations
    (10,284 )     (10,491 )     (20,516 )     (19,779 )     (150,185 )
Other income (expenses):
                                       
Interest income
    1,060       1,331       1,753       3,034       10,974  
Interest expense
    (86 )     (59 )     (179 )     (129 )     (1,559 )
Change in fair value of warrant liability
    (86 )           (149 )           (454 )
Other expense
                            (1,180 )
 
                             
Loss before tax benefit
    (9,396 )     (9,219 )     (19,091 )     (16,874 )     (142,404 )
(Provision for)/benefit from income taxes
          (75 )           (150 )     545  
 
                             
Net loss
    (9,396 )     (9,294 )     (19,091 )     (17,024 )     (141,859 )
Deemed dividend
                            (19,424 )
Preferred stock accretion
    (310 )           (351 )           (802 )
 
                             
Net loss attributable to common stockholders
  $ (9,706 )   $ (9,294 )   $ (19,442 )   $ (17,024 )   $ (162,085 )
 
                             
Net loss attributable to common stockholders per common share — basic and diluted
  $ (1.37 )   $ (0.41 )   $ (4.80 )   $ (0.76 )        
 
                               
Weighted-average common shares outstanding — basic and diluted
    7,083,748       22,467,198       4,051,709       22,439,893          
 
                               
See accompanying notes to consolidated financial statements

 

- 5 -


Table of Contents

Amicus Therapeutics, Inc.
(a development stage company)
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
                         
                    Period from  
                    February 4,
2002
 
    Six Months Ended     (inception)  
    June 30,     to June 30,  
    2007     2008     2008  
Operating activities
                       
Net loss
  $ (19,091 )   $ (17,024 )   $ (141,859 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Non-cash interest expense
                525  
Depreciation and amortization
    609       653       3,447  
Amortization of non-cash compensation
                522  
Stock-based compensation — employees
    1,632       3,203       9,841  
Stock-based compensation — non-employees
    134             853  
Stock-based license payments
                1,220  
Change in fair value of warrant liability
    149             454  
Impairment of leasehold improvements
                1,030  
Non-cash charge for in-process research and development
                418  
Beneficial conversion feature related to bridge financing
                135  
Changes in operating assets and liabilities:
                       
Prepaid expenses and other current assets
    (1,111 )     (158 )     (1,670 )
Other non-current assets
                (288 )
Accounts payable and accrued expenses
    (3,438 )     280       10,743  
Deferred revenue
          (1,894 )     48,720  
 
                 
Net cash used in operating activities
    (21,116 )     (14,940 )     (65,909 )
Investing activities
                       
Sale and redemption of marketable securities
    42,936       73,442       242,508  
Purchases of marketable securities
    (99,495 )     (88,829 )     (374,943 )
Purchases of property and equipment
    (412 )     (1,059 )     (8,670 )
 
                 
Net cash used in investing activities
    (56,971 )     (16,446 )     (141,105 )
Financing activities
                       
Proceeds from the issuance of preferred stock, net of issuance costs
    24,053             143,022  
Proceeds from the issuance of common stock, net of issuance costs
    68,146             68,093  
Proceeds from the issuance of convertible notes
                5,000  
Payments of capital lease obligations
    (652 )     (768 )     (3,634 )
Proceeds from exercise of stock options
    263       281       973  
Proceeds from exercise of warrants (common and preferred)
    98             264  
Proceeds from capital asset financing arrangement
    546             5,611  
 
                 
Net cash provided by/(used in) financing activities
    92,454       (487 )     219,329  
 
                 
Net increase/(decrease) in cash and cash equivalents
    14,367       (31,873 )     12,315  
Cash and cash equivalents at beginning of period
    12,127       44,188        
 
                 
Cash and cash equivalents at end of period
  $ 26,494     $ 12,315     $ 12,315  
 
                 
Supplemental disclosures of cash flow information
                       
Cash paid during the period for interest
  $ 179     $ 129     $ 1,265  
Non-cash activities
                       
Conversion of notes payable to preferred stock
  $     $     $ 5,000  
Conversion of preferred stock to common stock
  $ 148,591     $     $ 148,591  
Accretion of redeemable convertible preferred stock
  $ 351     $     $ 802  
Beneficial conversion feature related to the issuance of Series C redeemable convertible preferred stock
  $     $     $ 19,424  
See accompanying notes to consolidated financial statements

 

- 6 -


Table of Contents

Note 1. Description of Business and Significant Accounting Policies
Corporate Information, Status of Operations and Management Plans
Amicus Therapeutics, Inc. (the Company) was incorporated on February 4, 2002 in Delaware for the purpose of creating a premier drug development company at the forefront of therapy for human genetic diseases initially based on intellectual property in-licensed from Mount Sinai School of Medicine. The Company’s activities since inception have consisted principally of raising capital, establishing facilities, and performing research and development, including clinical trials. Accordingly, the Company is considered to be in the development stage.
In November 2007, the Company entered into a License and Collaboration Agreement with Shire Pharmaceuticals Ireland Ltd. (Shire). Under the agreement, the Company and Shire will jointly develop the Company’s three lead pharmacological chaperone compounds for lysosomal storage disorders: Amigal (migalastat hydrochloride), Plicera (isofagomine tartrate) and AT2220. For further information, see “— Note 7. Development and Commercialization Agreement with Shire.”
The Company has an accumulated deficit of approximately $141.9 million at June 30, 2008 and anticipates incurring losses through the year 2008 and beyond. The Company has not yet generated commercial sales revenues and has been able to fund its operating losses to date through the sale of its redeemable convertible preferred stock, issuance of convertible notes, net proceeds from our initial public offering (IPO), the upfront licensing payment from Shire and other financing arrangements. The Company believes that its existing cash and cash equivalents and short-term investments will be sufficient to cover its cash flow requirements for 2008.
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, 2007. 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, 2007.
Revenue Recognition
The Company recognizes revenue in accordance with the Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements (SAB 101), as amended by Staff Accounting Bulletin No. 104, Revision of Topic 13 (SAB 104).
In determining the accounting for collaboration agreements, the Company follows the provisions of Emerging Issues Task Force (EITF) Issue 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21). EITF 00-21 provides guidance on whether an arrangement involves multiple revenue-generating deliverables that should be accounted for as a single unit of accounting or divided into separate units of accounting for revenue recognition purposes and, if this division is required, how the arrangement consideration should be allocated among the separate units of accounting. If the arrangement represents a single unit of accounting, the revenue recognition policy and the performance obligation period must be determined (if not already contractually defined) for the entire arrangement. If the arrangement represents separate units of accounting according to the EITF separation criteria, a revenue recognition policy must be determined for each unit. Revenues for non-refundable upfront license fee payments will be recognized on a straight line basis as Collaboration Revenue over the period of the performance obligations.

 

- 7 -


Table of Contents

Reimbursements for research and development costs under collaboration agreements are recognized as revenue in accordance with EITF Issue 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent (EITF 99-19). The revenue associated with these reimbursable amounts is included in Research Revenue and the costs associated with these reimbursable amounts are included in research and development expenses. The Company records these reimbursements as revenue and not as a reduction of research and development expenses as the Company has the risks and rewards as the principal in the research and development activities.
Income Taxes
The Company accounts for income taxes under the liability method. Under this method deferred income tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and tax basis of assets and liabilities and for operating losses and tax credit carryforwards, using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance is recorded if it is “more likely than not” that a portion or all of a deferred tax asset will not be realized.
During the three and six months ended June 30, 2008, the Company recorded an income tax provision of approximately $0.1 million and $0.2 million, respectively, for estimated minimum federal income taxes related to temporary differences in revenue recognition between U.S. GAAP and applicable federal tax law.
New Accounting Standards
In May 2008, the FASB issued FASB Staff Position (FSP) No. 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), which specifies that issuers of these instruments should separately account for the liability and equity components in a manner that reflects the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. FSP No. 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. FSP No. 14-1 is also to be applied retrospectively to all periods presented except if these instruments were not outstanding during any of the periods that are presented in the annual financial statements for the period of adoption but were outstanding during an earlier period. The Company does not expect this will have a significant impact on the financial statements of the Company.
In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities (SFAS No. 161), which requires enhanced disclosures about an entity’s derivative and hedging activities in order to improve the transparency of financial reporting. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company does not expect this will have a significant impact on the financial statements of the Company.
Note 2. Investments in Marketable Securities
The Company adopted SFAS No. 157, Fair Value Measurements (SFAS No. 157), effective January 1, 2008. SFAS No. 157 is applicable for all financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 requires fair value measurements be classified and disclosed in one of the following three categories:
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.

 

- 8 -


Table of Contents

As of June 30, 2008, the Company held $132.6 million of available for sale investment securities consisting of marketable debt instruments of corporations, financial institutions and government agencies. In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, these investments are classified as available-for-sale and are reported at fair value on the Company’s balance sheet. Unrealized holding gains and losses are reported within accumulated other comprehensive income/ (loss) as a separate component of stockholders’ (deficiency) equity. 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 charges have been recorded.
The Company’s investment portfolio has not been adversely impacted by the recent disruption in the credit markets. However, if there is continued and expanded disruption in the credit markets, there can be no assurance that the Company’s investment portfolio will not be adversely affected in the future.
The Company’s available for sale investment securities are classified within Level 1 or Level 2 of the fair value hierarchy. These investment securities are valued using quoted market prices, broker or dealer quotations or other observable inputs. The fair value measurements of the Company’s available for sale investment securities are identified in the following table (in thousands):
                                 
            Fair Value Measurements at  
            Reporting Date using  
            Quoted Prices              
            In Active     Significant        
            Markets for     Other     Significant  
            Identical     Observable     Unobservable  
    June 30,     Assets     Inputs     Inputs  
    2008     (Level 1)     (Level 2)     (Level 3)  
Commercial paper
  $ 83,740     $     $ 83,740     $  
Asset-backed securities
    24,018             24,018        
U.S. government agency securities
    14,006             14,006        
Corporate debt securities
    10,871             10,871        
Money market fund
    10,371       10,371              
 
                       
 
  $ 143,006     $ 10,371     $ 132,635     $  
 
                       
Note 3. Stock-Based Compensation
During the three and six months ended June 30, 2008, the Company recorded compensation expense of approximately $1.9 million and $3.2 million, respectively. The stock-based compensation expense had no impact on the Company’s cash flows from operations and financing activities. As of June 30, 2008, the total unrecognized compensation cost related to non-vested stock options granted was $13.0 million and is expected to be recognized over a weighted average period of 2.7 years.
The fair value of the options granted is estimated on the date of grant using a Black-Scholes-Merton option pricing model with the following weighted-average assumptions:
                                 
    Three Months     Six Months     Three Months     Six Months  
    Ended     Ended     Ended     Ended  
    June 30,     June 30,     June 30,     June 30,  
    2007     2007     2008     2008  
Expected stock price volatility
    78.2 %     78.2 %     78.0 %     78.2 %
Risk free interest rate
    4.6 %     4.6 %     3.5 %     2.9 %
Expected life of options (years)
    6.25       6.25       6.25       6.25  
Expected annual dividend per share
  $ 0.00     $ 0.00     $ 0.00     $ 0.00  

 

- 9 -


Table of Contents

A summary of option activities related to the Company’s stock options for the six months ended June 30, 2008 is as follows:
                                 
                    Weighted        
            Weighted     Average        
    Number     Average     Remaining     Aggregate  
    of     Exercise     Contractual     Intrinsic  
    Shares     Price     Life     Value  
    (in thousands)                     (in millions)  
 
                               
Balance at December 31, 2007
    2,443.2     $ 8.08                  
Options granted
    789.7     $ 10.22                  
Options exercised
    (107.4 )   $ 2.75                  
Options forfeited
    (91.3 )   $ 9.66                  
 
                             
Balance at June 30, 2008
    3,034.2     $ 8.77     8.2 years   $ 8.2  
 
                             
Vested and unvested expected to vest, June 30, 2008
    2,824.8     $ 8.64     8.2 years   $ 8.0  
Exercisable at June 30, 2008
    1,048.4     $ 6.71     7.4 years   $ 4.8  
Note 4. Basic and Diluted Net Loss Attributable to Common Stockholders per Common Share
The Company calculates net loss per share in accordance with SFAS No. 128, Earnings Per Share. The Company has determined that its series A, B, C, and D redeemable convertible preferred stock represented participating securities in accordance with EITF 03-6, Participating Securities and the Two—Class Method under FASB Statement No. 128. However, because the Company operates at a loss, and losses are not allocated to the redeemable convertible preferred stock, the two-class method does not affect the Company’s calculation of earnings per share. 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.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands, except per share amounts)   2007     2008     2007     2008  
Statement of Operations
                               
Net loss attributable to common stockholders
  $ (9,706 )   $ (9,294 )   $ (19,442 )   $ (17,024 )
Net loss attributable to common stockholders per common share — basic and diluted
  $ (1.37 )   $ (0.41 )   $ (4.80 )   $ (0.76 )
Note 5. Comprehensive Loss
The components of comprehensive loss are as follows (in thousands):
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2007     2008     2007     2008  
 
Net loss
  $ (9,396 )   $ (9,294 )   $ (19,091 )   $ (17,024 )
Change in unrealized net gain on marketable securities
    96       (431 )     98       90  
 
                       
Comprehensive loss
  $ (9,300 )   $ (9,725 )   $ (18,993 )   $ (16,934 )
 
                       
Accumulated other comprehensive loss equals the unrealized net gains on marketable securities which are the only components of other comprehensive loss included in the Company’s financial statements.

 

- 10 -


Table of Contents

Note 6. Capital Structure
Common Stock
As of June 30, 2008, the Company was authorized to issue 50,000,000 shares of common stock. Dividends on common stock will be paid when, and if declared by the board of directors. Each holder of common stock is entitled to vote on all matters and is entitled to one vote for each share held.
Redeemable Convertible Preferred Stock
In March 2007, the Company issued 1,976,527 shares of its Series D redeemable convertible preferred stock for gross proceeds of $24.1 million. On June 5, 2007, all outstanding shares of the Company’s Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C redeemable convertible preferred stock and Series D redeemable convertible preferred stock were automatically converted into shares of common stock at the closing of the Company’s IPO.
Note 7. Development and Commercialization Agreement with Shire
In November 2007, the Company entered into a License and Collaboration Agreement with Shire. Under the agreement, the Company and Shire will jointly develop the Company’s three lead pharmacological chaperone compounds for lysosomal storage disorders: Amigal, Plicera and AT2220. The Company granted Shire the rights to commercialize these products outside the U.S. The Company retains all rights to its other programs and to develop and commercialize Amigal, Plicera and AT2220 in the U.S.
The Company received an initial, non-refundable license fee payment of $50 million from Shire. Joint development costs toward conduct of clinical trials and pursuing global approval of the three compounds will be shared 50/50 going forward. In addition, the Company is eligible to receive, for all three drug product candidates, aggregate potential milestone payments of up to $150 million if certain clinical and regulatory milestones are achieved for all three of the programs, and $240 million in sales-based milestones. The Company will also be eligible to receive tiered double-digit royalties on net sales of the products which are marketed outside of the U.S.
In accordance with the guidance in EITF 00-21, the Company determined that its various deliverables due under the collaboration agreement represent as a single unit of accounting for revenue recognition purposes. The initial, non-refundable upfront license fee payment of $50 million will be recognized on a straight line basis as Collaboration Revenue over the period of the performance obligations. The Company determined that the period of performance obligations is 18 years as contractually defined.
During the three and six months ended June 30, 2008, the Company recorded $0.7 million and $1.4 million, respectively, in Collaboration Revenue. As of June 30, 2008, the Company recorded $2.8 million of current deferred revenue and $45.4 million of long-term deferred revenue related to the $50 million upfront payment.
During the three and six months ended June 30, 2008, the Company recorded $3.1 million and $5.6 million, respectively, in Research Revenue. As of June 30, 2008, the Company recorded $0.5 million of current portion of deferred revenue related to reimbursed research and development costs.

 

- 11 -


Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel small molecule, orally-administered drugs, known as pharmacological chaperones, for the treatment of a range of human genetic diseases. Certain human diseases result from mutations in specific genes that, in many cases, lead to the production of proteins with reduced stability. Proteins with such mutations may not fold into their correct three-dimensional shape and are generally referred to as misfolded proteins. Misfolded proteins are often recognized by cells as having defects and, as a result, may be eliminated prior to reaching their intended location in the cell. The reduced biological activity of these proteins leads to impaired cellular function and ultimately to disease. Our novel approach to the treatment of human genetic diseases consists of using pharmacological chaperones that selectively bind to the target protein increasing the stability of the protein and helping it fold into the correct three-dimensional shape. This allows proper trafficking of the protein, thereby increasing protein activity, improving cellular function and potentially reducing cell stress. We are researching the applicability of our platform pharmacological chaperone technology to treating various diseases in our discovery program and developing the use of our lead compounds in our clinical development program.
We have three compounds in clinical development: Amigal (migalastat hydrochloride) for Fabry disease, Plicera (isofagomine tartrate) for Gaucher disease and AT2220 for Pompe disease.
Amigal: In August, Amicus announced the successful completion of an End of Phase 2 meeting for Amigal with the U.S. Food and Drug Administration (FDA). The FDA indicated that the data from the completed Phase 2 clinical trials of Amigal support the start of Phase 3 development. In addition, the FDA indicated that Amigal meets the criteria to be considered for accelerated approval and that it was not opposed to the use of a surrogate primary endpoint pending further discussion and final agreement on a Phase 3 trial design. Along with our partner Shire Human Genetic Therapies, Inc. (Shire), we are engaged in ongoing discussions with FDA and the European Medicines Agency (EMEA) regarding plans for a global Phase 3 clinical development program for Amigal. We expect to complete these interactions in the second half of 2008, and subject to the outcome of the discussions, we plan to initiate Phase 3 development of Amigal in the first half of 2009. In parallel with the regulatory process, 23 of the original 26 patients who participated in the Phase 2 clinical trial of Amigal will continue to be treated with Amigal in the voluntary Phase 2 extension study to monitor long term safety and efficacy and evaluate additional doses and dose regimens. Data from this extension study are expected to be available by Q1 2009 prior to finalization of the Phase 3 protocol. In addition, we expect to conduct clinical pharmacology studies to support the Phase 3 program.
Plicera: We have amended the protocol for the ongoing 6-month Phase 2 clinical trial of Plicera in patients naive to ERT to include modified doses and dose regimens. We expect the results of this study to be available in 2009. We have modified the development plan for Plicera to include a study of the pharmacokinetics of Plicera in Gaucher patients rather than conducting a longer-term Phase 2 study in patients switching from ERT to Plicera as previously disclosed. The design of this study is in development and we expect to provide additional guidance by the end of 2008.
AT2220: In the second quarter of 2008, we initiated a Phase 2 clinical trial of AT2220 (1-deoxynojirimycin HCl). We are conducting the study in adult Pompe patients in clinical centers throughout North America and Europe. In addition, we are conducting preclinical animal studies to evaluate the effects of administering AT2220 in combination with enzyme replacement therapy. Based on these results, we will consider initiating a clinical trial of the AT2220-ERT combination treatment in Pompe patients in 2009.
Research: Amicus is accelerating its investment in research and development to assess the potential for using pharmacological chaperones to treat a broader range of human genetic diseases beyond lysosomal storage diseases. As part of this effort, Amicus continues to conduct preclinical studies in Parkinson’s disease, funded in part by a grant from the Michael J. Fox Foundation. In addition to the work in Parkinson’s, Amicus is investing in new research aimed at evaluating disease targets for other neurodegenerative and metabolic disorders.
Costs associated with the clinical development of Amigal, Plicera and AT2220 and research conducted on other programs has caused us to generate significant losses to date, which we expect to continue. These activities are budgeted to expand over time and will require further resources if we are to be successful. From our inception in February 2002 through June 30, 2008, we have accumulated a deficit of $141.9 million. As we have not yet generated commercial sales revenue from any of our product candidates, our operating losses will continue and are likely to be substantial over the next several years. Although Shire Pharmaceuticals Ireland Ltd. (Shire) will be responsible for a portion of the costs associated with the clinical development of Amigal, Plicera and AT2220 as discussed below, we may need to obtain additional funds to further develop our research and development programs and product candidates.

 

- 12 -


Table of Contents

In June 2007, we completed our initial public offering (IPO) of 5,000,000 shares of common stock at a public offering price of $15.00 per share. Net cash proceeds from the IPO were approximately $68.1 million after deducting underwriting discounts, commissions and offering expenses payable by us. In connection with the closing of the IPO, all of the Company’s shares of redeemable convertible preferred stock outstanding at the time of the offering were automatically converted into 16,112,721 shares of common stock.
Collaboration with Shire
On November 7, 2007, we entered into a license and collaboration agreement with Shire. Under the agreement, Amicus and Shire will jointly develop Amicus’ three lead pharmacological chaperone compounds for lysosomal storage disorders: Amigal, Plicera and AT2220. We granted Shire the rights to commercialize these products outside the United States (U.S.). We will retain all rights to our other programs and to develop and commercialize Amigal, Plicera and AT2220 in the U.S.
We received an initial, non-refundable license fee payment of $50 million from Shire. Joint development costs associated with clinical development and pursuing global approval of the three compounds will be shared on a 50/50 basis going forward. In addition, we are eligible to receive, for all three drug product candidates, aggregate potential milestone payments of up to $150 million if certain clinical and regulatory milestones are achieved and $240 million in sales-based milestones. We are also eligible to receive tiered double-digit royalties on net sales of these products when marketed outside of the U.S.
Financial Operations Overview
Revenue
In connection with our collaboration agreement with Shire, Shire paid us an initial, non-refundable license fee of $50 million and reimbursed us for certain research and development costs associated with our lead clinical development programs. For the three and six months ended June 30, 2008, we recognized approximately $0.7 million and $1.4 million, respectively, of the license fee in Collaboration Revenue and $3.1 million and $5.6 million, respectively, of Research Revenue for reimbursed research and development costs. The license fee will be recognized as Collaboration Revenue over the 18 year performance obligation period. We have not generated any commercial sales revenue since our inception.
Research and Development Expenses
We expect our research and development expense to increase 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 and intellectual property license costs;
    manufacturing development costs;
    personnel related expenses, including salaries, benefits, travel, and related costs for the personnel involved in drug discovery and development;
    activities relating to regulatory filings and the advancement of our product candidates through preclinical studies and clinical trials; and
    facilities and other allocated expenses, which include direct and allocated expenses for rent, facility maintenance, as well as laboratory and other supplies.
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.

 

- 13 -


Table of Contents

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. From our inception in February 2002 through June 30, 2008, we have incurred research and development expense in the aggregate of $105.7 million.
The following table summarizes our principal product development programs, including the related stages of development for each product candidate in development, and the out-of-pocket, third party expenses incurred with respect to each product candidate (in thousands).
                                         
                                    Period from  
                                    February 4,
2002
 
    Three Months Ended     Six Months Ended     (inception)  
    June 30,     June 30,     to June 30,  
Product Candidate   2007     2008     2007     2008     2008  
Third party direct project expenses
                                       
Amigal (Fabry Disease — Phase 2)
  $ 1,815     $ 1,547     $ 2,406     $ 2,250     $ 23,280  
Plicera (Gaucher Disease — Phase 2)
    543       539       2,570       1,025       17,133  
AT2220 (Pompe Disease — Phase 2)
    695       459       1,633       944       9,132  
 
                             
Total third party direct project expenses
    3,053       2,545       6,609       4,219       49,545  
 
                             
 
                                       
Other project costs (1)
                                       
Personnel costs
    2,301       3,588       4,600       6,969       31,400  
Other costs (2)
    1,429       2,715       2,658       4,601       24,722  
 
                             
Total other project costs
    3,730       6,303       7,258       11,570       56,122  
 
                             
 
                                       
Total research and development costs
  $ 6,783     $ 8,848     $ 13,867     $ 15,789     $ 105,667  
 
                             
 
     
(1)   Other project costs are leveraged across multiple projects.
 
(2)   Other costs include facility, supply, overhead, and licensing costs that support multiple clinical and preclinical projects.
The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or the period, if any, in which material net cash inflows may commence from Amigal, Plicera, AT2220 or any of our other preclinical product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the conduct, duration and cost of clinical trials, which vary significantly over the life of a project as a result of differences arising during clinical development, including:
    the number of clinical sites included in the trials;
    the length of time required to enroll suitable patients;
    the number of patients that ultimately participate in the trials; and
    the results of our clinical trials; and
 
    any mandate by the FDA or other regulatory authority to conduct clinical trials beyond those currently anticipated.
Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of the foregoing variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the U.S. Food and Drug Administration (FDA) or other regulatory authorities were to require us to conduct clinical trials beyond those which we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Drug development may take several years and millions of dollars in development costs.

 

- 14 -


Table of Contents

General and Administrative Expense
General and administrative expense consists primarily of salaries and other related costs, including stock-based compensation expense, for persons serving in our executive, finance, accounting, information technology and human resource functions. Other general and administrative expense includes facility-related costs not otherwise included in research and development expense, promotional expenses, costs associated with industry and trade shows, and professional fees for legal services, including patent-related expense, and accounting services. We expect that our general and administrative expenses will increase as we add personnel, in part to meet the reporting obligations applicable to public companies. From our inception in February 2002 through June 30, 2008, we spent $48.4 million on general and administrative expense.
Interest Income and Interest Expense
Interest income consists of interest earned on our cash and cash equivalents and marketable securities. Interest expense consists of interest incurred on our capital lease facility.
Critical Accounting Policies and Significant Judgments and Estimates
The discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. 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.
While there were no significant changes during the quarter ended June 30, 2008 to the items that we disclosed as our significant accounting policies and estimates described in Note 2 to the Company’s financial statements as contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.
Revenue Recognition
The Company recognizes revenue in accordance with the Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements (SAB 101), as amended by Staff Accounting Bulletin No. 104, Revision of Topic 13 (SAB 104).
In determining the accounting for collaboration agreements, the Company follows the provisions of Emerging Issues Task Force (EITF) Issue 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21). EITF 00-21 provides guidance on whether an arrangement involves multiple revenue-generating deliverables that should be accounted for as a single unit of accounting or divided into separate units of accounting for revenue recognition purposes and, if this division is required, how the arrangement consideration should be allocated among the separate units of accounting. If the arrangement represents a single unit of accounting, the revenue recognition policy and the performance obligation period must be determined (if not already contractually defined) for the entire arrangement. If the arrangement represents separate units of accounting according to the EITF separation criteria, a revenue recognition policy must be determined for each unit. Revenues for non-refundable upfront license fee payments will be recognized on a straight line basis as Collaboration Revenue over the period of the performance obligations.

 

- 15 -


Table of Contents

Reimbursements for research and development costs under collaboration agreements are recognized as revenue in accordance with EITF Issue 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent (EITF 99-19). The revenue associated with these reimbursable amounts is included in Research Revenue and the costs associated with these reimbursable amounts are included in research and development expenses. The Company records these reimbursements as revenue and not as a reduction of research and development expenses as the Company has the risks and rewards as the principal in the research and development activities.
Accrued Expenses
When we are required to estimate accrued expenses because we have not yet been invoiced or otherwise notified of actual cost, we identify services that have been performed on our behalf and estimate the level of service performed and the associated cost incurred. The majority of our service providers invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us. Examples of estimated accrued expenses include:
    fees owed to contract research organizations in connection with preclinical and toxicology studies and clinical trials;
    fees owed to investigative sites in connection with clinical trials;
    fees owed to contract manufacturers in connection with the production of clinical trial materials;
    fees owed for professional services, and
    unpaid salaries, wages and benefits.
Stock-Based Compensation     
Effective January 1, 2006, we adopted SFAS No. 123(R), Share-Based Payment, using the fair value method, which requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Our financial statements as of and for the three and six months ended June 30, 2007 and 2008 reflect the impact of SFAS No. 123(R). 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 requisite service period of the last separately vesting portion of each award. Expected volatility was calculated based on a blended weighted average of historical information of our stock and the weighted average of historical information of similar public entities for which historical information was available. The average expected life was determined using the SEC shortcut approach as described in Staff Accounting Bulletin, Disclosure about Fair Value of Financial Instruments, which is the mid-point between the vesting date and the end of the contractual term. The risk-free interest rate is based on U.S. Treasury, zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant.
We account for equity instruments issued to non-employees in accordance with the provisions of Emerging Issues Task Force No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. The equity instruments, consisting of stock options, are valued using the Black-Scholes-Merton valuation model. The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest.
Basic and Diluted Net Loss Attributable to Common Stockholders per Common Share  
We calculated net loss per share in accordance with SFAS No. 128, Earnings Per Share. We have determined that the Series A, B, C, and D redeemable convertible preferred stock represented participating securities in accordance with EITF 03-6, Participating Securities and the Two — Class Method under FASB Statement No. 128. However, because we operate at a loss, and losses are not allocated to the redeemable convertible preferred stock, the two class method does not affect our calculation of earnings per share. We had a net loss for all periods presented; accordingly, the inclusion of common stock options and warrants would be anti-dilutive. Therefore, the weighted average shares used to calculate both basic and diluted earnings per share are the same.

 

- 16 -


Table of Contents

The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net loss attributable to common stockholders per common share and pro forma net loss attributable to common stockholders per common share:
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands, except per share amount)   2007     2008     2007     2008  
Historical
                               
Numerator:
                               
Net loss
  $ (9,396 )   $ (9,294 )   $ (19,091 )   $ (17,024 )
Deemed dividend
                       
Accretion of redeemable convertible preferred stock
    (310 )           (351 )      
 
                       
Net loss attributable to common stockholders
  $ (9,706 )   $ (9,294 )   $ (19,442 )   $ (17,024 )
 
                       
 
                               
Denominator:
                               
Weighted average common shares outstanding — basic and diluted
    7,083,748       22,467,198       4,051,709       22,439,893  
 
                       
Dilutive common stock equivalents would include the dilutive effect of convertible securities, common stock options and warrants for common stock equivalents. Potentially dilutive common stock equivalents totaled approximately 24.8 million and 25.6 million for the six months ended June 30, 2007 and 2008, respectively. Potentially dilutive common stock equivalents were excluded from the diluted earnings per share denominator for all periods because of their anti-dilutive effect.
Results of Operations
Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
Research and Development Expense. Research and development expense was $8.8 million for the three months ended June 30, 2008 representing an increase of $2.0 million or 29% from $6.8 million for the three months ended June 30, 2007. The variance was primarily attributable to higher personnel costs associated with headcount growth and an increase in consulting and lab supplies due to the continued progress of existing programs. We expect research and development expense to increase in the third and fourth quarters of 2008 as we move forward with clinical trials relating to our lead clinical development compounds and expand our discovery research activities.
General and Administrative Expense. General and administrative expense was $5.1 million for the three months ended June 30, 2008, an increase of $1.9 million or 59% from $3.2 million from the three months ended June 30, 2007. The variance was primarily attributable to higher personnel costs associated with headcount growth and to a lesser extent, legal, insurance and other costs associated with being a public company.
Interest Income and Interest Expense. Interest income was $1.3 million for the three months ended June 30, 2008, compared to $1.1 million for the three months ended June 30, 2007. The increase of $0.2 million or 18% was due to higher cash balances as a result of the receipt of the $50 million upfront licensing payment from Shire, partially offset by lower interest rates. Interest expense was $0.1 million for the three months ended June 30, 2008 and 2007.
Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
Research and Development Expense. Research and development expense was $15.8 million for the six months ended June 30, 2008 representing an increase of $1.9 million or 14% from $13.9 million for the six months ended June 30, 2007. The variance was primarily attributable to higher personnel costs associated with headcount growth and an increase in lab supplies due to the continued progress of existing programs, partially offset by lower contract manufacturing costs due to the timing of batch production. We expect research and development expense to increase in the third and fourth quarters of 2008 as we move forward with clinical trials relating to our lead clinical development compounds and expand our discovery research activities.

 

- 17 -


Table of Contents

General and Administrative Expense. General and administrative expense was $10.3 million for the six months ended June 30, 2008, an increase of $4.3 million or 72% from $6.0 million from the six months ended June 30, 2007. The variance was primarily attributable to higher personnel costs associated with headcount growth, increased administrative costs associated with being a public company.
Interest Income and Interest Expense. Interest income was $3.0 million for the six months ended June 30, 2008, compared to $1.8 million for the six months ended June 30, 2007. The increase of $1.2 million or 67% was due to higher cash balances as a result of the receipt of the $50 million upfront licensing payment from Shire, partially offset by lower interest rates. Interest expense was $0.1 million for the six months ended June 30, 2008, compared to $0.2 million for the six months ended June 30, 2007. The decrease in interest expense is attributable to a decrease in capital lease borrowings.
Liquidity and Capital Resources
Source of Liquidity
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 our inception in 2002. We have funded our operations principally with $148.7 million of proceeds from redeemable convertible preferred stock offerings, $75.0 million of gross proceeds from our IPO in June 2007 and $50.0 million from the non-refundable license fee from the Shire collaboration agreement in November 2007. The following table summarizes our significant funding sources as of June 30, 2008:
                         
                    Approximate  
Funding   Year     No. Shares     Amount(1)  
 
                  (in thousands)  
 
Series A Redeemable Convertible Preferred Stock
    2002       444,443     $ 2,500  
Series B Redeemable Convertible Preferred Stock
    2004, 2005, 2006, 2007       4,917,853       31,189  
Series C Redeemable Convertible Preferred Stock
    2005, 2006       5,820,020       54,999  
Series D Redeemable Convertible Preferred Stock
    2006, 2007       4,930,405       60,000  
Common Stock
    2007       5,000,000       75,000  
Upfront License Fee from Shire
    2007             50,000  
 
                   
 
                       
 
            21,112,721     $ 273,688  
 
                   
 
     
(1)   Represents gross proceeds
In addition, in conjunction with the Shire collaboration agreement, we have received reimbursement of research and development expenditures from the date of the agreement (November 7, 2007) through June 30, 2008 of $7.5 million.
As of June 30, 2008, we had cash, cash equivalents and marketable securities of $145.0 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.

 

- 18 -


Table of Contents

Net Cash Used in Operating Activities
Net cash used in operations for the six months ended June 30, 2007 was $21.1 million and consisted of the net loss for the six months ended June 30, 2007 of $19.1 million and the change in operating assets and liabilities of $4.5 million offset by non-cash charges for depreciation and amortization of $0.6 million, stock-based compensation of $1.8 million and the change in fair value of warrant liability of $0.1 million.
Net cash used in operations for the six months ended June 30, 2008 was $14.9 million due to the net loss for the six months ended June 30, 2008 of $17.0 million and a reduction in deferred revenue of $1.9 million, partially offset by non-cash charges for depreciation and amortization of $0.7 million and stock-based compensation of $3.2 million.
Net Cash Used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2007 was $57.0 million. Net cash used in investing activities reflects $99.5 million for the purchase of marketable securities and $0.4 million for the acquisition of property and equipment, partially offset by $42.9 million for the sale and redemption of marketable securities.
Net cash used in investing activities for the six months ended June 30, 2008 was $16.4 million. Net cash used in investing activities reflects $88.8 million for the purchase of marketable securities and $1.1 million for the acquisition of property and equipment, partially offset by $73.4 million for the sale and redemption of marketable securities.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2007 was $92.5 million, consisting primarily of $24.1 million from the issuance of preferred stock, $68.1 million from the issuance of common stock, $0.5 million from asset financing arrangements, and $0.4 million proceeds from exercise of stock options and warrants offset by payments of equipment debt financing obligations of $0.7 million.
Net cash used in financing activities for the six months ended June 30, 2008 was $0.5 million, consisting primarily of $0.8 million of payments of capital lease obligations partially offset by $0.3 million of proceeds from exercise of stock options.
 Funding Requirements
We expect to incur losses from operations for the foreseeable future primarily due to increasing research and development expenses, including expenses related to the hiring of personnel and additional clinical trials, and greater general and administrative expenses resulting from expanding our finance and administrative staff, adding infrastructure, and incurring additional costs related to being a public company. Our future capital requirements will depend on a number of factors, including:
    the continued progress of our research and development of products,
    the progress, results, duration and cost of discovery, preclinical development, laboratory testing and clinical trials for our product candidates,
    the timing and outcome of regulatory review of our product candidates,
    the number and development requirements of other product candidates that we pursue,
    the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims and other intellectual property rights,
    the availability of financing,
    our success in developing markets for our product candidates,
    the costs of commercialization activities, including product marketing sales and distribution,
    the acquisition of licenses to new products or compounds, and
    the status of competitive products.

 

- 19 -


Table of Contents

We do not anticipate that we will generate revenue from commercial sales for at least the next several years, if at all. In the absence of additional funding, we expect our continuing operating losses to result in increases in our cash used in operations over the next several quarters and years. However, we believe that our existing cash and cash equivalents and short-term investments, together with the expected reimbursement of research and development expenses and research milestones from our collaboration with Shire, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements at least until 2011.
Financial Uncertainties Related to Potential Future Payments
Milestone Payments
We have acquired rights to develop and commercialize our product candidates through licenses granted by various parties. While our license agreements for Amigal and AT2220 do not contain milestone payment obligations, two of our agreements related to Plicera do require us to make such payments if certain specified pre-commercialization events occur.
The events that trigger these payments include:
    completion of Phase 2 clinical trials;
    commencement of Phase 3 clinical trials;
    submission of an NDA to the FDA or foreign equivalents; and
 
    receipt of marketing approval from the FDA or foreign equivalents.
Upon the satisfaction of these milestones and assuming successful development of Plicera, we may be obligated, under the agreements that we have in place, to make future milestone payments aggregating up to approximately $7.9 million. However, such potential milestone payments are subject to many uncertain variables that would cause such payments, if any, to vary in size.
Royalties
Under our license agreements, if we owe royalties on net sales for one of our products to more than one licensor, then we have the right to reduce the royalties owed to one licensor for royalties paid to another. The amount of royalties to be offset is generally limited in each license and can vary under each agreement. For Amigal and AT2220, we will owe royalties only to Mt. Sinai School of Medicine (MSSM). We expect to pay royalties to all three licensors with respect to Plicera. To date, we have not made any royalty payments on sales of our products and believe we are several years away from selling any products that would require us to make any such royalty payments.
Whether we will be obligated to make milestone or royalty payments in the future is subject to the success of our product development efforts and, accordingly, is inherently uncertain. In conjunction with the $50 million upfront payment from Shire in November 2007, we recorded an accrual of $2.7 million for our best estimate of royalties due to MSSM on the upfront payment.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
We do not use derivative financial instruments in our investment portfolio. We regularly invest 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. We believe that the market risk arising from our holdings of these financial instruments is minimal. We do not have exposure to market risks associated with changes in interest rates, as we have no variable interest rate debt outstanding. Although we do not believe we have any material exposure to market risks associated with interest rates, we may experience reinvestment risk as fixed income securities mature and are reinvested in securities bearing lower interest rates.

 

- 20 -


Table of Contents

The recent and precipitous decline in the market value of certain securities backed by residential mortgage loans has led to a large liquidity crisis affecting the broader U.S. housing market, the financial services industry and global financial markets. Investors holding many of these and related securities have experienced substantial decreases in asset valuations and uncertain secondary market liquidity. Furthermore, credit rating authorities have, in many cases, been slow to respond to the rapid changes in the underlying value of certain securities and pervasive market illiquidity, regarding these securities.
As a result, this “credit crisis” may have a potential impact on the determination of the fair value of financial instruments or possibly require impairments in the future should the value of certain investments suffer a decline in value which is determined to be other than temporary. We currently do not believe that any change in the market value of fixed income investments in our portfolio is material, nor does it warrant a determination that there was any other than temporary impairment.
ITEM 4T. 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 Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer), with the participation of our management. Based on that evaluation, the Chief Executive Officer and the Chief 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 Chief Executive Officer and Chief 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 that occurred during the 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
We are not a party to any material legal proceedings.
ITEM 1A. RISK FACTORS
There have been no material changes with respect to the Risk Factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
None.
Use of Proceeds
Our initial public offering of common stock was effected through a Registration Statement on Form S-1
(File No. 333-141700) that was declared effective by the Securities and Exchange Commission on May 30, 2007, which registered an aggregate of 5,750,000 shares of our common stock. On June 5, 2007, at the closing of the offering, 5,000,000 shares of common stock were sold on our behalf at an initial public offering price of $15.00 per share, for aggregate offering proceeds of $75.0 million. The initial public offering was underwritten and managed by Morgan Stanley, Merrill Lynch & Co., JPMorgan, Lazard Capital Markets and Pacific Growth Equities, LLC. Following the sale of the 5,000,000 shares, the public offering terminated.

 

- 21 -


Table of Contents

We paid underwriting discounts totaling approximately $5.3 million and incurred additional costs of approximately $1.6 million in connection with the offering, for total expenses of approximately $6.9 million. After deducting underwriting discounts and offering expenses, the net offering proceeds to us were approximately $68.1 million. No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning ten percent or more of any class of our equity securities or to any other affiliates.
As of August 1, 2008, we had invested the $68.1 million in net proceeds from the offering in money market funds and in investment-grade, interest bearing instruments, pending their use. Through August 1, 2008, we have not used the net proceeds from the offering. We intend to use the proceeds for clinical development of our drug candidates, for research and development activities relating to additional preclinical programs and to fund working capital and other general corporate purposes, which may include the acquisition or licensing of complementary technologies, products or businesses.
Issuer Purchases of Equity Securities
The following table sets forth purchases of our common stock for the three months ended June, 2008:
                                 
                    (c) Total number of        
                  shares purchased as     (d) Maximum number of shares  
    (a) Total number     (b) Average     part of publicly     that may yet be  
    of shares     Price Paid     announced plans or     purchased under the plans or  
Period   purchased     per Share     programs     programs  
 
                               
April 1, 2008 – April 30, 2008
    220     $ 10.89             6,615  
 
                               
May 1, 2008 – May 31, 2008
    220     $ 10.40             6,395  
 
                               
June 1, 2008 – June 30, 2008
    220     $ 10.20             6,175  
 
                           
 
                               
Total
    660                        
 
                           
Pursuant to a restricted stock award dated October 2, 2006 between Amicus Therapeutics and James E. Dentzer, Chief Financial Officer, Mr. Dentzer was granted 40,000 restricted shares, 25% of which vested on October 2, 2007. The remaining shares vest in a series of thirty-six successive equal monthly installments commencing on November 1, 2007 and ending on November 1, 2010, subject generally to Mr. Dentzer’s continued employment with the Company. In order to comply with the minimum statutory federal tax withholding rate of 25% plus 1.45% for Medicare, Mr. Dentzer surrenders to us a portion of his vested shares on each vesting date, representing 26.45% of the total value of the shares then vested.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.

 

- 22 -


Table of Contents

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a)   The Company’s Annual Meeting of Stockholders was held on Tuesday, June 10, 2008.
 
(b)   The results of votes of security holders for the election of Class I directors are as follows;
                 
Election of Directors   For     Withheld  
Alexander E. Barkas, Ph.D.
    19,949,047       266,584  
Stephen Bloch, M.D.
    19,949,047       266,584  
P. Sherrill Neff
    19,750,330       298,713  
John F. Crowley, Donald J. Hayden, Michael G. Raab, Glenn P. Sblendorio, James N. Topper, M.D., Ph.D. and Gregory M. Weinhoff, M.D. continued as directors after the annual meeting.
(c)   The results of votes of security holders for the approval of the Amicus Therapeutics, Inc. Amended and Restated 2007 Equity Incentive Plan are as follows:
                         
For   Against     Abstain     Broker Non-Votes  
16,497,285
    1,771,352       253,521       1,532,885  
The results of votes of security holders for the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm are as follows:
                         
For   Against     Abstain     Broker Non-Votes  
19,778,669
    8,979       261,396        
ITEM 5. OTHER INFORMATION
None.

 

- 23 -


Table of Contents

ITEM 6. EXHIBITS
     
Exhibit    
Number   Description
   
 
  3.1 (1)
 
Restated Certificate of Incorporation
   
 
  3.2 (2)
 
Amended and Restated By-laws
   
 
10.1 (3)
 
Amicus Therapeutics, Inc. 2007 Amended and Restated Equity Incentive Plan
 
 
 
10.2 (3)
 
Letter Agreement dated June 10, 2008 with Dr. David Lockhart
 
 
 
31.1*
 
Certification of Chief 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 Chief 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 Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
(1)   Incorporated by reference to Exhibit 3.2 to our Registration Statement on Form S-1
 
(2)   Incorporated by reference to Exhibit 3.4 to our Registration Statement on Form S-1
 
(3)   Incorporated by reference to Exhibits 10.1 and 10.2, respectively, to the Current Report on Form 8-K filed June 10, 2008
 
*   These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of Amicus Therapeutics, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

- 24 -


Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  AMICUS THERAPEUTICS, INC.
 
 
Date: August 7, 2008  By:   /s/ JOHN F. CROWLEY    
    John F. Crowley   
    President and Chief Executive Officer (Principal Executive Officer)   
 
Date: August 7, 2008   By:   /s/ JAMES E. DENTZER    
    James E. Dentzer   
    Chief Financial Officer
(Principal Financial and Accounting Officer) 
 

 

- 25 -


Table of Contents

         
INDEX TO EXHIBITS
     
Exhibit    
Number   Description
 
 
 
  3.1 (1)
 
Restated Certificate of Incorporation
 
 
 
  3.2 (2)
 
Amended and Restated By-laws
 
 
 
10.1 (3)
 
Amicus Therapeutics, Inc. 2007 Amended and Restated Equity Incentive Plan
 
 
 
10.2 (3)
 
Letter Agreement dated June 10, 2008 with Dr. David Lockhart
 
 
 
31.1*
 
Certification of Chief 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 Chief 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 Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
(1)   Incorporated by reference to Exhibit 3.2 to our Registration Statement on Form S-1
 
(2)   Incorporated by reference to Exhibit 3.4 to our Registration Statement on Form S-1
 
(3)   Incorporated by reference to Exhibits 10.1 and 10.2, respectively, to the Current Report on Form 8-K filed June 10, 2008
 
*   These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of Amicus Therapeutics, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

- 26 -

Filed by Bowne Pure Compliance
Exhibit 31.1
CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION BY CHIEF EXECUTIVE OFFICER
I, John F. Crowley, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Amicus Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
Date: August 7, 2008
  /s/ John F. Crowley
 
John F. Crowley
   
 
  President and Chief Executive Officer    

 

 

Filed by Bowne Pure Compliance
Exhibit 31.2
CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION BY CHIEF FINANCIAL OFFICER
I, James E. Dentzer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Amicus Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
Date: August 7, 2008
  /s/ James E. Dentzer
 
James E. Dentzer
   
 
  Chief Financial Officer    

 

 

Filed by Bowne Pure Compliance
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Amicus Therapeutics, Inc. (the “Company”), that, to his knowledge, the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2008, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. This written statement is being furnished to the Securities and Exchange Commission as an exhibit to such Form 10-Q. A signed original of this statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
             
Date: August 7, 2008
  By:   /s/ John F. Crowley
 
John F. Crowley
   
 
      President and Chief Executive Officer    
 
           
Date: August 7, 2008
  By:   /s/ James E. Dentzer    
 
           
 
      James E. Dentzer    
 
      Chief Financial Officer