Edgar Filing: AMICUS THERAPEUTICS INC

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2012

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		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

1 Cedar Brook Drive, Cranbury, NJ 08512

(Address of Principal Executive Offices and Zip Code)

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

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

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

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

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller Reporting Company x

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

The number of shares outstanding of the registrant’s common stock, $.01 par value per share, as of August 2, 2012 was 49,339,581 shares.

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AMICUS THERAPEUTICS, INC

Form 10-Q for the Quarterly Period Ended June 30, 2012

			Page

PART I.	FINANCIAL INFORMATION		4

Item 1.		Financial Statements (unaudited)	4

		Consolidated Balance Sheets as of December 31, 2011 and June 30, 2012	4

		Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2012, and period February 4, 2002 (inception) to June 30, 2012	5

		Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2011 and 2012, and period February 4, 2002 (inception) to June 30, 2012	6

		Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2011 and 2012, and period February 4, 2002 (inception) to June 30, 2012	7

		Notes to Consolidated Financial Statements	9

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.		Quantitative and Qualitative Disclosures about Market Risk	35

Item 4.		Controls and Procedures	35

PART II.	OTHER INFORMATION		36

Item 1.		Legal Proceedings	36

Item 1A.		Risk Factors	36

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	61

Item 3.		Defaults Upon Senior Securities	63

Item 4.		Mine Safety Disclosures	63

Item 5.		Other Information	63

Item 6.		Exhibits	64

SIGNATURES			65

INDEX TO EXHIBITS			66

We have filed applications to register certain trademarks in the United States and abroad, including AMICUSTM and AMICUS THERAPEUTICSTM (and design).

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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:

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

· the continuation of our collaboration with GlaxoSmithKline PLC and GSK’s achievement of milestone payments thereunder;

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

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

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

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

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

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

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

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

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in Part II Item 1A — “Risk Factors” of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 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.

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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,
	2011			2012
Assets:
Current assets:
Cash and cash equivalents	$	25,668		$	28,858
Investments in marketable securities	30,034			66,914
Receivable due from GSK	5,043			7,237
Prepaid expenses and other current assets	5,903			2,658
Total current assets	66,648			105,667

Property and equipment, less accumulated depreciation and amortization of $9,507 and $7,658 at December 31, 2011 and June 30, 2012, respectively	2,438			5,489
Other non-current assets	709			442
Total Assets	$	69,795		$	111,598

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	9,708		$	9,067
Current portion of deferred revenue	8,504			7,929
Current portion of secured loan	1,044			816
Total current liabilities	19,256			17,812

Deferred revenue, less current portion	18,999			15,679
Warrant liability	1,948			4,442
Secured loan, less current portion	—			498

Commitments and contingencies

Stockholders’ equity:
Common stock, $.01 par value, 125,000,000 shares authorized, 34,654,206 shares issued and outstanding at December 31, 2011, 125,000,000 shares authorized, 46,377,897 shares issued and outstanding at June 30, 2012	407			524
Additional paid-in capital	299,285			365,210
Accumulated other comprehensive income	4			17
Deficit accumulated during the development stage	(270,104		)	(292,584		)
Total stockholders’ equity	29,592			73,167
Total Liabilities and Stockholders’ Equity	$	69,795		$	111,598

See accompanying notes to consolidated financial statements

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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						Six Months						(inception)
	Ended June 30,						Ended June 30,						to June 30,
	2011			2012			2011			2012			2012
Revenue:
Research revenue	$	2,380		$	5,477		$	6,686		$	11,591		$	57,493
Collaboration and milestone revenue	1,660			5,160			3,320			6,820			64,382
Total revenue	$	4,040		$	10,637		$	10,006		$	18,411		$	121,875

Operating Expenses:
Research and development	$	11,618		$	13,723		$	22,743		$	27,727		$	293,347
General and administrative	6,720			5,819			11,122			9,914			123,163
Restructuring charges	—			—			—			—			1,522
Impairment of leasehold improvements	—			—			—			—			1,030
Depreciation and amortization	426			442			864			862			10,925
In-process research and development	—			—			—			—			418
Total operating expenses	18,764			19,984			34,729			38,503			430,405
Loss from operations	(14,724		)	(9,347		)	(24,723		)	(20,092		)	(308,530		)
Other income (expenses):
Interest income	46			116			105			143			14,216
Interest expense	(41		)	(15		)	(89		)	(58		)	(2,391		)
Change in fair value of warrant liability	2,078			(118		)	(1,354		)	(2,494		)	(1,594		)
Other income	—			21			70			21			252
Loss before tax benefit	(12,641		)	(9,343		)	(25,991		)	(22,480		)	(298,047		)
Benefit from income taxes	—			—			—			—			5,463
Net loss	(12,641		)	(9,343		)	(25,991		)	(22,480		)	(292,584		)
Deemed dividend	—			—			—			—			(19,424		)
Preferred stock accretion	—			—			—			—			(802		)
Net loss attributable to common stockholders	$	(12,641	)	$	(9,343	)	$	(25,991	)	$	(22,480	)	$	(312,810	)
Net loss attributable to common stockholders per common shares — basic and diluted	$	(0.37	)	$	(0.20	)	$	(0.75	)	$	(0.53	)
Weighted-average common shares outstanding — basic and diluted	34,530,693			46,870,067			34,514,947			42,103,642

See accompanying notes to consolidated financial statements

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Amicus Therapeutics, Inc.

(a development stage company)

Consolidated Statements of Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)

													Period from
													February 4,
													2002
	Three Months						Six Months						(inception)
	Ended June 30,						Ended June 30,						to June 30,
	2011			2012			2011			2012			2012

Net loss	$	(12,641	)	$	(9,343	)	$	(25,991	)	$	(22,480	)	$	(292,584	)

Other comprehensive income/(loss):

Unrealized gain (loss) on available-for-sale securities	29			(20		)	29			13			17

Other comprehensive income/(loss), before income taxes	29			(20		)	29			13			17
Provision for income taxes related to other comprehensive income/(loss) items (Note 1)	—			—			—			—			—

Other comprehensive income/(loss)	$	29		$	(20	)	$	29		$	13		$	17

Comprehensive loss	$	(12,612	)	$	(9,363	)	$	(25,962	)	$	(22,467	)	$	(292,567	)

Note 1 — Taxes have not been accrued on unrealized gain on securities as the Company is in a loss position for all periods presented.

See accompanying notes to consolidated financial statements

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Amicus Therapeutics, Inc.

(a development stage company)

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

							Period from
							February 4, 2002
	Six Months						(inception) to
	Ended June 30,						June 30,
	2011			2012			2012
Operating activities
Net loss	$	(25,991	)	$	(22,480	)	$	(292,584	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense	—			—			525
Depreciation and amortization	864			862			10,925
Amortization of non-cash compensation	—			—			522
Stock-based compensation - employees	5,302			3,145			38,883
Stock-based compensation - non-employees	—			—			853
Stock-based license payments	—			—			1,220
Change in fair value of warrant liability	1,354			2,494			1,594
Loss on disposal of asset	—			27			387
Impairment of leasehold improvements	—			—			1,030
Non-cash charge for in-process research and development	—			—			418
Debt instrument convertible beneficial conversion feature	—			—			135
Changes in operating assets and liabilities:
Receivable due from GSK	(1,977		)	(2,194		)	(7,237		)
Prepaid expenses and other current assets	(840		)	3,245			(2,658		)
Other non-current assets	—			267			(463		)
Accounts payable and accrued expenses	(1,271		)	(641		)	9,067
Deferred revenue	(1,354		)	(3,895		)	23,608
Net cash used in operating activities	(23,913		)	(19,170		)	(213,775		)
Investing activities
Sale and redemption of marketable securities	57,224			34,839			706,927
Purchases of marketable securities	(36,594		)	(71,706		)	(773,942		)
Purchases of property and equipment	(182		)	(3,939		)	(17,829		)
Net cash provided by/(used in) investing activities	20,448			(40,806		)	(84,844		)
Financing activities
Proceeds from the issuance of preferred stock, net of issuance costs	—			—			143,022
Proceeds from the issuance of common stock and warrants, net of issuance costs	—			62,057			175,303
Proceeds from the issuance of convertible notes	—			—			5,000
Payments of capital lease obligations	(40		)	—			(5,587		)
Payments of secured loan agreement	(626		)	(726		)	(3,440		)
Proceeds from exercise of stock options	348			840			2,551
Proceeds from exercise of warrants (common and preferred)	—			—			264
Proceeds from capital asset financing arrangement	—			—			5,611
Proceeds from secured loan agreement	—			995			4,753
Net cash (used in) /provided by financing activities	(318		)	63,166			327,477
Net (decrease) increase in cash and cash equivalents	(3,783		)	3,190			28,858
Cash and cash equivalents at beginning of period	29,572			25,668			—
Cash and cash equivalents at end of period	$	25,789		$	28,858		$	28,858

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Amicus Therapeutics, Inc.

(a development stage company)

Consolidated Statements of Cash Flows (continued)

(Unaudited)

(in thousands)

					Period from
					February 4, 2002
	Six Months				(inception) to
	Ended June 30,				June 30,
	2011		2012		2012
Supplemental disclosures of cash flow information
Cash paid during the period for interest	$	89	$	50	$	2,083
Non-cash activities
Conversion of notes payable to preferred stock	$	—	$	—	$	5,000
Conversion of preferred stock to common stock	$	—	$	—	$	148,951
Accretion of redeemable convertible preferred stock	$	—	$	—	$	802
Beneficial conversion feature related to the issuance of Series C redeemable convertible preferred stock	$	—	$	—	$	19,424

See accompanying notes to consolidated financial statements

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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 and is a biopharmaceutical company focused on the discovery, development and commercialization of orally-administered, small molecule drugs known as pharmacological chaperones, a novel, first-in-class approach to treating a broad range of diseases including lysosomal storage diseases and diseases of neurodegeneration. The Company’s activities since inception have consisted principally of raising capital, establishing facilities and performing research and development. Accordingly, the Company is considered to be in the development stage.

On July 17, 2012, the Company entered into an Amended and Restated License and Expanded Collaboration Agreement (the “Expanded Collaboration Agreement”) with GlaxoSmithKline PLC (GSK) pursuant to which the Company and GSK will continue to develop and commercialize migalastat HCI, currently in Phase 3 development for the treatment of Fabry disease. The Expanded Collaboration Agreement amends and replaces in its entirety the License and Collaboration Agreement entered into between the Company and GSK on October 28, 2010 (the “Original Collaboration Agreement”) for the development and commercialization of migalastat HCl. Under the terms of the Expanded Collaboration Agreement, the Company and GSK will co-develop all formulations of migalastat HCl for Fabry disease, including the development of migalastat HCl co-formulated with an investigational enzyme replacement therapy (ERT) for Fabry disease (the “Co-formulated Product”) in collaboration with another GSK collaborator JCR Pharmaceutical Co., Ltd. The Company will commercialize all migalastat HCl products for Fabry disease in the United States while GSK will commercialize all such products in the rest of the world.

GSK is eligible to receive U.S. regulatory approval milestones totaling $20 million for migalastat HCl monotherapy and migalastat HCl for co-administration with ERT, and additional regulatory approval and product launch milestone payments totaling up to $35 million within seven years following the launch of the Co-formulated Product. The Company will also be responsible for certain pass-through milestone payments and single-digit royalties on the net U.S. sales of the Co-formulated Product that GSK must pay to a third party. In addition, the Company is no longer eligible to receive any milestones or royalties it would have been eligible to receive under the Original Collaboration Agreement other than a $3.5 million clinical development milestone achieved in the second quarter of 2012 and expected to be paid by GSK to Amicus in the third quarter of 2012.

The Company and GSK will continue to jointly fund development costs for all formulations of migalastat HCl in accordance with agreed upon development plans pursuant to which the Company and GSK will fund 25% and 75% of such costs, respectively, for the monotherapy and co-administration development of migalastat HCl for the remainder of 2012 and 40% and 60%, respectively, thereafter. Effective upon entry into the Expanded Collaboration Agreement, costs for the development of the Co-formulated Product are also split 40% and 60% between Amicus and GSK, respectively.

Additionally, simultaneous with entry into the Expanded Collaboration Agreement, the Company and GSK entered into a Stock Purchase Agreement (the “SPA”) pursuant to which GSK will purchase approximately 2.9 million shares of Amicus common stock at a price of $6.30 per share. The total value of this equity investment to the Company is approximately $18.6 million and increases GSK’s ownership position in the Company to 19.9%. GSK purchased approximately 6.9 million shares for an aggregate investment of approximately $31 million in connection with entry into the Original Collaboration Agreement in 2010.

For further information, see “— Note 7. Collaborative Agreements” and “— Note 9. Subsequent Events.”

The Company had an accumulated deficit of approximately $292.6 million at June 30, 2012 and anticipates incurring losses through the year 2012 and beyond. The Company has not yet generated commercial sales revenue and has been able to fund its operating losses to date through the sale of its redeemable convertible preferred stock, issuance of convertible notes, net proceeds from our initial public offering (IPO) and subsequent stock offerings, payments from partners during the terms of collaboration agreements and other financing arrangements. In March 2010, the Company sold 4.95 million shares of its common stock and warrants to purchase 1.85 million shares of common stock in a registered direct offering to a select group of institutional investors for net proceeds of $17.1

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million. In October 2010, the Company sold 6.87 million shares of its common stock as part of the Original Collaboration Agreement with GSK for proceeds of $31 million. In March 2012, the Company sold 11.5 million shares of its common stock in a stock offering for net proceeds of $62.0 million. The Company believes that its existing cash and cash equivalents and short-term investments will be sufficient to cover its cash flow requirements for 2012.

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, 2011. 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, 2011.

Revenue Recognition

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

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

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

The revenue associated with reimbursements for research and development costs under collaboration agreements 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 not commenced its planned principal operations (i.e., selling commercial products) and is a development stage enterprise, therefore development activities are part of its ongoing central operations.

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The Company’s collaboration agreement with GSK provided for, and any future collaborative agreements the Company may enter into also may provide for, contingent milestone payments. In order to determine the revenue recognition for these contingent milestones, the Company evaluates the contingent milestones using the criteria as provided by the Financial Accounting Standards Boards (FASB) guidance on the milestone method of revenue recognition at the inception of a collaboration agreement. The criteria requires that (i) the Company determines if the milestone is commensurate with either its performance to achieve the milestone or the enhancement of value resulting from the Company’s activities to achieve the milestone, (ii) the milestone be related to past performance, and (iii) the milestone be reasonable relative to all deliverable and payment terms of the collaboration arrangement. If these criteria are met then the contingent milestones can be considered as substantive milestones and will be recognized as revenue in the period that the milestone is achieved.

Fair Value Measurements

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

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

New Accounting Standards

In June 2011, the Financial Accounting Standards Board (FASB) amended its guidance on the presentation of comprehensive income in financial statements to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items that are recorded in other comprehensive income. The new accounting guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The provisions of this guidance are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Other than a change in presentation, the implementation of this accounting pronouncement did not have a material impact on our financial statements.

In May 2011, the FASB amended the FASB Accounting Standards Codification to converge the fair value measurement guidance in U.S. GAAP and International Financial Reporting Standards. Some of the amendments clarify the application of existing fair value measurement requirements, while other amendments change particular principles in fair value measurement guidance. In addition, the amendments require additional fair value disclosures. The amendments are effective for fiscal year 2012 and should be applied prospectively. The Company is currently evaluating the impact, if any, that the provisions of the amendments will have on its consolidated results of operations or financial position.

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Note 2. Cash, Cash Equivalents and Available-for-Sale Investments

As of June 30, 2012, the Company held $28.9 million in cash and cash equivalents and $66.9 million of available-for-sale investment securities which are reported at fair value on the Company’s balance sheet. Unrealized holding gains and losses are reported within accumulated other comprehensive income/(loss) as a separate component of stockholders’ 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 adjustments have been recorded.

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

Cash and available for sale securities consisted of the following as of December 31, 2011 and June 30, 2012 (in thousands):

	As of December 31, 2011
	Cost		Unrealized Gain		Unrealized Loss			Fair Value
Cash balances	$	25,668	$	—	$	—		$	25,668
U.S. government agency securities	2,000		—		—			2,000
Corporate debt securities	13,943		—		(8		)	13,935
Commercial paper	13,737		12		—			13,749
Certificate of deposit	350		—		—			350
	$	55,698	$	12	$	(8	)	$	55,702

Included in cash and cash equivalents	$	25,668	$	—	$	—		$	25,668
Included in marketable securities	30,030		12		(8		)	30,034
Total cash and available for sale securities	$	55,698	$	12	$	(8	)	$	55,702

	As of June 30, 2012
	Cost		Unrealized Gain		Unrealized Loss			Fair Value
Cash balances	$	28,858	$	—	$	—		$	28,858
Corporate debt securities	41,602		1		(28		)	41,575
Commercial paper	24,945		44		—			24,989
Certificate of deposit	350		—		—			350
	$	95,755	$	45	$	(28	)	$	95,772

Included in cash and cash equivalents	$	28,858	$	—	$	—		$	28,858
Included in marketable securities	66,897		45		(28		)	66,914
Total cash and available for sale securities	$	95,755	$	45	$	(28	)	$	95,772

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Unrealized gains and losses are reported as a component of accumulated other comprehensive income/(loss) in stockholders’ equity. For the year ended December 31, 2011, unrealized holding gains included in accumulated other comprehensive income was $4 thousand. For the six months ended June 30, 2012, unrealized holding gains included in accumulated other comprehensive income was $13 thousand.

For the year ended December 31, 2011 and the six months ended June 30, 2012, there were no realized gains or losses. The cost of securities sold is based on the specific identification method.

Unrealized loss positions in the available for sale securities as of December 31, 2011 and June 30, 2012 reflect temporary impairments that have not been recognized and have been in a loss position for less than twelve months. The fair value of these available for sale securities in unrealized loss positions was $13.2 million and $37.2 million as of December 31, 2011 and June 30, 2012, respectively.

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

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

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

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except per share amounts)	2011			2012			2011			2012
Statement of Operations
Net loss attributable to common stockholders	$	(12,641	)	$	(9,343	)	$	(25,991	)	$	(22,480	)
Net loss attributable to common stockholders per common share — basic and diluted	$	(0.37	)	$	(0.20	)	$	(0.75	)	$	(0.53	)

Dilutive common stock equivalents would include the dilutive effect of common stock options and warrants for common stock equivalents. Potentially dilutive common stock equivalents totaled approximately 7.6 million and 9.1 million for the six months ended June 30, 2011 and 2012, respectively. Potentially dilutive common stock equivalents were excluded from the diluted earnings per share denominator for all periods because of their anti-dilutive effect.

Note 4. Stockholders’ Equity

Common Stock and Warrants

On July 17, 2012, Amicus and GSK entered into the SPA pursuant to which GSK purchased 2.9 million unregistered shares of Amicus common stock at a price of $6.30 per share. The total purchase price for these shares was $18.6 million and increases GSK’s ownership position in the Company to 19.9%. The Company received all proceeds from the sale of such shares on July 26, 2012.

In March 2012, the Company sold 11.5 million shares of its common stock at a public offering price of $5.70 through a Registration Statement on Form S-3 that was declared effective by the SEC on May 27, 2009. The aggregate offering proceeds were $65.6 million.

In October 2010, GSK purchased approximately 6.9 million shares of the Company’s common stock at $4.56 per share in connection with the Original Collaboration Agreement. The total value of this equity investment was approximately $31 million.

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In March 2010, the Company sold 4.9 million shares of its common stock and warrants to purchase 1.9 million shares of common stock in a registered direct offering to a selected group of institutional investors through a Registration Statement on Form S-3 that was declared effective by the SEC on May 27, 2009. The shares of common stock and warrants were sold in units consisting of one share of common stock and one warrant to purchase 0.375 shares of common stock at a price of $3.74 per unit. The warrants have a term of four years and are exercisable any time on or after the six month anniversary of the date they were issued, at an exercise price of $4.43 per share. The aggregate offering proceeds were $18.5 million.

Stock Option Plans

During the three and six months ended June 30, 2012, the Company recorded compensation expense of approximately $1.8 million and $3.1 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, 2012, the total unrecognized compensation cost related to non-vested stock options granted was $9.6 million and is expected to be recognized over a weighted average period of 2.6 years.

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

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2011			2012			2011			2012
Expected stock price volatility	78.4		%	77.0		%	78.8		%	77.5		%
Risk free interest rate	2.1		%	1.1		%	2.2		%	0.7		%
Expected life of options (years)	6.25			6.25			6.25			6.25
Expected annual dividend per share	$	0.00		$	0.00		$	0.00		$	0.00

A summary of option activities related to the Company’s stock options for the six months ended June 30, 2012 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, 2011	6,653.5		$	6.87
Options granted	1,395.1		$	6.15
Options exercised	(223.7	)	$	3.77
Options forfeited	(589.8	)	$	7.97
Balance at June 30, 2012	7,235.1		$	6.74	7.5 years	$	3.5

Vested and unvested expected to vest, June 30, 2012	6,837.3		$	6.79	7.4 years	$	3.4
Exercisable at June 30, 2012	4,001.0		$	7.59	6.3 years	$	2.0

Note 5. Short-Term Borrowings and Long-Term Debt

In May 2009, the Company entered into a loan and security agreement with Silicon Valley Bank (SVB) that provides for up to $4 million of equipment financing through October 2012 (the “2009 Loan Agreement”). Borrowings under the agreement are collateralized by equipment purchased with the proceeds of the loan and bear interest at a fixed rate of approximately 9%. The 2009 Loan Agreement contained customary terms and

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conditions, including a financial covenant whereby the Company must maintain a minimum amount of liquidity measured at the end of each month where unrestricted cash, cash equivalents, and marketable securities, is greater than $20 million plus outstanding debt due to SVB.

In addition, the Company committed to a second loan and security agreement with SVB in August 2011 (the “2011 Loan Agreement”) in order to finance certain capital expenditures made by the Company in connection with its move in March 2012 to new office and laboratory space in Cranbury, New Jersey. The 2011 Loan Agreement provides for up to $3 million of equipment financing through January 2014. Borrowings under the 2011 Loan Agreement are collateralized by equipment purchased with the proceeds of the loan and bear interest at a variable rate of SVB prime + 2.5%. The current SVB prime rate is 4.0%. In February 2012, the Company borrowed approximately $1.0 million from the 2011 Loan Agreement which will be repaid over the following 2.5 years. The 2011 Loan Agreement contains the same financial covenants as the 2009 Loan Agreement. The Company has at all times been in compliance with these covenants during the term of both agreements.

At June 30, 2012, the total amount due under the 2009 Loan Agreement and the 2011 Loan Agreement was $1.3 million. The carrying amount of the Company’s borrowings approximates fair value at June 30, 2012.

Note 6. Assets and Liabilities Measured at Fair Value

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

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

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

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

Cash, Money Market Funds and Marketable Securities

The Company classifies its cash and money market funds within the fair value hierarchy as Level 1 as these assets are valued using quoted prices in active market for identical assets at the measurement date. The Company considers its investments in marketable securities as available for sale and classifies these assets within the fair value hierarchy as Level 2 primarily utilizing broker quotes in a non-active market for valuation of these securities. No changes in valuation techniques or inputs occurred during the three months ended June 30, 2012. No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the six months ended June 30, 2012.

Secured Debt

As disclosed in Note 5, the Company has loan and security agreements with Silicon Valley Bank. The carrying amount of the Company’s borrowings approximates fair value at June 30, 2012. The Company’s secured debt is classified as Level 2 and the fair value is estimated using quoted prices for similar liabilities in active markets, as well as inputs that are observable for the liability (other than quoted prices), such as interest rates that are observable at commonly quoted intervals.

Warrants

The Company allocated $3.3 million of proceeds from its March 2010 registered direct offering to warrants issued in connection with the offering that was classified as a liability. The valuation of the warrants is determined using the Black-Scholes model. This model uses inputs such as the underlying price of the shares issued when the warrant is exercised, volatility, risk free interest rate and expected life of the instrument. The Company has determined that the warrant liability should be classified within Level 3 of the fair value hierarchy by evaluating each input for the Black-Scholes model against the fair value hierarchy criteria and using the lowest level of input as

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the basis for the fair value classification. There are six inputs: closing price of Amicus stock on the day of evaluation; the exercise price of the warrants; the remaining term of the warrants; the volatility of Amicus’ stock over that term; annual rate of dividends; and the riskless rate of return. Of those inputs, the exercise price of the warrants and the remaining term are readily observable in the warrant agreements. The annual rate of dividends is based on the Company’s historical practice of not granting dividends. The closing price of Amicus stock would fall under Level 1 of the fair value hierarchy as it is a quoted price in an active market. The riskless rate of return is a Level 2 input, while the historical volatility is a Level 3 input in accordance with the fair value accounting guidance. Since the lowest level input is a Level 3, the Company determined the warrant liability is most appropriately classified within Level 3 of the fair value hierarchy. This liability is subject to fair value mark-to-market adjustment each period. As a result, the Company recognized the change in the fair value of the warrant liability as non-operating expense of $0.1 million and $2.5 million for the three and six months ended June 30, 2012, respectively. The resulting fair value of the warrant liability at June 30, 2012 was $4.4 million. The weighted average assumptions used in the Black-Scholes valuation model for the warrants as of December 31, 2011 and June 30, 2012 are as follows:

	December 31, 2011			June 30, 2012
Expected stock price volatility	67.3		%	73.27		%
Risk free interest rate	0.28		%	0.29		%
Expected life of warrants (years)	2.17			1.67
Expected annual dividend per share	$	0.00		$	0.00

A summary of the fair value of the Company’s assets and liabilities aggregated by the level in the fair value hierarchy within which those measurements fall as of June 30, 2012, are identified in the following table (in thousands):

	Balance as of December 31, 2011
	Level 1		Level 2		Total
*Assets:*
Cash/Money market funds	$	25,668	$	—	$	25,668
Corporate debt securities	—		2,000		2,000
Commercial paper	—		13,749		13,749
Corporate debt securities	—		13,935		13,935
Certificate of deposit	—		350		350
	$	25,668	$	30,034	$	55,702

	Level 1		Level 2		Level 3		Total
*Liabilities:*
Secured debt	$	—	$	1,044	$	—	$	1,044
Warrants liability	—		—		1,948		1,948
	$	—	$	1,044	$	1,948	$	2,992

	Balance as of June 30, 2012
	Level 1		Level 2		Total
*Assets:*
Cash/Money market funds	$	28,858	$	—	$	28,858
Corporate debt securities	—		41,575		41,575
Commercial paper	—		24,989		24,989
Certificate of deposit	—		350		350
	$	28,858	$	66,914	$	95,772

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	Level 1		Level 2		Level 3		Total
*Liabilities:*
Secured debt	$	—	$	1,314	$	—	$	1,314
Warrants liability	—		—		4,442		4,442
	$	—	$	1,314	$	4,442	$	5,756

The change in the fair value of the Level 3 liability was an increase of $0.1 million and a decrease of $2.1 million for the three months ended June 30, 2012, and 2011, respectively. The change in fair value for the Level 3 liability was an increase of $2.5 million and $1.4 million for the six months ended June 30, 2012 and 2011, respectively.

Note 7. Collaborative Agreements

GSK

On October 28, 2010, the Company entered into the Original Collaboration Agreement with Glaxo Group Limited, an affiliate of GSK, to develop and commercialize migalastat HCl. Under the terms of the Original Collaboration Agreement, GSK received an exclusive worldwide license to develop, manufacture and commercialize migalastat HCl. In consideration of the license grant, the Company received an upfront, license payment of $30 million from GSK and was eligible to receive further payments of approximately $173.5 million upon the successful achievement of development, regulatory and commercialization milestones, as well as tiered double-digit royalties on global sales of migalastat HCl. GSK and the Company were jointly funding development costs in accordance with an agreed upon development plan. Additionally, GSK purchased approximately 6.9 million shares of the Company’s common stock at $4.56 per share, a 30% premium on the average price per share of the Company’s stock over a 60 day period preceding the closing date of the transaction. The total value of this equity investment to the Company was approximately $31 million and represented a 14.8% ownership position in the Company as of June 30, 2012.

In accordance with the revenue recognition guidance related to multiple-element arrangements, the Company identified all of the deliverables at the inception of the agreement. The significant deliverables were determined to be the worldwide licensing rights to migalastat HCl, the technology and “know how” transfer of migalastat HCl development to date, the delivery of the Company’s common stock and the research services to continue and complete the development of migalastat HCl. The Company determined that the worldwide licensing rights, the technology and “know how” transfer together with the research services represent one unit of accounting as none of these three deliverables on its own has standalone value separate from the other. The Company also determined that the delivery of the Company’s common stock does have standalone value separate from the worldwide licensing rights, the technology and “know how” transfer and the research services. As a result, the Company’s common stock was considered a separate unit of accounting and was accounted for as an issuance of common stock. However, as the Company’s common stock was sold at a premium to the market closing price, the premium amount paid over the market closing price was considered as additional consideration paid to the Company for the collaboration agreement and was included as consideration for the single unit of accounting identified above.

The total arrangement consideration which was allocated to the single unit of accounting identified above was $33.2 million which consists of the upfront license payment of $30 million and the premium over the closing market price of the common stock transaction of $3.2 million. The Company will recognize this consideration as Collaboration Revenue on a straight-line basis over the development period of 5.2 years as included in the detailed development plan that was included in the Original Collaboration Agreement. The Company determined that the overall level of activity over the development period approximates a straight-line approach. At June 30, 2012, the Company had recognized approximately $10.9 million of the total arrangement consideration as Collaboration Revenue since the inception of the agreement.

The Company evaluated the contingent milestones included in the collaboration agreement at the inception of the Original Collaboration Agreement and determined that the contingent milestones are substantive milestones and will be recognized as revenue in the period that the milestone is achieved. The Company determined that the research based milestones were commensurate with the enhanced value of each delivered item as a result of the

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Company’s specific performance to achieve the milestones. There was considerable effort underway to meet the specified milestones and efforts continue to complete the development of migalastat HCl. Additionally, there is considerable time and effort involved in evaluating the data from the clinical trials that are planned and underway and if acceptable, in preparing the documentation required for filing for approval with the applicable regulatory authorities. The research based milestones would have related to past performances when achieved and are reasonable relative to the other payment terms within the collaboration agreement, including the $30 million upfront payment and the cost sharing arrangement. In June 2012, the Company achieved a clinical development milestone and recognized $3.5 million of milestone revenue. Under the terms of the Expanded Collaboration Agreement, the Company is no longer entitled to receive any milestone payments from GSK.

On July 17, 2012, the Company entered into the Expanded Collaboration Agreement with GSK pursuant to which the Company and GSK will continue to develop and commercialize migalastat HCl. The Expanded Collaboration Agreement amends and replaces in its entirety the Original Collaboration Agreement. For further information, see “— Note 9. Subsequent Events.”

Note 8. Restructuring Charges

In December 2009, the Company initiated and completed a facilities consolidation effort, closing one of its subleased locations in Cranbury, NJ. The Company recorded a charge of $0.7 million during the fourth quarter of 2009 for minimum lease payments of $0.5 million and the write-down of fixed assets in the facility.

The following table summarizes the restructuring charges and utilization for the six months ended June 30, 2012 (in thousands):

	Balance as of December 31, 2011		Charges	Cash Payments			Adjustments	Balance as of June 30, 2012

Facilities consolidation	$	38	—	$	(38	)	—	$	—

Note 9. Subsequent Events

The Company evaluated events that occurred subsequent to June 30, 2012 through the date of issuance of these financial statements. The following events are noted:

Expanded GSK Collaboration Agreement

On July 17, 2012, the Company entered into the Expanded Collaboration Agreement with GSK pursuant to which the Company and GSK will continue to develop and commercialize migalastat HCl, currently in Phase 3 development for the treatment of Fabry disease. The Expanded Collaboration Agreement amends and replaces in its entirety the Original Collaboration Agreement entered into between the Company and GSK on October 28, 2010 for the development and commercialization of migalastat HCl. Under the terms of the Expanded Collaboration Agreement, the Company and GSK will co-develop all formulations of migalastat HCl for Fabry disease, including the development of the Co-formulated Product in collaboration with another GSK collaborator, JCR Pharmaceutical Co., Ltd. The Company will commercialize all migalastat HCl products for Fabry disease in the United States while GSK will commercialize all such products in the rest of the world. The exclusive license granted to GSK under the Original Collaboration Agreement to commercialize migalastat HCl worldwide is therefore replaced under the Expanded Collaboration Agreement with two exclusive licenses: (i) an exclusive license from GSK to Amicus to commercialize migalastat HCl in the United States, and (ii) an exclusive license from Amicus to GSK to commercialize migalastat HCl in the rest of world. GSK and Amicus each have a license to manufacture migalastat HCl for commercialization of monotherapy and chaperone-ERT co-administration migalastat HCl products while GSK maintains an exclusive license to manufacture such products for development purposes (subject to limited exceptions) and to manufacture the Co-formulated Product.

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GSK is eligible to receive U.S. regulatory approval milestones totaling $20 million for migalastat HCl monotherapy and chaperone-ERT co-administration, and additional regulatory approval and product launch milestone payments totaling up to $35 million within seven years following the launch of the Co-formulated Product. Amicus will also be responsible for certain pass-through milestone payments and single-digit royalties on the net U.S. sales of the Co-formulated Product that GSK must pay to a third party. In addition, Amicus is no longer eligible to receive any milestones or royalties it would have been eligible to receive under the Original Collaboration Agreement other than a $3.5 million clinical development milestone achieved in the second quarter of 2012 and expected to be paid by GSK to Amicus in the third quarter of 2012.

The Company and GSK will continue to jointly fund development costs for all formulations of migalastat HCl in accordance with agreed upon development plans pursuant to which Amicus and GSK will fund 25% and 75% of such costs, respectively, for the monotherapy and co-administration development of migalastat HCl for the remainder of 2012 and 40% and 60%, respectively, thereafter. Effective upon entry into the Expanded Collaboration Agreement, costs for the development of the Co-formulated Product are also split 40% and 60% between Amicus and GSK, respectively.

Additionally, simultaneous with entry into the Expanded Collaboration Agreement, Amicus and GSK entered into an SPA pursuant to which GSK purchased approximately 2.9 million shares of Amicus common stock at a price of $6.30 per share. The SPA provides GSK with customary registration rights for the shares purchased and includes a six-month lock-up provision. The total purchase price was $18.6 million and the Company received all proceeds from the sale of such shares on July 26, 2012.

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

Overview

Amicus Therapeutics, Inc. (Amicus) is a biopharmaceutical company focused on the discovery, development and commercialization of orally-administered, small molecule drugs known as pharmacological chaperones, a novel, first-in-class approach to treating a broad range of diseases including lysosomal storage diseases and diseases of neurodegeneration. We believe that our pharmacological chaperone technology, our advanced product pipeline, especially our lead product candidate, migalastat HCl, and our strategic collaboration with GSK uniquely position us as a leader in the development of treatments for rare and orphan diseases.

We are focused on the development of pharmacological chaperone monotherapy programs and pharmacological chaperones in combination with enzyme replacement therapy (ERT), the current standard of treatment for Fabry and other lysosomal storage disease. In 2012, we are advancing two pharmacological chaperone monotherapy programs for genetic diseases:

· Migalastat HCl for patients with Fabry disease identified as having alpha-galactosidase A (alpha-Gal A) mutations amenable to chaperone therapy, and

· AT3375 for Parkinson’s disease in Gaucher disease carriers and potentially the broader Parkinson’s population.

Our pharmacological chaperone-ERT combination programs for 2012 include:

· Migalastat HCl co-administered with ERT for patients with Fabry disease receiving ERT treatment with any genetic mutation,

· Migalasat HCl co-formulated with a proprietary preclinical ERT,

· AT2220 (duvoglustat HCl) co-administered with ERT for Pompe disease,

· AT3375 and afegostat tartrate co-administered with ERT for Gaucher disease, and

· Several new, undisclosed pharmacological chaperone programs focused on the combination of chaperones with ERTs for additional lysosomal storage diseases.

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 within the cell, thereby increasing protein activity, improving cellular function and potentially reducing cell stress. We have also demonstrated in preclinical studies that pharmacological chaperones can further stabilize normal, or “wild-type” proteins. This stabilization could lead to a higher percentage of the target proteins folding correctly and more stably, which can increase cellular levels of that target protein and improve cellular function, making chaperones potentially applicable to a wide range of diseases.

Our lead product candidate, migalastat HCl for Fabry disease, is in late Phase 3 development. We are developing and commercializing migalastat HCl with an affiliate of GSK pursuant to the Expanded Collaboration Agreement entered into in July 2012. Our partnership with GSK allows us to utilize GSK’s significant expertise in clinical, regulatory, commercial and manufacturing matters in the development in migalastat HCl. In addition, the cost-sharing arrangements under the Expanded Collaboration Agreement provide us with financial strength and allow us to continue the development of migalastat HCl while also advancing our other programs. We also believe this collaboration is important in validating our status as a leader in the development of treatments for rare diseases given the increasing focus placed on the rare disease field.

Our Phase 3 clinical development program for the use of migalastat HCl as monotherapy in Fabry disease includes two global registration studies for patients with Fabry disease identified as having alpha-Gal A mutations amenable to migalastat HCl: Study 011 and Study 012. We completed enrollment of 67 total patients in Study 011, our placebo-controlled Phase 3 study, in December 2011 and expect results in the fourth quarter of 2012. We

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plan to use the data from Study 011 to support marketing applications for the U.S. Food and Drug Administration (FDA) and other regulatory agencies. Study 012 is our second phase 3 study for migalastat HCl intended to support the worldwide registration of migalastat HCl for Fabry disease. We dosed the first patient in Study 012 in September 2011 to compare the safety and efficacy of migalastat HCl and ERT (agalsidase beta or agalsidase alfa) and expect to complete enrollment of approximately 50 patients by the end of 2012.

In addition to potential benefits pharmacological chaperones may provide as a monotherapy, we also believe the use of pharmacological chaperones co-administered and co-formulated with ERT may address certain key limitations of ERT. The use of pharmacological chaperones co-administered with ERT may significantly enhance the safety and efficacy of ERT by, among other effects, prolonging the half-life of infused enzymes in the circulation, increasing uptake of the active enzymes into cells and tissues, and increasing enzyme activity and substrate reduction in target tissues compared to that observed with ERT alone. We are evaluating the use of pharmacological chaperones co-administered with ERT in two Phase 2 clinical studies, one evaluating the use of migalastat HCl co-administered with ERT for Fabry disease (Study 013) and another evaluating the use of AT2220 co-administered with ERT for Pompe disease (Study 010).

We are also conducting preclinical studies with JCR Pharmaceutical Co., Ltd (JCR) evaluating migalastat HCl co-formulated with a proprietary recombinant human alpha-Gal A enzyme (JR-051). Preclinical studies conducted by Amicus, GSK and JCR suggest that this co-formulated chaperone-ERT product may provide greater alpha-Gal A enzyme uptake into tissue and markedly reduced levels of GL-3 in Fabry disease-relevant tissues compared to recombinant enzyme alone. Amicus and GSK believe that this co-formulated chaperone-ERT product for Fabry disease has the potential to enter clinical studies in 2013.

Amicus is also investigating chaperone-ERT combinations as potential next-generation treatments for Gaucher and other undisclosed lysosomal storage diseases where there are significant opportunities to improve treatment outcomes. In Gaucher disease, Amicus is continuing preclinical studies to evaluate two pharmacological chaperones, AT2101 (afegostat tartrate) and AT3375, in combination with ERT (beta-glucosidase). Both of these chaperones target the enzyme deficient in Gaucher disease.

Gaucher disease is caused by inherited genetic mutations in the GBA gene, and mutations in this gene that encodes for the GCase enzyme are the most common genetic risk factor for Parkinson’s. By targeting GCase in the brain, AT3375 could potentially treat Gaucher, Parkinson’s disease in Gaucher carriers, and possibly the general Parkinson’s population.

We have generated significant losses to date and expect to continue to generate losses as we continue the clinical development of our drug candidates, including migalastat HCl, and conduct preclinical studies on other programs. 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, 2012, we have accumulated a deficit of $292.6 million. As we have not yet generated commercial sales revenue from any of our product candidates, our losses will continue and are likely to be substantial in the near term.

Program Status

Migalastat HCl for Fabry Disease: Phase 3 Global Registration Program

We and our partner GSK are conducting two Phase 3 global registration studies (Study 011 and Study 012) to support the global approval of migalastat HCl monotherapy for the treatment of Fabry disease. Study 011 and Study 012 are investigating migalastat HCl at an oral dose of 150 mg, administered every-other-day (QOD) to Fabry patients identified as having alpha-Gal A mutations amenable to migalastat HCl as a monotherapy. Study 011 is a randomized, placebo-controlled study with a six-month, double-blind primary treatment period and a six-month, open-label follow-up period. The primary endpoint is based on interstitial capillary globotriaosylceramide (GL-3) as measured in kidney biopsy. The six-month primary treatment period was completed in a total of 63 patients during the second quarter 2012. These patients received kidney biopsies at baseline and month six. All 63 of these patients are continuing in the six-month follow-up period, and all of these patients are expected to have 12-month kidney biopsies by year-end 2012.

We and GSK have recently engaged in encouraging interactions with the FDA regarding the planned NDA for migalastat HCl. The agency indicated it would consider safety and efficacy data from both the six- and 12-month kidney biopsies to support conditional approval under subpart H. In order to preserve the integrity and availability of clinical data for the open-label follow-up period, we and GSK have jointly determined that the unblinding and analysis of the data from the primary six-month treatment arm will not occur prior to fourth quarter 2012. We and GSK remain blinded to the results at this time.

Study 012 is a randomized, open-label, 18-month Phase 3 study investigating the safety and efficacy of migalastat HCI compared to current standard-of-care ERTs Fabrazyme (agalsidase beta) or Replagal (agalsidase

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alfa) for Fabry disease. A majority of patients have been enrolled in this study, which is targeting approximately 50 total patients (30 to switch to migalastat HCl and 20 to remain on ERT). Study 012 is currently underway at 25 clinical sites worldwide, including U.S. sites that are now able to enroll patients who have resumed full-dose Fabrazyme. Amicus and GSK continue to anticipate that enrollment in this study will be completed by year-end 2012.

Phase 2 and Phase 3 extension studies continue to evaluate long-term safety with migalastat HCl monotherapy in Fabry patients. As of June 30, 2012, all patients who have completed the six-month treatment and six-month follow-up periods in Study 011 are currently enrolled in a Phase 3 extension study. An additional 17 subjects continue in the ongoing Phase 2 extension study and have been receiving migalastat HCl for up to six years.

We will lead all U.S. commercial activities for migalastat HCl upon approval, including pricing, matching, patient access and reimbursement.

Pharmacological Chaperone-ERT (PC-ERT) Co-Administration for Lysosomal Storage Diseases

Fabry Disease

Study 013 is an ongoing open-label Phase 2 study to investigate a single oral dose of migalastat HCl (150 mg or 450 mg) co-administered two hours prior to ERT (Fabrazyme or Replagal) in males diagnosed with Fabry disease. When co-administered with ERT, migalastat HCl is designed to bind to and stabilize the enzyme in the circulation, independent of alpha-Gal A mutation type.

Positive preliminary results from Study 013 were announced in the first quarter 2012 in patients who received migalastat HCl 150 mg co-administered with Fabrazyme (0.5 mg/kg or 1.0 mg/kg). We expect to present results at a Fall 2012 scientific conference. Both Amicus and GSK are committed to working together to advance this Fabry co-administration program, which has been recognized as having significant medical interest and importance. A repeat-dose global study of migalastat HCl co-administered with ERT is currently being designed as the next step in U.S. and global development. Following the withdrawal of the U.S. marketing application for Replagal, Fabrazyme remains the only ERT with conditional approval in the U.S.

Pompe Disease

Amicus is investigating four ascending doses of AT2220 co-administered with the ERT alglucosidase alfa in a Phase 2 open-label study (Study 010) for Pompe disease. Approximately 22 patients will receive one infusion of ERT alone, and a single oral dose of AT2220 prior to the next ERT infusion. In addition to safety and pharmacokinetic effects, Study 010 will measure uptake of active enzyme in muscle tissue with and without the chaperone, three or seven days following each infusion.

Positive preliminary results from Study 010 were announced in the second quarter 2012 in patients enrolled in the first two cohorts of the study at the lowest dose groups of AT2220. Previous preclinical studies using acid alpha-glucosidase (GAA) knock-out mouse models of Pompe disease demonstrated that AT2220 co-administered with ERT increased the ERT uptake in key tissues of disease, including skeletal muscle and heart. This increased ERT uptake into muscle following AT2220-ERT co-administration corresponded in preclinical studies with greater reductions in muscle glycogen compared to ERT alone. Glycogen is the substrate that accumulates in the lysosomes of muscles in patients with Pompe disease. We expect to present additional results at a Fall 2012 scientific conference.

In parallel with Study 010, Amicus is evaluating ERT-related immunogenicity in Pompe disease. Immune responses occur in a majority of Pompe patients receiving alglucosidase alfa infusions (Lacana E, Yao LP, Pariser AR, Rosenberg AS. 2012. The role of immune tolerance induction in restoration of the efficacy of ERT in Pompe disease., Am J Med Genet C Semin Med Genet. 160C:30-39) which have the potential to limit treatment outcomes with ERT. Preclinical results to date suggest that AT2220 when co-administered with Myozyme may mitigate immunogenicity induced by this ERT by stabilizing the enzyme in its properly folded and active form.

As part of a grant from the Muscular Dystrophy Association, Amicus is using blood samples from healthy volunteers and from Pompe patients in Study 010 to determine if particular human leukocyte antigen (HLA) types

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are predictive of clinical immunogenicity to ERT. These results may help guide further investigation of the effects of AT2220 on immune response to ERT in future clinical studies.

Gaucher Disease and Other Lysosomal Storage Diseases

We are also investigating chaperone-ERT combinations as potential next-generation treatments for Gaucher and other undisclosed lysosomal storage diseases where we believe there are significant opportunities to improve treatment outcomes. In Gaucher disease, we are continuing preclinical studies to evaluate two pharmacological chaperones, AT2101 (afegostat tartrate) and AT3375, in combination with ERT (beta-glucosidase). Both of these chaperones target the enzyme deficient in Gaucher disease.

Collaboration with GSK

On July 17, 2012, the Company entered into the Expanded Collaboration Agreement (the “Expanded Collaboration Agreement”) with GSK pursuant to which the Company and GSK will continue to develop and commercialize migalastat HCI, currently in Phase 3 development for the treatment of Fabry disease. The Expanded Collaboration Agreement amends and replaces in its entirety the Original Collaboration Agreement for the development and commercialization of migalastat HCl. Under the terms of the Expanded Collaboration Agreement, the Company and GSK will co-develop all formulations of migalastat HCl for Fabry disease, including the development of migalastat HCl co-formulated with JR-051. The Company will commercialize all migalastat HCl products for Fabry disease in the United States while GSK will commercialize all such products in the rest of the world. The exclusive license granted to GSK under the Original Collaboration Agreement to commercialize migalastat HCl worldwide is therefore replaced under the Expanded Collaboration Agreement with two exclusive licenses: (i) an exclusive license from GSK to Amicus to commercialize migalastat HCl in the United States, and (ii) an exclusive license from Amicus to GSK to commercialize migalastat HCl in the rest of world. GSK and Amicus each have a license to manufacture migalastat HCl for commercialization of monotherapy and chaperone-ERT co-administration migalastat HCl products while GSK maintains an exclusive license to manufacture such products for development purposes (subject to limited exceptions) and to manufacture the Co-formulated Product. In the event of a change of control of Amicus during the term of the Expanded Collaboration Agreement, GSK has the option to purchase an exclusive license to develop, manufacture and commercialize migalastat HCl in the United States.

The Company and GSK will continue to jointly fund development costs for all formulations of migalastat HCl in accordance with agreed upon development plans pursuant to which Amicus and GSK will fund 25% and 75% of such costs, respectively, for the monotherapy and co-administration development of migalastat HCl for the remainder of 2012 and 40% and 60%, respectively, thereafter. Beginning immediately, costs for the development of the Co-formulated Product are also split 40% and 60% between Amicus and GSK, respectively.

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Other Potential Alliances and Collaborations

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

Financial Operations Overview

Revenue

In November 2010, GSK paid us an initial, non-refundable license fee of $30 million and a premium of $3.2 million related to GSK’s purchase of an equity investment in Amicus. The total upfront consideration received of $33.2 million will be recognized as Collaboration and Milestone Revenue on a straight-line basis over the development period of the collaboration agreement which is approximately 5.2 years. In June 2012, we recognized $3.5 million as milestone revenue due to the completion of the last patient visit in the Fabry Phase 3 011 study. For the three and six months ended June 30, 2012, we recognized approximately $5.2 million and $6.8 million, respectively, of the total upfront consideration and milestone event as Collaboration and Milestone Revenue, and approximately $5.5 million and $11.6 million, respectively, of Research Revenue for reimbursed research and development costs..

Research and Development Expenses

We expect to continue to incur substantial research and development expenses as we continue to develop our product candidates and explore new uses for our pharmacological chaperone technology. However, we will share future research and development costs related to migalastat HCl with GSK in accordance with the Expanded Collaboration Agreement. Research and development expense consists of:

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

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

· technology license costs;

· manufacturing development costs;

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

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

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

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

We expense research and development costs as incurred, including payments made to date under our license agreements. We believe that significant investment in product development is a competitive necessity and plan to continue these investments in order to realize the potential of our product candidates. From our inception in February 2002 through June 30, 2012, we have incurred research and development expense in the aggregate of $293.3 million.

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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) to
	June 30,					June 30,					June 30,
Projects	2011			2012		2011			2012		2012
Third party direct project expenses
Migalastat HCl (Fabry Disease — Phase 3)	$	4,166		$	4,560	$	8,228		$	10,269	$	75,604
Afegostat tartrate (Gaucher Disease — Phase 2*)	(1		)	15		(201		)	42		26,157
AT2220 (Pompe Disease — Phase 2)	41			3		45			—		13,243
Neurodegenerative Diseases (Preclinical)	498			124		949			341		8,949
Co-Administration studies (Fabry & Pompe - Phase 2; Gaucher - Preclinical)	48			1,320		169			2,188		5,138
Total third party direct project expenses	4,752			6,022		9,190			12,840		129,091
Other project costs (1)
Personnel costs	4,801			5,203		9,724			10,645		103,896
Other costs (2)	2,065			2,498		3,829			4,242		60,360
Total other project costs	6,866			7,701		13,553			14,887		164,256

Total research and development costs	$	11,618		$	13,723	$	22,743		$	27,727	$	293,347

(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.

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

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 our product candidates. As a result, we are not able to reasonably estimate the period, if any, in which material net cash inflows may commence from our product candidates, including migalastat HCl 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 evolving events 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;

· 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. In addition, GSK has considerable influence over and decision-making authority related to our migalastat HCl program. 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, regulatory approval and commercialization of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those which

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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.

General and Administrative Expense

General and administrative expense consists primarily of salaries and other related costs, including stock-based compensation expense, for persons serving in our executive, finance, accounting, legal, information technology and human resource functions. Other general and administrative expense includes facility-related costs not otherwise included in research and development expense, promotional expenses, costs associated with industry and trade shows, and professional fees for legal services, including patent-related expense and accounting services. From our inception in February 2002 through June 30, 2012, we spent $123.2 million on general and administrative expense.

Interest Income and Interest Expense

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

Critical Accounting Policies and Significant Judgments and Estimates

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. 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, 2012 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, 2011, 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

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

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

The revenue associated with reimbursements for research and development costs under collaboration agreements is included in Research Revenue and the costs associated with these reimbursable amounts are included in research and development expenses. We record these reimbursements as revenue and not as a reduction of research and development expenses as we have not commenced our planned principal operations (i.e., selling commercial products) and we are a development stage enterprise, therefore development activities are part of our ongoing central operations.

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

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

We apply the fair value method of measuring stock-based compensation, which requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based upon the grant-date fair value of the award. We chose the “straight-line” attribution method for allocating compensation costs and recognized the fair value of each stock option on a straight-line basis over the vesting period of the related awards.

We use the Black-Scholes option pricing model when estimating the value for stock-based awards. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility was calculated based on a blended weighted average of historical information of our stock and the weighted average of historical information of similar public entities for which historical information was available.

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We will continue to use a blended weighted average approach using our own historical volatility and other similar public entity volatility information until our historical volatility is relevant to measure expected volatility for future option grants. The average expected life was determined using a “simplified” method of estimating the expected exercise term which is the mid-point between the vesting date and the end of the contractual term. As our stock price volatility has been over 75% and we have experienced significant business transactions (Shire and GSK collaborations), we believe that we do not have sufficient reliable exercise data in order to justify a change in the use of the “simplified” method of estimating the expected exercise term of employee stock option grants. 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. Forfeitures are estimated based on voluntary termination behavior, as well as a historical analysis of actual option forfeitures. The weighted average assumptions used in the Black-Scholes option pricing model are as follows:

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2011			2012			2011			2012
Expected stock price volatility	78.4		%	77.0		%	78.8		%	77.5		%
Risk free interest rate	2.1		%	1.1		%	2.2		%	0.7		%
Expected life of options (years)	6.25			6.25			6.25			6.25
Expected annual dividend per share	$	0.00		$	0.00		$	0.00		$	0.00

Warrants

The warrants issued in connection with the March 2010 registered direct offering are classified as a liability. The fair value of the warrants liability is evaluated at each balance sheet date using the Black-Scholes valuation model. This model uses inputs such as the underlying price of the shares issued when the warrant is exercised, volatility, risk free interest rate and expected life of the instrument. Any changes in the fair value of the warrants liability is recognized in the consolidated statement of operations. The weighted average assumptions used in the Black-Scholes valuation model for the warrants December 31, 2011 and June 30, 2012 are as follows:

	December 31, 2011			June 30, 2012
Expected stock price volatility	67.3		%	73.27		%
Risk free interest rate	0.28		%	0.29		%
Expected life of warrants (years)	2.17			1.67
Expected annual dividend per share	$	0.00		$	0.00

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

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

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands, except per share amount)	2011			2012			2011			2012
Historical
Numerator:
Net loss attributable to common stockholders	$	(12,641	)	$	(9,343	)	$	(25,991	)	$	(22,480	)

Denominator:
Weighted average common shares outstanding - basic and diluted	34,530,693			46,870,067			34,514,947			42,103,642

Results of Operations

Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011

Revenue. For the three months ended June 30, 2012 we recognized $3.5 million as milestone revenue upon achieving clinical development milestone and $1.7 million of the total upfront consideration received from GSK upon entry into the License and Collaboration Agreement as Collaboration Revenue. The total upfront consideration received of $33.2 million will be recognized as Collaboration and Milestone Revenue on a straight-line basis over the development period of the collaboration agreement which is approximately 5.2 years.

Research revenue was $5.5 million for the three months ended June 30, 2012, representing an increase of $3.1 million or 129% from the $2.4 million for the three months ended June 30, 2011. The increase was due to an increase in GSK’s reimbursement rate from 50% to 75% on Jan 1, 2012 and increased overall expenditures in the development of migalastat HCl.

Research and Development Expense. Research and development expense was $13.7 million for the three months ended June 30, 2012, representing an increase of $2.1 million or 18% from $11.6 million for the three months ended June 30, 2011. The variance was primarily attributable to higher personnel costs, an increase in consulting costs and an increase in contract research and manufacturing costs due to the increased activity within the Fabry program.

General and Administrative Expense. General and administrative expense was $5.8 million for the three months ended June 30, 2012, representing a decrease of $0.9 million or 13% from $6.7 million for the three months ended June 30, 2011. The decrease was primarily due to additional stock option compensation expense recognized in 2011 as a result of the change in the terms of the Chief Executive Officer’s stock options resulting from his resignation

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and subsequent reappointment to the Chief Executive Officer position partially offset by an increase in personnel costs associated with a severance charge of $0.7 million in 2012.

Interest Income and Interest Expense. Interest income was $0.12 million for the three months ended June 30, 2012, representing an increase of $ 0.07 million or 140% increase from $0.05 million for the three months ended June 30, 2011. The increase was due to overall higher average cash and investment balances, due to cash raised in the March 2012 stock offering. Interest expense was approximately $0.02 million for the three months ended June 30, 2012 compared to $0.04 for the three months ended June 30, 2011. The decrease was due to less outstanding debt during the period on the secured loan.

Change in Fair Value of Warrant Liability. In connection with the sale of our common stock and warrants from the registered direct offering in March 2010, we recorded the warrants as a liability at their fair value using a Black-Scholes model and remeasure the fair value at each reporting date until exercised or expired. Changes in the fair value of the warrants are reported in the statements of operations as non-operating income or expense. For the three months ended June 30, 2012, we reported an expense of $0.1 million related to the increase in fair value of these warrants as compared to a gain of $2.1 million for the three months ended June 30, 2011, representing a decrease of $2.2 million or 106%. The decrease was due to the fluctuations in the price of our common stock.

Other Income. Other income was $0.02 million for the three months ended June 30, 2012 and represents cash received from the sale of property, plant and equipment.

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Results of Operations

Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011

Revenue. For the six months ended we recognized $3.5 million as milestone revenue upon achieving clinical development milestone and $3.3 million of the total upfront consideration received from GSK upon entry into the License and Collaboration Agreement as Collaboration Revenue. The total upfront consideration received of $33.2 million will be recognized as Collaboration and Milestone Revenue on a straight-line basis over the development period of the collaboration agreement which is approximately 5.2 years.

Research revenue was $11.6 million for the six months ended June 30, 2012, representing an increase of $4.9 million or 73% from the $6.7 million for the six months ended June 30, 2011. The increase was due to an increase in GSK’s reimbursement rate from 50% to 75% on Jan 1, 2012.

Research and Development Expense. Research and development expense was $27.7 million for the six months ended June 30, 2012, representing an increase of $5.0 million or 22% from $22.7 million for the six months ended June 30, 2011. The variance was primarily attributable to higher personnel costs, an increase in consulting costs and an increase in contract research and manufacturing costs due to the increased activity within the Fabry program.

General and Administrative Expense. General and administrative expense was $9.9 million for the six months ended June 30, 2012, representing a decrease of $1.2 million or 11% from $11.1 million for the six months ended June 30, 2011. The decrease was primarily due to additional stock option compensation expense recognized in 2011 as a result of the change in the terms of the Chief Executive Officer’s stock options resulting from his resignation and subsequent reappointment to the Chief Executive Officer position partially offset by an increase in personnel costs associated with a severance charge of $0.7 million in 2012.

Interest Income and Interest Expense. Interest income was $0.1 million for the six months ended June 30, 2012, and 2011. Interest expense was approximately $0.06 million for the six months ended June 30, 2012 compared to $0.09 for the three months ended June 30, 2011. The decrease was due to less outstanding debt during the period on the secured loan.

Change in Fair Value of Warrant Liability. In connection with the sale of our common stock and warrants from the registered direct offering in March 2010, we recorded the warrants as a liability at their fair value using a Black-Scholes model and remeasure the fair value at each reporting date until exercised or expired. Changes in the fair value of the warrants are reported in the statements of operations as non-operating income or expense. For the six months ended June 30, 2012, we reported an expense of $2.5 million related to the increase in fair value of these warrants as compared to an expense of $1.4 million for the six months ended June 30, 2011, representing an increase of $1.1 million or 79%. The increase was due to the fluctuations in the price of our common stock.

Other Income/Expense. Other income for the six months ended June 30, 2011 represents funds received from the U.S. Treasury Department in February 2011 of $0.07 million under the Qualified Therapeutic Discovery Projects tax credit and grant program. Other income for the six months ended June 30, 2012 was $0.02 million and represents cash received from the sale of property, plant and equipment.

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 we were incorporated in 2002. We have funded our operations principally with $148.7 million of proceeds from redeemable convertible preferred stock offerings, $75.0 million of gross proceeds from our IPO in June 2007, $18.5 million of gross proceeds from our Registered Direct Offering in March 2010, $65.6 million of gross proceeds from our stock offering in March 2012, $80.0 million from the non-refundable license fees from the collaboration agreements and $31.0 million from GSK’s investment in the Company. In the future, we expect to fund our operations, in part,

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through the receipt of cost-sharing payments from GSK. The following table summarizes our significant funding sources as of June 30, 2012:

			Approximate
			Amount (1)
Funding	Year	No. Shares	(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
Registered Direct Offering	2010	4,946,524	18,500
Upfront License Fee from GSK	2010	—	30,000
Common Stock GSK	2010	6,866,245	31,285
Common Stock	2012	11,500,000	65,550

		44,425,491	$	419,023

(1) Represents gross proceeds

On July 17, 2012, we entered into an SPA with GSK, pursuant to which GSK purchased 2.9 million unregistered shares of our common stock at a price of $6.30 per share. The total purchase price for these shares was $18.6 million and increases GSK’s ownership position to 19.9%. We received all proceeds from the sale of such shares on July 26, 2012.

In addition, in conjunction with the GSK collaboration agreement, we received reimbursement of research and development expenditures from the date of the agreement (October 28, 2010) through March 31, 2012 of $10.9 million. We also received $31.1 million in reimbursement of research and development expenditures from the Shire collaboration from the date of the agreement (November 7, 2007) through year-end 2009.

As of June 30, 2012, we had cash, cash equivalents and marketable securities of $95.8 million. We invest cash in excess of our immediate requirements with regard to liquidity and capital preservation in a variety of interest-bearing instruments, including obligations of U.S. government agencies and money market accounts. Wherever possible, we seek to minimize the potential effects of concentration and degrees of risk. Although we maintain cash balances with financial institutions in excess of insured limits, we do not anticipate any losses with respect to such cash balances.

Net Cash Used in Operating Activities

Net cash used in operations for the six months ended June 30, 2011 was $23.9 million due primarily to the net loss for the six months ended June 30, 2011 of $26.0 million and the change in operating assets and liabilities of $5.4 million. The change in operating assets and liabilities consisted of an increase in receivables from GSK related to the collaboration agreement of $2.0 million; a decrease in deferred revenue of $1.4 million related to the recognition of the upfront payment from GSK for the collaboration agreement; and a decrease in accounts payable and accrued expenses of $1.3 million related to program expenses.

Net cash used in operations for the six months ended June 30, 2012 was $19.2 million, due primarily to the net loss for the six months ended June 30, 2012 of $22.5 million and the change in operating assets and liabilities of $3.2 million. The change in operating assets and liabilities consisted of a increase in receivables from GSK related to the collaboration agreement of $2.2 million; a decrease of $3.2 million in prepaid assets primarily related to a receivable from the sale of state net operating loss carry forwards, or NOLs; a decrease of $0.3 in non-current assets related to the return of the security deposit on the terminated lease; a decrease in deferred revenue of $3.9 million related to the recognition of the upfront payment from GSK for the collaboration agreement and a decrease in accounts payable and accrued expenses of $0.6 million related to program expenses.

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Net Cash Provided By/ (Used in) Investing Activities

Net cash provided by investing activities for the six months ended June 30, 2011 was $20.4 million. Net cash provided by investing activities reflects $57.2 million for the sale and redemption of marketable securities partially offset by $36.6 million for the purchase of marketable securities and $0.2 million for the acquisition of property and equipment.

Net cash used in investing activities for the six months ended June, 2012 was $40.8 million. Net cash used by investing activities reflects $71.7 million for the purchase of marketable securities and $3.9 million for the acquisition of property and equipment partially offset by $34.8 million for the sale and redemption of marketable securities.

Net Cash (Used in)/Provided by Financing Activities

Net cash used in financing activities for the six months ended June 30, 2011 was $0.3 million, consisting primarily of $0.6 million of payments on our secured loan agreement and capital lease obligations. The payments were partially offset by $0.3 million of cash proceeds from the exercise of stock options.

Net cash provided by financing activities for the three months ended June 30, 2012 was $63.2 million, consisting of $62.1 million from the issuance of common stock, $1.0 million as proceeds from the new secured loan agreement with SVB and $0.8 million from the exercise of stock options. This was partially offset by the payments of our secured loan agreement of $0.7 million.

Funding Requirements

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

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

· the continuation of our collaboration with GSK and GSK’s achievement of milestone payments thereunder;

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

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

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

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

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

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

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

We do not anticipate that we will generate revenue from commercial sales until at least 2013, if at all. In the absence of additional funding, we expect our continuing operating losses to result in increases in our cash used in operations over the next several quarters and years. We believe that our existing cash and cash equivalents and short term investments will be sufficient to cover our cash flow requirements for 2012.

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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 migalastat HCl and AT2220 do not contain milestone payment obligations, two of these agreements related to afegostat tartrate do require us to make such payments if certain specified pre-commercialization events occur. Upon the satisfaction of certain milestones and assuming successful development of afegostat tartrate, we may be obligated, under the agreements that we have in place, to make future milestone payments aggregating up to approximately $7.9 million. In addition, under the Expanded Collaboration Agreement, GSK is eligible to receive U.S. regulatory approval milestones totaling $20 million for migalastat HCl monotherapy and migalastat HCl for co-administration with ERT, and additional regulatory approval and product launch milestone payments totaling up to $35 million within seven years following the launch of the Co-formulated Product. 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 migalastat HCl and AT2220, we will owe royalties only to Mt. Sinai School of Medicine (MSSM). We would expect to pay royalties to all three licensors with respect to afegostat tartrate should we advance afegostat tartrate to commercialization. To date, we have not made any royalty payments on sales of our.

In accordance with our license agreement with MSSM, we paid $3 million of the $30 million upfront payment received from GSK to MSSM in the fourth quarter of 2010. We will also be obligated to pay MSSM royalties on worldwide net sales of migalastat HCl.

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.

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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of change in fair value of a financial instrument due to changes in interest rates, equity prices, creditworthiness, financing, exchange rates or other factors. Our primary market risk exposure relates to changes in interest rates in our cash, cash equivalents and marketable securities. We place our investments in high-quality financial instruments, primarily money market funds, corporate debt securities, asset backed securities and U.S. government agency notes with maturities of less than one year, which we believe are subject to limited interest rate and credit risk. The securities in our investment portfolio are not leveraged, are classified as available-for-sale and, due to the short-term nature, are subject to minimal interest rate risk. We currently do not hedge interest rate exposure and consistent with our investment policy, we do not use derivative financial instruments in our investment portfolio. At June 30, 2012, we held $95.8 million in cash, cash equivalents and available for sale securities and due to the short-term maturities of our investments, we do not believe that a 10% change in average interest rates would have a significant impact on our interest income. Our outstanding debt has a fixed interest rate and therefore, we have no exposure to interest rate fluctuations.

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

ITEM 4. CONTROLS AND PROCEDURES

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

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

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

ITEM 1A. RISK FACTORS

The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should understand that it is not possible to predict or identify all such risks. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred significant operating losses since our inception. We currently do not, and since inception never have had, any products available for commercial sale. We expect to incur operating losses for the foreseeable future and may never achieve or maintain profitability.

Since inception, we have incurred significant operating losses. Our cumulative net loss attributable to common stockholders since inception was $312.8 million and we had an accumulated deficit of $292.6 million as of June 30, 2012. To date, we have financed our operations primarily through private placements of our redeemable convertible preferred stock, proceeds from our initial public offering and subsequent stock offerings, payments from partners during the terms of collaboration agreements and other financing arrangements. We have devoted substantially all of our efforts to research and development, including our preclinical development activities and clinical trials. We have not completed development of any drugs. We expect to continue to incur significant and increasing operating losses for at least the next several years and we are unable to predict the extent of any future losses as we:

· continue our ongoing Phase 3 clinical trials of migalastat HCl for the treatment of Fabry disease to support regulatory approval in the United States (Study 011) and worldwide (Study 012);

· continue our ongoing Phase 2 clinical trial of migalastat HCl co-administered with ERT for Fabry disease and our Phase 2 clinical trial of AT2220 co-administered with ERT for Pompe disease;

· continue our preclinical studies on the use of pharmacological chaperones for the treatment of Parkinson’s Disease;

· continue our preclinical studies on the use of pharmacological chaperones co-administered with ERT for other lysosomal storage diseases;

· continue the research and development of additional product candidates;

· seek regulatory approvals for our product candidates that successfully complete clinical trials; and

· establish a sales and marketing infrastructure to commercialize products for which we may obtain regulatory approval.

To become and remain profitable, we must succeed in developing and commercializing drugs with significant market potential. This will require us to be successful in a range of challenging activities, including the discovery of product candidates, successful completion of preclinical testing and clinical trials of our product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing and selling those products for which we may obtain regulatory approval. We are only in the preliminary stages of these activities. We may never succeed in these activities and may never generate revenues that are large enough to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual

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basis. Our failure to become or remain profitable could depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations.

We will need substantial funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect to continue to incur substantial research and development expenses in connection with our ongoing activities, particularly as we continue our Phase 3 development of migalastat HCl. Further, subject to obtaining regulatory approval of any of our product candidates including migalastat HCl, we expect to incur significant commercialization expenses for product sales and marketing, securing commercial quantities of product from our manufacturers and product distribution. While research and development costs associated with our migalastat HCl program will be shared with GSK so long as our collaboration continues, we remain responsible for all costs related to our other programs.

Should GSK terminate our collaboration agreement, we would likely need to seek additional funding in order to complete any clinical trials related to migalastat HCl, seek regulatory approvals of migalastat HCl, and launch the product candidate outside of the United States and continue our other clinical and preclinical programs. Capital may not be available when needed on terms that are acceptable to us, or at all, especially in light of the current challenging economic environment. If adequate funds are not available to us on a timely basis, we may be required to reduce or eliminate research development programs or commercial efforts.

Our future capital requirements will depend on many factors, including:

· the progress and results of our clinical trials of migalastat HCl;

· the continuation of our collaboration agreement with GSK and GSK’s achievement of milestone payments thereunder;

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

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

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

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

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

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

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

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

Any capital that we obtain may not be on terms favorable to us or our stockholders or may require us to relinquish valuable rights.

Until such time, if ever, as we generate product revenue to finance our operations, we expect to finance our cash needs through public or private equity offerings and debt financings, corporate collaboration and licensing arrangements and grants from patient advocacy groups, foundations and government agencies. If we are able to raise capital by issuing equity securities, as we did in March 2012, our stockholders will experience dilution. In addition,

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stockholders may experience dilution if the holders of the warrants issued in connection with our March 2010 offering exercise their warrants. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may include rights that are senior to the holders of our common stock. Each of our current loan and security agreements with Silicon Valley Bank includes a covenant whereby we must maintain a minimum amount of liquidity measured at the end of each month where unrestricted cash, cash equivalents and marketable securities is greater than $20 million plus outstanding debt due to Silicon Valley Bank. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to us or our stockholders. If we raise capital through additional collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us or our stockholders.

We may acquire other assets or businesses, or form collaborations or make investments in other companies or technologies, that could harm our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.

As part of our business strategy, we may pursue acquisitions of assets or businesses, or strategic alliances and collaborations, to expand our existing technologies and operations. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any such transaction, any of which could have a detrimental effect on our financial condition, results of operations and cash flows. We have no experience with acquiring other companies and limited experience with forming collaborations. We may not be able to find suitable acquisition candidates, and if we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business and we may incur additional debt or assume unknown or contingent liabilities in connection therewith. Integration of an acquired company or assets may also disrupt ongoing operations, require the hiring of additional personnel and the implementation of additional internal systems and infrastructure, especially the acquisition of commercial assets, and require management resources that would otherwise focus on developing our existing business. We may not be able to find suitable collaboration partners or identify other investment opportunities, and we may experience losses related to any such investments.

To finance any acquisitions or collaborations, we may choose to issue debt or shares of our common stock as consideration. Any such issuance of shares would dilute the ownership of our stockholders. If the price of our common stock is low or volatile, we may not be able to acquire other assets or companies or fund a transaction using our stock as consideration. Alternatively, it may be necessary for us to raise additional funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to us, or at all.

Our short operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.

We are a development stage company. We commenced operations in February 2002. Our operations to date have been limited to organizing and staffing our company, acquiring and developing our technology and undertaking preclinical studies and clinical trials of our most advanced product candidates. We have not yet generated any commercial sales for any of our product candidates. We have not yet demonstrated our ability to successfully complete large-scale, clinical trials, obtain regulatory approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history.

In addition, if we are successful in obtaining marketing approval for any of our lead product candidates or if we acquire commercial assets, we will need to transition from a company with a research focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

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Risks Related to the Development and Commercialization of Our Product Candidates

We depend heavily on the success of our most advanced product candidate, migalastat HCl. All of our product candidates are still in either preclinical or clinical development. Clinical trials of our product candidates may not be successful. If we are unable to commercialize migalastat HCl, or experience significant delays in doing so, our business will be materially harmed.

We have invested a significant portion of our efforts and financial resources in the development of our most advanced product candidates, including migalastat HCl. Our ability to generate product revenue, which may never occur, will depend heavily on the successful development and commercialization of these product candidates, and upon the continuation and success of any collaborations we may enter into, in particular our collaboration with GSK. The successful commercialization of our product candidates will depend on several factors, including the following:

· successful enrollment of patients in our clinical trials on a timely basis;

· obtaining supplies of our product candidates and, where required, third party marketed products including ERTs, for completion of our clinical trials on a timely basis;

· successful completion of preclinical studies and clinical trials;

· obtaining regulatory agreement in the structure and design of our clinical programs;

· obtaining marketing approvals from the United States Food and Drug Administration (FDA) and similar regulatory authorities outside the U.S.;

· establishing commercial-scale manufacturing arrangements with third party manufacturers whose manufacturing facilities are operated in compliance with current good manufacturing practice (cGMP) regulations;

· launching commercial sales of the product, whether alone or in collaboration with others;

· acceptance of the product by patients, the medical community and third party payors;

· competition from other companies and their therapies;

· successful protection of our intellectual property rights from competing products in the U.S. and abroad; and

· a continued acceptable safety and efficacy profile of our product candidates following approval.

If the market opportunities for our product candidates are smaller than we believe they are, then our revenues may be adversely affected and our business may suffer.

Each of the diseases that our most advanced product candidates are being developed to address is rare. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on estimates.

Currently, most reported estimates of the prevalence of these diseases are based on studies of small subsets of the population of specific geographic areas, which are then extrapolated to estimate the prevalence of the diseases in the broader world population. In addition, as new studies are performed the estimated prevalence of these diseases may change. In fact, as a result of some recent studies, we believe that previously reported studies do not accurately account for the prevalence of Fabry disease and that the prevalence of Fabry disease could be many times higher than previously reported. There can be no assurance that the prevalence of Fabry disease or Pompe disease in the

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study populations, particularly in these newer studies, accurately reflects the prevalence of these diseases in the broader world population.

We estimate the number of potential patients in the broader world population who have those diseases and may respond to treatment with our product candidates by further extrapolating estimates of the prevalence of specific types of genetic mutations giving rise to these diseases. For example, we base our estimate of the percentage of Fabry patients who may respond to treatment with migalastat HCl on the frequency of missense and other similar mutations that cause Fabry disease reported in the Human Gene Mutation Database. As a result of recent studies that estimate that the prevalence of Fabry disease could be many times higher than previously reported, we believe that the number of patients diagnosed with Fabry disease will increase and estimate that the number of Fabry patients who may benefit from the use of migalastat HCl is significantly higher than some previously reported estimates of Fabry disease generally. If our estimates of the prevalence of Fabry disease or of the number of patients who may benefit from treatment with our product candidates prove to be incorrect, the market opportunities for our product candidates may be smaller than we believe they are, our prospects for generating revenue may be adversely affected and our business may suffer.

Initial results from a clinical trial do not ensure that the trial will be successful and success in early stage clinical trials does not ensure success in later-stage clinical trials.

We will only obtain regulatory approval to commercialize a product candidate if we can demonstrate to the satisfaction of the FDA or the applicable non-U.S. regulatory authority, in well-designed and conducted clinical trials, that the product candidate is safe and effective and otherwise meets the appropriate standards required for approval for a particular indication. Clinical trials are lengthy, complex and extremely expensive processes with uncertain results. A failure of one or more of our clinical trials may occur at any stage of testing. We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA.

Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and initial results from a clinical trial do not necessarily predict final results. We cannot be assured that these trials will ultimately be successful. In addition, patients may not be compliant with their dosing regimen or trial protocols or they may withdraw from the study at any time for any reason.

Even if our early stage clinical trials are successful, we will need to conduct additional clinical trials with larger numbers of patients receiving the drug for longer periods for all of our product candidates before we are able to seek approvals to market and sell these product candidates from the FDA and regulatory authorities outside the U.S. In addition, each of our product candidates is based on our pharmacological chaperone technology. To date, we are not aware that any product based on chaperone technology has been approved by the FDA. As a result, while we have reached agreement with the FDA that a surrogate primary endpoint may be evaluated in our Phase 3 study for migalastat HCl, we cannot be sure what endpoints the FDA will require us to measure in later-stage clinical trials of our other product candidates. If the FDA requires different endpoints than the endpoints we anticipate using or a different analysis of those endpoints, it may be more difficult for us to obtain, or we may be delayed in obtaining, FDA approval of our product candidates. If we are not successful in commercializing any of our lead product candidates, or are significantly delayed in doing so, our business will be materially harmed.

We have limited experience in conducting and managing the preclinical development activities and clinical trials necessary to obtain regulatory approvals, including approval by the FDA.

We have limited experience in conducting and managing the preclinical development activities and clinical trials necessary to obtain regulatory approvals, including approval by the FDA. We have not obtained regulatory approval nor commercialized any of our product candidates. Although we completed enrollment in our first Phase 3 study of migalastat HCl, we have not yet completed a Phase 3 clinical trial for any of our product candidates. Our limited experience might prevent us from successfully designing or implementing a clinical trial. We have limited experience in conducting and managing the application process necessary to obtain regulatory approvals and we might not be able to demonstrate that our product candidates meet the appropriate standards for regulatory approval. If we are not successful in conducting and managing our preclinical development activities or clinical trials or

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obtaining regulatory approvals, we might not be able to commercialize our lead product candidates, or might be significantly delayed in doing so, which will materially harm our business.

We may find it difficult to enroll patients in our clinical trials.

Each of the diseases that our lead product candidates are intended to treat is rare and we expect only a subset of the patients with these diseases to be eligible for our clinical trials. We may not be able to initiate or continue clinical trials for each or all of our product candidates if we are unable to locate a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other non-U.S. regulatory agencies. For example, the entry criteria for our ongoing Phase 3 study in migalastat HCl for Fabry disease to support approval in the United States (Study 011) requires that patients must have a genetic mutation that we believe is responsive to migalastat HCl, and may not have received ERT in the past or must have stopped treatment for at least six months prior to enrolling in the study. As a result, enrollment of the study lasted for over two years.

In addition, the requirements of our clinical testing mandate that a patient cannot be involved in another clinical trial for the same indication. We are aware that our competitors have ongoing clinical trials for products that are competitive with our product candidates and patients who would otherwise be eligible for our clinical trials may be involved in such testing, rendering them unavailable for testing of our product candidates. Our inability to enroll a sufficient number of patients for any of our current or future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether.

If our preclinical studies do not produce positive results, if our clinical trials are delayed or if serious side effects are identified during drug development, we may experience delays, incur additional costs and ultimately be unable to commercialize our product candidates.

Before obtaining regulatory approval for the sale of our product candidates, we must conduct, at our own expense, extensive preclinical tests to demonstrate the safety of our product candidates in animals, and clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Preclinical and clinical testing is expensive, difficult to design and implement and can take many years to complete. A failure of one or more of our preclinical studies or clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, preclinical testing and the clinical trial process that could delay or prevent our ability to obtain regulatory approval or commercialize our product candidates, including:

· our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical testing or clinical trials or we may abandon projects that we expect to be promising;

· we may decide to amend existing protocols for on-going clinical trials;

· regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;

· conditions imposed on us by the FDA or any non-U.S. regulatory authority regarding the scope or design of our clinical trials may require us to resubmit our clinical trial protocols to institutional review boards for re-inspection due to changes in the regulatory environment;

· the number of patients required for our clinical trials may be larger than we anticipate or participants may drop out of our clinical trials at a higher rate than we anticipate;

· our third party contractors or clinical investigators may fail to comply with regulatory requirements or fail to meet their contractual obligations to us in a timely manner;

· we might have to suspend or terminate one or more of our clinical trials if we, the regulators or the institutional review boards determine that the participants are being exposed to unacceptable health risks;

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· regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;

· the cost of our clinical trials may be greater than we anticipate;

· the supply or quality of our product candidates or other materials necessary to conduct our clinical trials, such as existing treatments like ERT, may be insufficient or inadequate or we may not be able to reach agreements on acceptable terms with prospective clinical research organizations; and

· the effects of our product candidates may not be the desired effects or may include undesirable side effects or the product candidates may have other unexpected characteristics.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete our clinical trials or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

· be delayed in obtaining, or may not be able to obtain, marketing approval for one or more of our product candidates and milestone payments from our collaborators;

· obtain approval for indications that are not as broad as intended or entirely different than those indications for which we sought approval; or

· have the product removed from the market after obtaining marketing approval.

Our product development costs will also increase if we experience delays in testing or approvals. We do not know whether any preclinical tests or clinical trials will be initiated as planned, will need to be restructured or will be completed on schedule, if at all. Significant preclinical or clinical trial delays also could shorten the patent protection period during which we may have the exclusive right to commercialize our product candidates. Such delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products or product candidates. In addition, GSK has significant influence on the conduct of our migalastat HCl program, and could compel us to perform unanticipated clinical trials of migalastat HCl or delay the approval process for a variety of reasons.

Even if migalastat HCl or any other product candidate that we develop receives marketing approval, we will continue to face extensive regulatory requirements and the product may still face future development and regulatory difficulties.

Even if marketing approval is obtained, a regulatory authority may still impose significant restrictions on a product’s indications, conditions for use, distribution or marketing or impose ongoing requirements for potentially costly post-market surveillance, post-approval studies or clinical trials. For example, any labeling ultimately approved by the FDA for migalastat HCl, if it is approved for marketing, may include restrictions on use, such as limitations on how Fabry disease is defined and diagnosed. In addition, the labeling may include restrictions based upon evidence of specific genetic mutations or symptoms found in patients. Migalastat HCl will also be subject to ongoing FDA requirements governing the labeling, packaging, storage, advertising, distribution, promotion, recordkeeping and submission of safety and other post-market information, including adverse events, and any changes to the approved product, product labeling, or manufacturing process. The FDA has significant post-market authority, including, for example, the authority to require labeling changes based on new safety information, and to require post-market studies or clinical trials to evaluate serious safety risks related to the use of a drug. For products approved under the Accelerated Approval regulations, the FDA has the authority to require clinical studies to confirm the clinical benefit associated with the surrogate endpoint. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current Good Manufacturing Practice, or cGMP, and other regulations.

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If we, our drug products or the manufacturing facilities for our drug products fail to comply with applicable regulatory requirements, a regulatory agency may:

· issue warning letters or untitled letters;

· seek an injunction or impose civil or criminal penalties or monetary fines;

· suspend or withdraw marketing approval;

· suspend any ongoing clinical trials;

· refuse to approve pending applications or supplements to applications submitted by us;

· suspend or impose restrictions on operations, including costly new manufacturing requirements;

· seize or detain products, refuse to permit the import or export of products or request that we initiate a product recall; or

· refuse to allow us to enter into supply contracts, including government contracts.

The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we are found to have promoted off-label uses, we may become subject to significant liability.

The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the product’s approved labeling. In particular, any labeling approved by the FDA for migalastat HCL or any of our other product candidates may include restrictions on use. The FDA may impose further requirements or restrictions on the distribution or use of migalastat HCL or any of our other product candidates as part of a REMS plan. If we receive marketing approval for migalastat HCl or any other product candidates, physicians may nevertheless prescribe such products to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.

The commercial success of any product candidates that we may develop, including migalastat HCl, will depend upon the degree of market acceptance by physicians, patients, third party payors and others in the medical community.

Any products that we bring to the market, including migalastat HCl, may not gain market acceptance by physicians, patients, third party payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

· prevalence and severity of any sid