Overview
We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel small molecule, orally-administered drugs, known as pharmacological chaperones, for the treatment of a range of human genetic diseases. Certain human diseases result from mutations in specific genes that, in many cases, lead to the production of proteins with reduced stability. Proteins with such mutations may not fold into their correct three-dimensional shape and are generally referred to as misfolded proteins. Misfolded proteins are often recognized by cells as having defects and, as a result, may be eliminated prior to reaching their intended location in the cell. The reduced biological activity of these proteins leads to impaired cellular function and ultimately to disease. Our novel approach to the treatment of human genetic diseases consists of using pharmacological chaperones that selectively bind to the target protein increasing the stability of the protein and helping it fold into the correct three-dimensional shape. This allows proper trafficking of the protein, thereby increasing protein activity, improving cellular function and potentially reducing cell stress. We continue to develop our product candidates and explore new uses for our platform pharmacological chaperone technology.
We have three compounds in clinical development: Amigal (migalastat hydrochloride) for the treatment of Fabry disease, Plicera (afegostat tartrate) for the treatment of Gaucher disease and AT2220 (1-deoxynojirimycin HCl) for the treatment of Pompe disease.
Amigal: In the second quarter of 2009, Amicus announced that the Company reached agreement with the U.S. Food and Drug Administration (FDA) on the key protocol design elements of its pivotal trial, including the use of the surrogate primary endpoint of the change in the amount of kidney interstitial capillary GL-3, the substrate that accumulates in the cells of Fabry patients. In addition, the FDA is in agreement that the Company is eligible to seek Accelerated Approval for Amigal according to Subpart H regulations. Amicus began submitting the Phase 3 protocol to investigational sites worldwide in June 2009 and patient enrollment and dosing are now underway. Furthermore, Amicus previously reported that it completed a series of discussions with the European Medicines Agency regarding the clinical study required for Amigal registration in Europe. The Company will provide an update on the timing of the initiation of this study in 2010. Plicera: The Company previously reported preliminary results from its Phase 2 randomized, open-label study to assess the safety, tolerability and preliminary efficacy of its investigational drug, Plicera, in treatment-naive adult patients with type 1 Gaucher disease. Two dose regimens of Plicera (225 mg three days on/four days off and seven days on/seven days off) were studied during this six month trial. While all patients enrolled experienced an increase in the level of the target enzyme (GCase) as measured in white blood cells, clinically meaningful improvements in key measures of disease were observed in just one of the eighteen patients who completed the study. The preliminary results suggest that treatment with Plicera was generally well tolerated, with no serious adverse events reported. Nineteen subjects were enrolled and 18 subjects completed the study. One subject discontinued treatment because of an adverse event (conjunctivitis-related symptoms). The Company plans to further analyze and evaluate the results of this Phase 2 study. However, Amicus no longer plans to advance Plicera into Phase 3 development.
AT2220: Late in the third quarter, the Company announced its plans to initiate a Phase 1 study of AT2220 (1-deoxynojirimycin HCl), its investigational drug in development for the treatment of Pompe Disease. The primary objective of this study is to evaluate the pharmacokinetics of AT2220 in muscle tissue in healthy adult subjects. The FDA agreed to Amicus' proposal for the Phase 1 study and subsequently converted the clinical hold of AT2220 to a partial hold to allow the conduct of this study. This open label, single dose Phase 1 study was initiated in early October and the Company expects to announce results from the trial in the first half of 2010. Additionally, Amicus continues to be encouraged by the results of preclinical studies designed to evaluate the use of AT2220 in combination with enzyme replacement therapy. The Company expects to report additional data from these studies at scientific conferences in 2010.

Research: Amicus continues to invest in research to assess the potential for applying its chaperone technology platform to the treatment of a broad range of human genetic diseases. As part of this effort, Amicus continues to conduct preclinical studies in Parkinson's disease and is investing in new research aimed at evaluating disease targets for other neurodegenerative and genetic disorders.
Costs associated with the clinical development of Amigal, Plicera and AT2220 and research conducted on other programs have caused us to generate significant losses to date, which we expect to continue. These activities are budgeted to expand over time and will require further resources if we are to be successful. From our inception in February 2002 through September 30, 2009, we have accumulated a deficit of $203.7 million. As we have not yet generated commercial sales revenue from any of our product candidates, our operating losses will continue and are likely to be substantial over the next several years and we may need to obtain additional funds to further develop our research and development programs and product candidates. In addition, we will no longer receive cost sharing revenue and no longer be eligible to receive milestone payments from Shire in connection with our prior collaboration agreement. For further information, see "- Note 7. Development and Commercialization Agreement with Shire."
In October, we announced a work-force reduction of approximately 20 percent, or 26 employees, as a part of a corporate restructuring with reductions occurring across all levels and organizations within the Company. In addition, we are terminating our relationships with approximately 17 contractors currently working at the Company. We are taking this step to reduce costs and to align resources with our key strategic priorities. We estimate that we will record charges of approximately $0.9 million during the fourth quarter of 2009 for employment termination costs payable in cash in connection with the workforce reduction.
Collaboration with Shire
On November 7, 2007, we entered into a license and collaboration agreement with Shire. Under the agreement, Amicus and Shire were jointly developing Amicus' three lead pharmacological chaperone compounds for lysosomal storage disorders:
Amigal, Plicera and AT2220. We granted Shire the rights to commercialize these products outside the United States (U.S.) and retained all rights to our other programs and to develop and commercialize Amigal, Plicera and AT2220 in the U.S. In October 2009, the Company and Shire mutually agreed to terminate the collaboration agreement. For further information, see "- Note 7. Development and Commercialization Agreement with Shire." Financial Operations Overview
Revenue
In connection with our collaboration agreement with Shire, Shire paid us an initial, non-refundable license fee of $50 million and reimburses us for certain research and development costs associated with our lead clinical development programs.
For the three and nine months ended September 30, 2009, we recognized approximately $0.7 million and $2.1 million, respectively, of the license fee in Collaboration Revenue and $4.2 million and $12.8 million, respectively, of Research Revenue for reimbursed research and development costs. For the three and nine months ended September 30, 2008, we recognized approximately $0.7 million and $2.1 million, respectively, of the license fee in Collaboration Revenue and $3.0 million and $8.5 million, respectively, of Research Revenue for reimbursed research and development costs. Research and Development Expenses
We expect our research and development expense to increase as we continue to develop our product candidates and explore new uses for our pharmacological chaperone technology. Research and development expense consists of:
• internal costs associated with our research and clinical development activities;

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

• technology 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 September 30, 2009, we have incurred research and development expense in the aggregate of $165.6 million. The following table summarizes our principal product development programs, including the related stages of development for each product candidate in development, and the out-of-pocket, third party expenses incurred with respect to each product candidate (in thousands).

                                                                                                      Period from
                                                                                                    February 4, 2002
                                              Three Months Ended          Nine Months Ended          (inception) to
                                                 September 30,              September 30,            September 30,
Product Candidate                             2008           2009         2008          2009              2009
Third party direct project expenses
Amigal (Fabry Disease - Phase 2)            $     906      $  3,096     $   3,156     $  6,854     $           32,294
Plicera (Gaucher Disease - Phase 2)               547         1,098         1,572        5,693                 24,597
AT2220 (Pompe Disease - Phase 2)                  764           266         1,708        1,528                 12,552

Total third party direct project expenses       2,217         4,460         6,436       14,075                 69,443


Other project costs (1)
Personnel costs                                 3,454         4,830        10,423       14,759                 53,725
Other costs (2)                                 2,529         3,319         7,130        9,120                 42,428

Total other project costs                       5,983         8,149        17,553       23,879                 96,153


Total research and development costs        $   8,200      $ 12,609     $  23,989     $ 37,954     $          165,596

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

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

The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of 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, Amigal, Plicera, AT2220 or any of our other preclinical product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the conduct, duration and cost of clinical trials, which vary significantly over the life of a project as a result of 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. 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 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, 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 September 30, 2009, we spent $73.4 million on general and administrative expense. Interest Income and Interest Expense
Interest income consists of interest earned on our cash and cash equivalents and marketable securities. Interest expense consists of interest incurred on our capital lease facility and 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 September 30, 2009 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, 2008, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.
Revenue Recognition
The Company recognizes revenue 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 determining the accounting for collaboration agreements, the Company determines whether an arrangement involves multiple revenue-generating deliverables that should be accounted for as a single unit of accounting or divided into separate units of accounting for revenue recognition purposes. If this division is required, the arrangement consideration should be allocated among the separate units of accounting. If the arrangement represents a single unit of accounting, the revenue recognition policy and the performance obligation period must be determined (if not already contractually defined) for the entire arrangement. If the arrangement represents separate units of accounting according to the separation criteria, a revenue recognition policy must be determined for each unit. Revenues for non-refundable upfront license fee payments will be recognized on a straight line basis as Collaboration Revenue over the period of the performance obligations.
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 the risks and rewards as the principal in the research and development activities. Accrued Expenses
When we are required to estimate accrued expenses because we have not yet been invoiced or otherwise notified of actual cost, we identify services that have been performed on our behalf and estimate the level of service performed and the associated cost incurred. The majority of our service providers invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us. Examples of estimated accrued expenses include:
• fees owed to contract research organizations in connection with preclinical and toxicology studies and clinical trials;

• fees owed to investigative sites in connection with clinical trials;

• fees owed to contract manufacturers in connection with the production of clinical trial materials;

• fees owed for professional services, and

• unpaid salaries, wages and benefits.

Stock-Based Compensation
Effective January 1, 2006, we adopted 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 on 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 requisite service period of the last separately vesting portion of each award. Expected volatility was calculated based on a blended weighted average of historical information of our stock and the weighted average of historical information of similar public entities for which historical information was available. The average expected life was determined using the mid-point between the vesting date and the end of the contractual term. The risk-free interest rate is based on U.S. Treasury, zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant.
We valued the equity instruments, consisting of stock options, issued to non-employees using the Black-Scholes-Merton valuation model. The measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest.
Basic and Diluted Net Loss Attributable to Common Stockholders per Common Share We calculated net loss per share 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 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                  Nine Months Ended
                                                    September 30,                       September 30,
(In thousands, except per share amount)         2008              2009              2008              2009

Historical
Numerator:
Net loss attributable to common
stockholders                                $     (8,180 )    $    (13,429 )    $    (25,205 )    $    (39,523 )


Denominator:
Weighted average common shares
outstanding - basic and diluted               22,517,431        22,621,513        22,465,981        22,617,808

Dilutive common stock equivalents would include the dilutive effect of common stock options for common stock equivalents. Potentially dilutive common stock equivalents totaled approximately 3.1 million and 4.0 million for the nine months ended September 30, 2008 and 2009, respectively. Potentially dilutive common stock equivalents were excluded from the diluted earnings per share denominator for all periods because of their anti-dilutive effect. Results of Operations
Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
Research and Development Expense. Research and development expense was $12.6 million for the three months ended September 30, 2009 representing an increase of approximately $4.4 million or 54% from $8.2 million for the three months ended September 30, 2008. The variance was primarily attributable to higher personnel costs associated with headcount growth, an increase in manufacturing costs due to the timing of batch production and an increase in contract research related to clinical trials. We expect research and development expense to continue to increase in 2009 as we move forward with clinical trials relating to our lead clinical development compounds and expand our discovery research activities.
General and Administrative Expense. General and administrative expense was $5.2 million for the three months ended September 30, 2009, representing an increase of $0.8 million or 18% from $4.4 million for the three months ended September 30, 2008. The variance was primarily attributable higher personnel costs associated with headcount growth.
Interest Income and Interest Expense. Interest income was $0.1 million for the three months ended September 30, 2009, compared to $1.0 million for the three months ended September 30, 2008. The decrease of $0.9 million or 90% was due to lower interest rates and decreased cash and cash equivalents balances. Interest expense was approximately $0.1 million for the three months ended September 30, 2009 and 2008.
Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
Research and Development Expense. Research and development expense was $38.0 million for the nine months ended September 30, 2009 representing an increase of approximately $14.0 million or 58% from $24.0 million for the nine months ended September 30, 2008. The variance was primarily attributable to higher personnel costs associated with headcount growth, an increase in manufacturing costs due to the timing of batch production and an increase in contract research related to clinical trials. We expect research and development expense to continue to increase in 2009 as we move forward with clinical trials relating to our lead clinical development compounds and expand our discovery research activities.
General and Administrative Expense. General and administrative expense was $15.6 million for the nine months ended September 30, 2009, representing an increase of $0.9 million or 6% from $14.7 million for the nine months ended September 30, 2008. The variance was primarily attributable higher personnel costs associated with headcount growth.

Interest Income and Interest Expense. Interest income was $0.9 million for the nine months ended September 30, 2009, compared to $4.1 million for the nine months ended September 30, 2008. The decrease of $3.2 million or 78% was due to lower interest rates and decreased cash and cash equivalents balances. Interest expense was approximately $0.2 million for the nine months ended September 30, 2009 and 2008.
Liquidity and Capital Resources
Source of Liquidity
As a result of our significant research and development expenditures and the lack of any approved products to generate product sales revenue, we have not been profitable and have generated operating losses since our inception in 2002. We have funded our operations principally with $148.7 million of proceeds from redeemable convertible preferred stock offerings, $75.0 million of gross proceeds from our initial public offering in June 2007 and $50.0 million from the non-refundable license fee from the Shire collaboration agreement in November 2007. The following table summarizes our significant funding sources as of September 30, 2009:

                                                                                      Approximate
                                                                                       Amount(1)
                    Funding                          Year          No. Shares        (in thousands)
Series A Redeemable Convertible Preferred Stock         2002           444,443      $          2,500
                                                       2004,
                                                       2005,
                                                       2006,
Series B Redeemable Convertible Preferred Stock         2007         4,917,853                31,189
. . .