Amicus Therapeutics (FOLD) 10-Q2021 Q3 Quarterly report

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks, uncertainties, and assumptions. Forward-looking statements are all statements, other than statements of historical facts, that discuss our current expectation and projections relating to our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, and objectives of management. These statements may be preceded by, followed by, or include the words "aim," "anticipate," "believe," "can," "could," "estimate," "expect," "forecast," "intend," "likely," "may," "outlook," "plan," "potential," "predict," "project," "seek," "should," "will," "would," the negatives or plurals thereof, and other words and terms of similar meaning, although not all forward-looking statements contain these identifying words.

We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure you that the assumptions and expectations will prove to be correct. You should understand that the following important factors could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

In light of these risks and uncertainties, we may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in Part I Item 1A — Risk Factors of the Annual Report on Form 10-K for the fiscal year ended December 31, 2020, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Those factors and the other risk factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations, or investments we may make. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements.

You should read this Quarterly Report on Form 10-Q in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (including the documents incorporated by reference therein) completely and with the understanding that our actual future results may be materially different from what we expect. These forward-looking statements speak only as of the date of this report. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statements, even if experience or future developments make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law. 

Amicus Therapeutics, Inc. (the "Company") is a global, patient-dedicated biotechnology company focused on discovering, developing, and delivering novel medicines for rare diseases. The Company has a portfolio of product opportunities led by the first, oral monotherapy for Fabry disease that has achieved widespread global approval, a differentiated biologic for Pompe disease that is under review with the U.S. Food and Drug Administration ("FDA"), and an industry leading rare disease gene therapy portfolio.

The Company has established an industry leading gene therapy portfolio of potential therapies for people living with rare metabolic diseases, through a license with Nationwide Children's Hospital ("Nationwide Children's") and a research collaboration with the University of Pennsylvania ("Penn"). The Company's pipeline includes gene therapy programs in rare, neurologic/neuromuscular diseases lysosomal disorders ("LDs"), specifically: CLN6 Batten disease ("CLN6"), CLN3 Batten disease ("CLN3"), and CLN1 Batten disease ("CLN1"), Pompe disease, Fabry disease, CDKL5 deficiency disorder ("CDD"), Mucopolysaccharidosis Type IIIB ("MPSIIIB"), as well as a next generation program in Mucopolysaccharidosis Type IIIA ("MPSIIIA"). In the first quarter of 2020, the FDA granted Fast Track designation to the CLN3 gene therapy, AT-GTX-502, for the treatment of pediatric patients less than 18 years of age. In September 2020 and February 2021, the European Medicines Agency granted Priority Medicines designation and the FDA granted Fast Track Designation, respectively, to the CLN6 gene therapy, AT-GTX-501, for the treatment of patients with variant late infantile neuronal ceroid lipofuscinosis 6 ("vLINCL6"). The research collaboration with Penn also provides the Company with exclusive disease-specific access and option rights to develop potentially disruptive new gene therapy platform technologies and programs for most LDs and a broader portfolio of more prevalent rare diseases, including Rett Syndrome, Angelman Syndrome, Myotonic Dystrophy, and select other muscular dystrophies.

In September 2021, the Company announced its intent to launch a next-generation genetic medicine company, Caritas Therapeutics, Inc. (“Caritas”) through a definitive business combination agreement pursuant to which the Amicus gene therapy business will be acquired by ARYA Sciences Acquisition Corp IV ("ARYA"), a special purpose acquisition company (or "SPAC"), sponsored by Perceptive Advisors.

The business combination agreement and the transactions contemplated thereby were unanimously approved by the respective boards of directors of the Company and ARYA. The transaction is expected to close in late 2021 or early 2022, following the approval of the transaction by ARYA’s stockholders and the fulfillment of other customary closing conditions.

Prior to the closing, all expenses will continue to be reported within the Company's Consolidated Statements of Operations. Following the close of the transaction, Amicus will become the largest stockholder of Caritas with an approximate 36% ownership stake (assuming no redemptions by ARYA’s stockholders), through transfer of assets constituting the Company's gene therapy business and contributing $50 million in exchange for a number of units of Caritas as an equity investment.

As of September 30, 2021, the Company will continue to fully consolidate the gene therapy business until the close of the transaction and has not applied accounting treatment under the "held for sale" guidance due to the conditional regulatory and stockholder approvals.

Based on the current operating model, the Company believes that the current cash position, which includes expected revenues, and net proceeds from the September 2021 private placement of securities, is sufficient to fund the Company's operations and ongoing research programs to achieve self-sustainability. Potential impacts of the COVID-19 pandemic, business development collaborations, pipeline expansion, and investment in manufacturing capabilities could impact the Company's future capital requirements.

The Company has prepared the accompanying unaudited Consolidated Financial Statements in accordance with the U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP 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 fiscal year ended December 31, 2020. 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, 2020.

The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions are eliminated in consolidation.

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

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

Additionally, the Company assessed the impact COVID-19 pandemic has had on its operations and financial results as of September 30, 2021 and through the issuance of this report. The Company’s analysis was informed by the facts and circumstances as they were known to the Company. This assessment considered the impact COVID-19 may have on financial estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses.

The Company considers all highly liquid investments purchased with a maturity of three months or less at the date of acquisition to be cash equivalents. Marketable securities consist of fixed income investments with a maturity of greater than three months and other highly liquid investments that can be readily purchased or sold using established markets. These investments are classified as available-for-sale and are reported at fair value on the Company's Consolidated Balance Sheets. Unrealized holding gains and losses are reported within comprehensive income (loss) in the Statements of Comprehensive Loss. Fair value is based on available market information including quoted market prices, broker or dealer quotations, or other observable inputs.

Restricted cash consists primarily of funds held to satisfy the requirements of certain agreements that are restricted in their use and is included in other current assets and other non-current assets on the Company's Consolidated Balance Sheets.

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

Inventories are stated at the lower of cost and net realizable value, determined by the first-in, first-out method. Inventories are reviewed periodically to identify slow-moving or obsolete inventory based on projected sales activity as well as product shelf-life. In evaluating the recoverability of inventories produced, the probability that revenue will be obtained from the future sale of the related inventory is considered and inventory value is written down for inventory quantities in excess of expected requirements. Expired inventory is disposed of and the related costs are recognized as cost of goods sold in the Consolidated Statements of Operations.

Cost of goods sold includes the cost of inventory sold, manufacturing and supply chain costs, product shipping and handling costs, provisions for excess and obsolete inventory, as well as royalties payable.

The Company primarily enters into lease agreements for office space, equipment, and vehicles. The leases have varying terms, some of which could include options to renew, extend, and early terminate. The Company determines if an arrangement is a lease at contract inception. Operating leases are included in right-of-use ("ROU") assets and lease liabilities on the Consolidated Balance Sheets.

ROU assets represent the Company's right to control the use of an explicitly or implicitly identified fixed asset for a period of time and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Lease payments included in the measurement of the lease liability are comprised of fixed payments. Variable lease payments are excluded from the ROU asset and lease liability and are recognized in the period in which the obligation for those payments is incurred. Variable lease payments are presented in the Consolidated Statements of Operations in the same line item as expenses arising from fixed lease payments for operating leases. The Company has lease agreements that include lease and non-lease components, which the Company accounts for as a single lease component for all underlying asset categories.

The lease term for all of the Company's leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.

Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company applies this policy to all underlying asset categories.

ASU 2019-12 - In December 2019, the Financial Accounting Standard Board issued Accounting Standard Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). This new guidance removes specific exceptions to the general principles in Topic 740. It eliminates the need for an organization to analyze whether the following applies in a given period: (i) exception to the incremental approach for intraperiod tax allocation; (ii) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (iii) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 also improves financial statement preparers’ application of income tax-related guidance and simplifies the following: (i) franchise taxes that are partially based on income; (ii) transactions with a government that result in a step up in the tax basis of goodwill; (iii) separate financial statements of legal entities that are not subject to tax; and (iv) enacted changes in tax laws in interim periods. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this guidance prospectively on January 1, 2021. The adoption did not have a material impact on the Company's Consolidated Financial Statements or related disclosures.

The Company has evaluated recent accounting pronouncements and believes that none of them will have a material effect on the Company's Consolidated Financial Statements or related disclosures.

The Company regularly invests excess operating cash in deposits with major financial institutions, money market funds, notes issued by the U.S. government, as well as fixed income investments and U.S. bond funds, both of which can be readily purchased and sold using established markets. The Company believes that the market risk arising from its holdings of these financial instruments is mitigated as many of these securities are either government backed or of the highest credit rating. Investments that have original maturities greater than three months but less than one year are classified as current.

For the nine months ended September 30, 2021 there were no realized gains or losses. For the fiscal year ended December 31, 2020, there were nominal realized gains. The cost of securities sold is based on the specific identification method.

Unrealized loss positions in the marketable securities as of September 30, 2021 and December 31, 2020 reflect temporary impairments and are not a result of credit loss. Additionally, as these positions have been in a loss position for less than twelve months and the Company does not intend to sell these securities before recovery, the losses are recognized in other comprehensive gain (loss). The fair value of these marketable securities in unrealized loss positions was $13.5 million and $124.9 million as of September 30, 2021 and December 31, 2020, respectively.

The Company recorded a reserve for inventory of $0.1 million as of September 30, 2021 and December 31, 2020, respectively.

During the first and third quarters of 2021, the Company entered into separate, privately negotiated exchange agreements with a limited number of holders ("Holders") of the unsecured Convertible Notes due in 2023 ("Convertible Notes"). Under the terms of the Exchange Agreements, the Holders agreed to exchange the remaining aggregate principal amount of $2.8 million of Convertible Notes held by them in exchange for an aggregate of approximately 472,356 shares of Company common stock, par value $0.01 per share. This transaction resulted in $2.7 million in additional paid-in-capital and common stock of 5000 dollars on the Consolidated Balance Sheets as of September 30, 2021. Additionally, the Company recognized a net loss from extinguishment of debt of $0.3 million in the Consolidated Statements of Operations during the nine months ended September 30, 2021.

During the first quarter of 2021, 1,260,000 and 1,294,999 warrants were exercised at $7.06 and $7.98 per share of common stock, respectively, resulting in gross cash proceeds of $19.2 million.

As discussed in ''— Note 5. Debt'' during the first and third quarters of 2021, the Company entered into separate, privately negotiated Exchange Agreements with the Holders of the Convertible Notes. Under the terms of the Exchange Agreements, the Holders agreed to exchange the remaining aggregate principal amount of $2.8 million of Convertible Notes held by them in exchange for an aggregate of approximately 472,356 shares of Company common stock, par value $0.01 per share. This transaction resulted in an increase of $2.7 million and 5000 dollars to additional paid-in-capital and common stock, respectively.

In September 2021, the Company entered into a securities purchase agreement with certain entities, the (“Purchase Agreements”) for the private placement of an aggregate of 11,296,660 shares of the Company’s common stock, at a purchase price of $10.18 per share and pre-funded warrants to purchase an aggregate of 8,349,705 shares of common stock, at a purchase price of $10.17 per pre-funded warrant. Proceeds from the private placement, net of offering costs, were $199.8 million. Each pre-funded warrant has an initial exercise price of $0.01 per share and is exercisable at any time after its original issuance, subject generally to the lock-up period, at the option of each holder, in such holder’s discretion, by (i) payment in full in immediately available funds of the initial exercise price for the number of shares of common stock purchased upon such exercise or (ii) a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth in the pre-funded warrant. Certain of the Purchase Agreements provide for a lock-up period of either 60 days or nine months based on the individual agreements.

The Company's Amended and Restated 2007 Equity Incentive Plan (the "Plan") provides for the granting of restricted stock units and options to purchase common stock in the Company to employees, directors, advisors, and consultants at a price to be determined by the Company's Board of Directors. The Plan is intended to encourage ownership of stock by employees and consultants of the Company and to provide additional incentives for them to promote the success of the Company's business. The Board of Directors, or its committee, is responsible for determining the individuals to be granted options, the number of options each individual will receive, the option price per share, and the exercise period of each option.

As of September 30, 2021, the total unrecognized compensation cost related to non-vested stock options granted was $30.7 million and is expected to be recognized over a weighted average period of three years.

All non-vested units are expected to vest over their normal term. As of September 30, 2021, there was $52.8 million of total unrecognized compensation cost related to unvested RSUs with service-based vesting conditions. These costs are expected to be recognized over a weighted average period of two years.

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

A summary of the fair value of the Company's recurring assets and liabilities aggregated by the level in the fair value hierarchy within which those measurements fall as of December 31, 2020 are identified in the following tables:

Previously, the Company's Convertible Notes fell into the Level 2 category within the fair value level hierarchy. The fair value was determined using broker quotes in a non-active market for valuation. As noted in ''— Note 5. Debt," the Convertible Notes were fully settled during the third quarter of 2021.

The Company did not have any Level 3 assets as of September 30, 2021 or December 31, 2020.

The Company classifies its cash within the fair value hierarchy as Level 1 as these assets are valued using quoted prices in an 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 and the money market funds within the fair value hierarchy as Level 2 primarily utilizing broker quotes in a non-active market for valuation of these securities.

The contingent consideration payable resulted from the acquisition of Callidus Biopharma, Inc. ("Callidus") in November 2013. The most recent valuation was determined using a probability weighted discounted cash flow valuation approach. Gains and losses are included in the Consolidated Statements of Operations.

The contingent consideration payable for Callidus has been classified as a Level 3 recurring liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for the various inputs to the valuation approach, the estimated fair value could be significantly higher or lower than the fair value the Company determined.

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

Contingent consideration liabilities are remeasured to fair value each reporting period using discount rates, probabilities of payment, and projected payment dates. Projected contingent payment amounts related to clinical and regulatory based milestones are discounted back to the current period using a discounted cash flow model. Increases in discount rates and the time to payment may result in lower fair value measurements. Increases or decreases in any of those inputs together, or in isolation, may result in a significantly lower or higher fair value measurement. There is no assurance that any of the conditions for the milestone payments will be met.

The Company reached a regulatory milestone in September 2021, associated with the acceptance of the BLA submission for review by the FDA related to the contingent consideration of Callidus for the ATB-200 Pompe disease program. As of September 30, 2021, the milestone payment of $6.0 million, which is payable in cash, resulted in a decrease in the current portion of the contingent consideration liability and a corresponding increase in accounts payable on the Consolidated Balance Sheets.

Dilutive common stock equivalents would include the dilutive effect of common stock options, convertible debt units, RSUs, and warrants for common stock equivalents. Potentially dilutive common stock equivalents were excluded from the diluted earnings per share denominator for all periods because of their anti-dilutive effect. Weighted average common shares outstanding includes outstanding pre-funded warrants with an exercise price of $0.01.

We are a global, patient-dedicated biotechnology company focused on discovering, developing, and delivering novel medicines for rare diseases. We have a portfolio of product opportunities led by the first, oral monotherapy for Fabry disease that has achieved widespread global approval, a differentiated biologic for Pompe disease that is under review with the U.S. Food and Drug Administration ("FDA"), and an industry leading rare disease gene therapy portfolio.

The lead biologics program of our pipeline is Amicus Therapeutics GAA ("AT-GAA", also known as ATB200/AT2221, or cipaglucosidase alfa/miglustat), a novel, two-component, potential best-in-class treatment for Pompe disease. In February 2019, the FDA granted Breakthrough Therapy designation ("BTD") to AT-GAA for the treatment of late-onset Pompe disease. In September 2021, the FDA set the Prescription Drug User Fee Act ("PDUFA") target action date of May 29, 2022 for the New Drug Application ("NDA") for miglustat and July 29, 2022 for the Biologics License Application ("BLA") for cipaglucosidase alfa.

We have established an industry leading gene therapy portfolio of potential therapies for people living with rare metabolic diseases, through a license with Nationwide Children's Hospital ("Nationwide Children’s") and a research collaboration with the University of Pennsylvania ("Penn"). Our pipeline includes gene therapy programs in rare, neurologic/neuromuscular diseases and lysosomal disorders ("LDs"), specifically: CLN6 Batten disease ("CLN6"), CLN3 Batten disease ("CLN3"), and CLN1 Batten disease ("CLN1"), Pompe disease, Fabry disease, CDKL5 deficiency disorder ("CDD"), Mucopolysaccharidosis Type IIIB ("MPSIIIB"), as well as a next generation program in Mucopolysaccharidosis Type IIIA ("MPSIIIA"). In the first quarter of 2020, the FDA granted Fast Track designation to the CLN3 Batten disease gene therapy, AT-GTX-502, for the treatment of pediatric patients less than 18 years of age. In September 2020 and February 2021, the European Medicines Agency ("EMA") granted Priority Medicines ("PRIME") designation and the FDA granted Fast Track designation, respectively, to the CLN6 Batten disease gene therapy, AT-GTX-501, for the treatment of patients with variant late infantile neuronal ceroid lipofuscinosis 6 ("vLINCL6"). The research collaboration with Penn also provides us with exclusive disease-specific access and the option rights to develop potentially disruptive new gene therapy platform technologies and programs for most LDs and a broader portfolio of more prevalent rare diseases, including Rett Syndrome, Angelman Syndrome, Myotonic Dystrophy, and select other muscular dystrophies.

In September 2021, we announced our intent to launch a next-generation genetic medicine company, Caritas Therapeutics, Inc. (“Caritas”) through a definitive business combination agreement pursuant to which the Amicus gene therapy business will be acquired by ARYA Sciences Acquisition Corp IV ("ARYA"), a special purpose acquisition company (or "SPAC"), sponsored by Perceptive Advisors.

The business combination agreement and the transactions contemplated thereby were unanimously approved by our board of directors and the ARYA board of directors. The transaction is expected to close in late 2021 or early 2022, following approval of the transaction by ARYA’s stockholders and the fulfillment of other customary closing conditions.

Our strategy is to create, manufacture, test, and deliver the highest quality medicines for people living with rare metabolic diseases through internally developed, jointly developed, acquired, or in-licensed products and product candidates that have the potential to obsolete current treatments, provide significant benefits to patients, and be first- or best-in-class. In addition to our lead programs in Fabry and Pompe diseases, we are leveraging our global capabilities to develop and expand our robust pipeline in genomic medicine through our anticipated co-development and commercialization agreement with Caritas. We have made significant progress toward fulfilling our vision of building a leading global biotechnology company focused on rare metabolic diseases.

Our operations have not been significantly impacted by the novel coronavirus (“COVID-19”) pandemic thus far. However, we continued to observe periodic increase in lag times between patient identification and Galafold® initiation due to the resurgence of COVID-19 into 2021. We have maintained operations in all geographies, secured our global supply chain for our commercial and clinical products, as well as maintained the operational integrity of our clinical trials, with minimum disruptions. Our ability to continue to operate without any significant disruptions will depend on the continued health of our employees, the ongoing demand for Galafold® and the continued operation of our global supply chain. We have continued to provide uninterrupted access to medicines for those in need of treatment, while prioritizing the health and safety of our global workforce. However, our results of operations in future periods may be negatively impacted by unknown future impacts from the COVID-19 pandemic.

Highlights of our progress include:

We are leveraging our biologics capabilities to develop AT-GAA, a novel treatment paradigm for Pompe disease. AT-GAA consists of a uniquely engineered rhGAA enzyme, ATB200, or cipaglucosidase alfa, with an optimized carbohydrate structure to enhance lysosomal uptake, administered in combination with AT2221, or miglustat, that functions as an enzyme stabilizer. Miglustat binds to and stabilizes ATB200, or cipaglucosidase alfa, preventing inactiviation of rhGAA in circulation to improve the uptake of active enzyme in key disease-relevant tissues, resulting in increased clearance of accumulated substrate, glycogen. Miglustat is not an active ingredient that contributes directly to substrate reduction ("glycogen").

We initiated ATB200-03 (or "PROPEL"), a global Phase 3 clinical study of AT-GAA in adult patients with late-onset Pompe disease in December 2018 and completed last patient, last visit in December 2020. In February 2021, we reported topline results from the Phase 3 PROPEL study. Patients in PROPEL were randomized 2:1 so that for every two patients randomized to be treated with AT-GAA, one was randomized to be treated with alglucosidase alfa. Of the Pompe disease patients enrolled, 77% were being treated with alglucosidase alfa (n=95) immediately prior to enrollment (“Switch”) and 23% had never been treated with any ERT (n=28) (“Naïve”). 117 patients completed the PROPEL study and all 117 voluntarily enrolled in the long-term extension study. The primary endpoint of the study was the mean change in 6-minute walk distance as compared with baseline measurements at 52 weeks across the combined ERT Switch and ERT Naïve patient populations. In this combined population patients taking AT-GAA (n=85) walked on average 21 meters farther at 52 weeks compared to 7 meters with those treated with alglucosidase alfa (n=37). This primary endpoint in the combined population was assessed for superiority and while numerically greater, statistical significance for superiority on this combined population was not achieved for the AT-GAA arm as compared to the alglucosidase alfa arm (p=0.072).

Per the hierarchy of the statistical analysis plan, the first key secondary endpoint of the study was the mean change in percent-predicted Forced Vital Capacity (“FVC”) at 52 weeks across the combined population. In this combined population patients taking AT-GAA demonstrated a nominally statistically significant and clinically meaningful difference for superiority over those treated with alglucosidase alfa. AT-GAA significantly slowed the rate of respiratory decline in patients after 52 weeks. Patients treated with AT-GAA showed a 0.9% absolute decline in percent-predicted FVC, compared to a 4.0% absolute decline in the alglucosidase alfa arm (p=0.023). Patients within the combined study population demonstrated statistically significant improvements on the GSGC (“Gait, Stairs, Gower’s Chair”) key secondary endpoint, which captures strength, coordination and mobility, compared to a worsening for alglucosidase alfa treated patients in the overall population (p<0.05). Additionally, lower MMT (Manual Muscle Testing), Patient-Reported Outcomes Measurement Information System (“PROMIS”) physical function and PROMIS fatigue secondary endpoints favored AT-GAA treated patients over alglucosidase alfa treated patients. Results also showed improvements in the two important biomarker endpoints of Pompe disease (Hex-4 and CK), which significantly favored AT-GAA compared to alglucosidase alfa (p<0.001). AT-GAA demonstrated a similar safety profile to alglucosidase alfa.

The PROPEL Switch patients entered the study having been treated with alglucosidase alfa for a minimum of two years. More than two thirds (67%+) of those patients had been on ERT treatment for more than five years prior to entering the PROPEL study (mean of 7.4 years). A pre-specified analysis of the patients switching from alglucosidase alfa on 6-minute walk distance showed that after 52 weeks from switching, AT-GAA treated patients (n=65) walked 16.9 meters farther than their baseline, compared to 0.0 meters for those patients who were randomized to remain on alglucosidase alfa (n=30) (p=0.046). A pre-specified analysis of the patients switching from alglucosidase alfa on percent-predicted FVC showed that AT-GAA treated patients stabilized and slightly improved their respiratory function on this important measure while those patients remaining on alglucosidase alfa continued to significantly decline in respiratory muscle function. AT-GAA patients showed a 0.1% absolute increase in percent-predicted FVC while the alglucosidase alfa patients showed a 4.0% absolute decline over the course of the year (p=0.006).

The PROPEL Naïve patients treated with AT-GAA for 52 weeks (n=20) walked 33 meters farther than their baseline, on the 6-minute walk distance endpoint. The Naïve patients treated with alglucosidase alfa (n=7) walked 38 meters further than their baseline. The difference between the two groups was not statistically significant (p=0.60). Additionally, patients never previously treated with any ERT showed similar declines in percent-predicted FVC at 52 weeks of –4.1% for AT-GAA treated patients and –3.6% for alglucosidase alpha treated patients. The difference between the two groups was not statistically significant (p=0.57).

As part of our long-term commitment to provide multiple solutions to address the significant unmet needs of the Pompe disease community, we are also advancing a next-generation gene therapy treatment for Pompe disease. In October 2018, we expanded our gene therapy portfolio through a collaboration agreement with Penn to pursue research and development of novel gene therapies for Pompe disease and other indications.

In April 2019, we presented initial preclinical data from our investigational AAV gene therapy program for Pompe disease. This initial preclinical study in Pompe disease knockout mice administered a single high dose of AAV gene therapy with either unmodified wild-type hGAA ("unmodified hGAA") or an Amicus/Penn engineered hGAA transgene with a Lysosomal-Targeting Cell receptor binding motif ("engineered hGAA"). The engineered hGAA AAV gene therapy demonstrated more robust and consistent glycogen reduction compared to unmodified hGAA AAV gene therapy, in all key tissues assessed in a Pompe disease mouse model. In the central nervous system, the engineered hGAA AAV gene therapy also showed robust glycogen reduction in neuronal cells, suggesting this may be an effective way to address neuronal aspects of Pompe disease. Unmodified hGAA AAV gene therapy showed minimal glycogen reduction in neuronal cells. This preclinical study provided initial validation for combining Amicus-engineered transgenes with Penn's AAV gene therapy technologies.

In May 2020, we presented preclinical data with the engineered hGAA AAV in single and combined central nervous system ("CNS") and systemic directed gene therapy in a mouse model of Pompe disease with advanced disease at treatment. The engineered hGAA AAV showed better targeting and clearance of glycogen storage at low doses in Pompe disease mice compared to unmodified hGAA AAV. High dose IV therapy showed strength rescue and the addition of high dose intracerabroventricular ("ICV") therapy to high dose IV provided incremental benefit.

Through our license with Nationwide Children’s and research collaboration with Penn, we are researching potential first-in-class gene therapies for multiple forms of Batten disease. Batten disease is the common name for a broad class of rare, fatal, inherited disorders of the nervous system, also known as neuronal ceroid lipofuscinoses ("NCLs"). In these diseases, a defect in a specific gene triggers a cascade of problems that interferes with a cell's ability to recycle certain molecules. Each gene is called ceroid lipofuscinosis, neuronal ("CLN") and given a different number designation as its subtype. There are 13 known forms of Batten disease often referred to as CLN1-8; 10-14. The various types of Batten disease have similar features and symptoms but vary in severity and age of onset.

We have two clinical programs in CLN6 and CLN3, and several preclinical programs including CLN1 and other types of Batten disease.

The thirteen patients enrolled in our Phase 1/2 study for CLN6 have received a one-time intrathecal administration of AT-GTX-501. In October 2020, interim results were reported for the 13 patients from this program, demonstrating that treatment with AT-GTX-501 was well tolerated. The majority of AEs were mild and unrelated to treatment. No pattern of AEs related to AAV or anti-CLN6 immunogenicity was observed. Interim efficacy data based on evaluation using the Hamburg Motor and Language scores suggested a slowing of disease progression for 12 of the 13 patients at the 12-month timepoint and for eight of the 13 patients at the 24-months timepoint. Additional, interim clinical data was reported on various components of Hamburg Seizure and Vision scores in most patients from baseline to month 12 or 24, compared to the progression expected in matched untreated patients. Two study participants passed away during the long term follow up period from disease-related complications deemed by the investigator as unrelated to AT-GTX-501.

In the fourth quarter of 2018, we announced the initiation of a Phase 1/2 study to evaluate the safety and efficacy of a single intrathecal administration of an AAV serotype AT-GTX-502 gene therapy in patients with CLN3. In the Phase 1/2 study, a total of three patients were dosed in the low-dose group, and based on the safety profile to date, the data safety monitoring board cleared us to begin enrollment in the high-dose cohort. One patient is currently dosed in the high-dose cohort. In February 2021, we announced initial safety for the first four patients up to 15 months post-administration of AT-GTX-502 and preliminary efficacy data for the first three patients in the low-dose cohort for up 15 months post-administration of AT-GTX-502, as well as one patient in the high-dose cohort for up to 3 months post-administration of AT-GTX-502. Initial results of the study suggest that AT-GTX-502 was well tolerated and demonstrated potential early signs of disease stabilization compared to a natural history dataset.

We are researching a potential first-in-class genetic medicine for CDD consisting of a CDKL5 protein engineered for cross correction, delivered as either a protein replacement or as a gene therapy through our collaboration with Penn. CDKL5 is a gene on the X-chromosome encoding the CDKL5 protein that regulates the expression of several essential proteins for normal brain development. Genetic mutations in the CDKL5 gene result in CDKL5 protein deficiency and CDD. This disorder manifests clinically as persistent seizures starting in infancy, followed by severe impairment in neurological development. Most children affected by CDD cannot walk or care for themselves and may also suffer from scoliosis, visual impairment, sensory issues, and gastrointestinal complications.

We have a number of additional gene therapies in active preclinical development. Our strategy is to utilize our innovative program engineering approaches to develop first or best in class AAV gene therapies for these rare devastating diseases.

We will continue to evaluate business development opportunities as appropriate to build stockholder value and provide us with access to the financial, technical, clinical, and commercial resources necessary to develop and market technologies or products with a focus on rare and orphan diseases. We are exploring potential collaborations, alliances, and other business development opportunities on a regular basis. These opportunities may include business combinations, partnerships, the strategic out-licensing of certain assets, or the acquisitions of preclinical-stage, clinical-stage, or marketed products or platform technologies consistent with our strategic plan to develop and provide therapies to patients living with rare and orphan diseases.