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AMICUS THERAPEUTICS INC
0001178879
--12-31
No
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2011-09-30
Q3
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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
<div align="left" style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div align="left">
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Note 1. Description of Business and Significant Accounting Policies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Corporate Information, Status of Operations and Management Plans</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 for the treatment of
rare diseases. Pharmacological chaperones are a novel, first-in-class approach to treating a broad
range of diseases including lysosomal storage disorders 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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In October 2010, the Company entered into the License and Collaboration Agreement with Glaxo
Group Limited, an affiliate of GlaxoSmithKline PLC (GSK), to develop and commercialize Amigal.
Under the terms of the License and Collaboration Agreement, GSK received an exclusive worldwide
license to develop, manufacture and commercialize Amigal. In consideration of the license grant,
the Company received an upfront, license payment of $30 million and a premium related to the equity
portion of the transaction of $3.2 million from GSK and is eligible to receive further payments of
$173.5 million in aggregate upon the successful achievement of development, regulatory and commercialization
milestones, as well as tiered double-digit royalties on global sales
of Amigal. Potential payments include up to (i) $13.5 million related to the attainment of
certain clinical development objectives and the acceptance of regulatory filings in select
worldwide markets, (ii) $80 million related to market approvals for Amigal in selected
territories throughout the world, and (iii) $80 million associated with the achievement of
certain sales thresholds. GSK and the Company
will jointly fund development costs in accordance with an agreed upon development plan. For further
information, see “— Note 8. Collaborative Agreements.”
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company had an accumulated deficit of approximately $261.4 million at September 30, 2011
and anticipates incurring losses through the year 2011 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 the collaboration agreements and other financing arrangements. The Company
believes that its existing cash and cash equivalents and short-term investments will be sufficient
to cover its cash flow requirements for 2012.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Basis of Presentation</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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, 2010. 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, 2010.
</div>
<!-- Folio -->
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</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Revenue Recognition</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s collaboration agreement with GSK provides 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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Fair Value Measurements</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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).
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>New Accounting Standards</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In June 2011, the FASB issued guidance on the reporting and presentation of comprehensive
income. This guidance eliminates the option to present the components of other comprehensive income
as part of the statement of changes in stockholders’ equity and requires an entity to present items
of net income, other comprehensive income and total comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. The
guidance also requires companies to display reclassification adjustments for each component of
other comprehensive income in both net income and other comprehensive income. The amendments in
this guidance do not change the items that must be reported in other comprehensive income or when
an item of other comprehensive income must be reclassified to net income. The new guidance was
originally proposed to be effective for fiscal years, and interim periods within those years,
beginning after December 15, 2011 and applied retrospectively. In October 2011, the FASB proposed
to defer the effective date of certain provisions in the guidance related to the presentation of
reclassification adjustments. No effective date has been announced. As the new guidance requires
additional presentation only, there will be no impact to the Company’s consolidated results of
operations or financial position.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 years
beginning after December 15, 2011 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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In April 2010, the FASB issued guidance on revenue recognition related to the milestone method
of revenue recognition. This guidance provides criteria on defining a substantive milestone and
determining when it may be appropriate to apply the milestone method of revenue recognition for
research or development transactions. Early adoption is permitted retrospectively from the
beginning of an entity’s fiscal year. The Company early adopted this guidance on the milestone
method of revenue recognition and retrospectively applied this guidance to the beginning of 2010.
This method was first applied in conjunction with the License and Collaboration Agreement with GSK
during the fourth quarter of 2010; there have been no milestones recognized in the year of
adoption. This guidance did not have a material impact on the timing or pattern of revenue
recognition relative to the agreement nor is expected to in future periods.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 2 - us-gaap:CashAndCashEquivalentsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Note 2. Cash, Cash Equivalents and Short Term Investments</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2011, the Company held $22.8 million in cash and cash equivalents and
$46.7 million of short term investment securities. The short term investment securities are
classified as available-for-sale and as such, 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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Cash and available for sale securities consisted of the following as of December 31, 2010
and September 30, 2011 (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>As of December 31, 2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Gain</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Loss</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash balances
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">29,572</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29,572</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">U.S. government agency securities
</div></td>
<td> </td>
<td> </td>
<td align="right">12,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">11,991</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate debt securities
</div></td>
<td> </td>
<td> </td>
<td align="right">42,075</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(33</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">42,044</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial paper
</div></td>
<td> </td>
<td> </td>
<td align="right">23,476</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,488</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Certificate of deposit
</div></td>
<td> </td>
<td> </td>
<td align="right">350</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">350</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">107,473</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">14</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(42</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">107,445</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Included in cash and cash
equivalents
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">29,572</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29,572</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Included in marketable securities
</div></td>
<td> </td>
<td> </td>
<td align="right">77,901</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(42</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">77,873</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total cash and available for
sale securities
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">107,473</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">14</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(42</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">107,445</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>As of September 30, 2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Gain</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Loss</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash balances
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">22,810</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22,810</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">U.S. government agency securities
</div></td>
<td> </td>
<td> </td>
<td align="right">2,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,999</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate debt securities
</div></td>
<td> </td>
<td> </td>
<td align="right">29,412</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(42</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">29,370</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial paper
</div></td>
<td> </td>
<td> </td>
<td align="right">14,981</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,999</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Certificate of deposit
</div></td>
<td> </td>
<td> </td>
<td align="right">350</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">350</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">69,553</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">18</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(43</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">69,528</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Included in cash and cash
equivalents
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">22,810</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22,810</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Included in marketable securities
</div></td>
<td> </td>
<td> </td>
<td align="right">46,743</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(43</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">46,718</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total cash and available for
sale securities
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">69,553</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">18</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(43</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">69,528</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Unrealized gains and losses are reported as a component of accumulated other
comprehensive income/(loss) in stockholders’ equity. For the year ended December 31, 2010 and
the nine months ended September 30, 2011, unrealized holding gains included in accumulated
other comprehensive income were de minimis.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">For the year ended December 31, 2010 and the nine months ended September 30, 2011, there
were no realized gains or losses. The cost of securities sold is based on the specific
identification method.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Unrealized loss positions in the available for sale securities as of December 31, 2010 and
September 30, 2011 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 $46.1 million and $28.3 million as of December 31, 2010 and
September 30, 2011, respectively.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Note 3. Basic and Diluted Net Loss Attributable to Common Stockholders per Common Share</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 would be anti-dilutive. Therefore, the weighted average shares used to calculate
both basic and diluted earnings per share are the same.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Nine Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000">(In thousands, except per share amounts)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Statement of Operations</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss attributable to common stockholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(15,357</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(9,759</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(39,848</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(35,750</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss attributable to common
stockholders per common
share — basic and diluted
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.56</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.28</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1.50</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1.03</td>
<td nowrap="nowrap">)</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 7.0 million and 8.5 million for the nine months ended September 30, 2010 and 2011,
respectively. Potentially dilutive common stock equivalents were excluded from the diluted
earnings per share denominator for all periods because of their anti-dilutive effect.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 4 - us-gaap:ComprehensiveIncomeNoteTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Note 4. Comprehensive Loss</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The components of comprehensive loss are as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Nine Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(15,357</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(9,759</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(39,848</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(35,750</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Change in
unrealized net
gain/(loss) on
marketable
securities
</div></td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(32</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">3</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Comprehensive loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(15,352</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(9,770</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(39,880</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(35,747</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Accumulated other comprehensive loss equals the unrealized net gains and losses on marketable
securities which are the only components of other comprehensive loss included in the Company’s
financial statements.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 5 - us-gaap:StockholdersEquityNoteDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Note 5. Stockholders’ Equity</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Common Stock and Warrants</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2011, the Company was authorized to issue 50,000,000 shares of common
stock. Dividends on common stock will be paid when, and if declared by the board of directors.
Each holder of common stock is entitled to vote on all matters and is entitled to one vote
for each share held.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In October 2010, in connection with the License and Collaboration Agreement, GSK purchased
approximately 6.9 million shares of the Company’s common stock at $4.56 per share. The total value
of this equity investment was approximately $31 million and represents a 19.9% ownership position
in the Company.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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. The Company intends to use the net proceeds from
the sale of the common stock and warrants for general corporate purposes and to further advance the
development of the Company’s lead product candidate, Amigal, and the completion of certain
activities required for the submission of a license application globally.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Stock Option Plans</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three and nine months ended September 30, 2011, the Company recorded compensation
expense of approximately $1.9 million and $7.2 million,
respectively. The higher level of stock based compensation expense
during the nine months ended September 30, 2011 was primarily
due to additional stock option compensation expense recognized as a result of the change in the
terms of the Chief Executive Officer’s stock options resulting from his resignation in April 2011
and subsequent reappointment to the Chief Executive Officer position in August 2011 and the expense
related to the vesting of the former President’s restricted stock grant. The stock-based
compensation expense had no impact on the Company’s cash flows from operations and financing
activities. As of September 30, 2011, the total unrecognized compensation cost related to
non-vested stock options granted was $10.4 million and is expected to be recognized over a weighted
average period of 2.6 years.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of the options granted is estimated on the date of grant using a
Black-Scholes-Merton option pricing model with the following weighted-average assumptions:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Three Months</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Nine Months</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Three Months</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Nine Months</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected stock price volatility
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">79.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">80.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">78.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">78.8</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Risk free interest rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1.9</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">2.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1.3</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">2.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected life of options (years)
</div></td>
<td> </td>
<td> </td>
<td align="right">6.25</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6.25</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6.25</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6.25</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected annual dividend per
share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.00</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.00</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.00</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.00</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A summary of option activities related to the Company’s stock options for the nine months
ended September 30, 2011 is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Number</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>of</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Exercise</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Contractual</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Intrinsic</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Life</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>(in thousands)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>(in millions)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">5,104.1</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7.27</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Options granted
</div></td>
<td> </td>
<td> </td>
<td align="right">2,207.0</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5.93</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Options exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(108.5</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">3.88</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Options forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(520.9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">7.44</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at September 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">6,681.7</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.87</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">7.5 years</td>
<td> </td>
<td align="left">$</td>
<td align="right">0.9</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Vested and unvested expected
to vest, September 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">6,064.2</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.92</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">7.4 years</td>
<td> </td>
<td align="left">$</td>
<td align="right">0.6</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercisable at September 30,
2011
</div></td>
<td> </td>
<td> </td>
<td align="right">3,336.2</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8.06</td>
<td> </td>
<td> </td>
<td colspan="3" align="center">6.0 years</td>
<td> </td>
<td align="left">$</td>
<td align="right">0.5</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Restricted Stock Awards — </i>Restricted stock awards are granted subject to certain
restrictions, including in some cases service conditions. The grant-date fair value of
restricted stock awards, which has been determined based upon the market value of the
Company’s shares on the grant date, is expensed over the vesting period.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes information on the Company’s restricted stock:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Restricted Stock</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Number of</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average Grant</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Date Fair Value</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>(in thousands)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Unvested at December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">50.0</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7.21</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(50.0</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">7.21</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Unvested at September 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The 50,000 restricted stock awards were granted to the Company’s President, Matthew R.
Patterson, upon his appointment to Acting Chief Executive Officer in April 2011. Pursuant to
the terms of the grant, these restricted shares fully vested on August 31, 2011 upon Mr.
Patterson’s resignation from the Company.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three and nine months ended September 30, 2011, the Company recorded
compensation expense relating to restricted stock awards of approximately $0.3 million and $0.4 million, respectively. As of
September 30, 2011, there was no unrecognized compensation cost related to unvested restricted
stock awards.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - us-gaap:DebtDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Note 6. Short-Term Borrowings and Long-Term Debt</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 contains customary terms and 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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 anticipated to be
made by the Company in connection with its planned move in March 2012 following the expiration of
its current leases for 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%. The 2011 Loan Agreement contains the same financial covenant as the 2009 Loan Agreement.
The Company has at all times been in compliance with these covenants during the term of both
agreements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">At September 30, 2011, the current and long-term amounts due under the 2009 Loan Agreement
were $1.3 million and $0.1 million, respectively. There are no amounts currently due under the
2011 Loan Agreement. The carrying amount of the Company’s borrowings approximates fair value at
September 30, 2011.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 7 - us-gaap:FairValueDisclosuresTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Note 7. Assets and Liabilities Measured at Fair Value</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s financial assets and liabilities are measured at fair value and classified
within the fair value hierarchy which is defined as follows:
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><i>Level 1 </i>— Quoted prices in active markets for identical assets or liabilities that the
Company has the ability to access at the measurement date.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><i>Level 2 </i>— Inputs other than quoted prices in active markets that are observable for
the asset or liability, either directly or indirectly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><i>Level 3 </i>— Inputs that are unobservable for the asset or liability.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Cash, Money Market Funds and Marketable Securities</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 September 30, 2011. No transfers of
assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the nine
months ended September 30, 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Secured Debt</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As disclosed in Note 6, the Company has a loan and security agreement with Silicon Valley
Bank. The carrying amount of the Company’s borrowings approximates fair value at September 30,
2011. 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.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b><i>Warrants</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 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, 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, for the nine month period ended September 30, 2011, the Company recognized
the change in the fair value of the warrant liability as non-operating income of $2.0 million. The
resulting fair value of the warrant liability at September 30, 2011, was $2.7 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A summary of the fair value of the Company’s assets and liabilities aggregated by the level in
the fair value hierarchy within which those measurements fall as of September 30, 2011, are
identified in the following table (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b><i>Assets:</i></b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash/Money market funds
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">22,810</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22,810</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">U.S. government agency securities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,999</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,999</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate debt securities
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,370</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,370</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Commercial paper
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,999</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,999</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Certificate of deposit
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">350</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">350</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">22,810</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">46,718</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">69,528</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b><i>Liabilities:</i></b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Secured debt
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,357</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,357</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warrant liability
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,690</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,690</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,357</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,690</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,047</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes the changes in Level 3 liability for the nine months ended
September 30, 2011 (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance as of</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance as of</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>(Decrease)/increase</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>in fair value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Warrant liability
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4,712</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,022</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">2,690</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
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<!-- Begin Block Tagged Note 8 - us-gaap:CollaborativeArrangementDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Note 8. Collaborative Agreements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>GSK</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On October 28, 2010, the Company entered into the License and Collaboration Agreement with
Glaxo Group Limited, an affiliate of GSK, to develop and commercialize Amigal. Under the terms of
the License and Collaboration Agreement, GSK received an exclusive worldwide license to develop,
manufacture and commercialize Amigal. In consideration of the license grant, the Company received
an upfront, license payment of $30 million from GSK and is eligible to receive further payments of
$173.5 million in aggregate upon the successful achievement of development, regulatory and commercialization
milestones, as well as tiered double-digit royalties on global sales of Amigal. Potential payments include up to (i) $13.5 million related to the attainment of
certain clinical development objectives and the acceptance of regulatory filings in select
worldwide markets, (ii) $80 million related to market approvals for Amigal in selected
territories throughout the world, and (iii) $80 million associated with the achievement of
certain sales thresholds. GSK and the Company
will jointly fund development costs in accordance with an agreed upon development plan. This plan
provides that the Company will fund 50% of the development costs for 2011 and 25% of the
development costs in 2012 and beyond. The Company’s development costs are subject to annual and
aggregate caps. Additionally, GSK purchased approximately 6.9 million shares of the Company’s
common stock at $4.56 per share. The total value of this equity investment to the Company was
approximately $31 million and represents a 19.9% ownership position in the Company. Under the
terms of the collaboration agreement, while the Company will collaborate with GSK, GSK will have
decision-making authority over clinical, regulatory and commercial matters. Additionally, GSK will
have primary responsibility for interactions with regulatory agencies and prosecuting applications
for marketing and reimbursement approvals worldwide.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 Amigal, the technology and
“know how” transfer of Amigal development to date, the delivery of the Company’s common stock and
the research services to continue and complete the development of Amigal. 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 is 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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 collaboration agreement. The Company determined that the overall level of activity over the
development period approximates a straight-line approach. At September 30, 2011, the Company
recognized approximately $5.9 million of the total arrangement consideration as Collaboration
Revenue since the inception of the agreement.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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. During the nine months ended September 30, 2011, the Company
recorded $10.8 million in Research Revenue. As of September 30, 2011, the Company recorded
$3.8 million of current receivable due from GSK related to reimbursed research and development
costs.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company evaluated the contingent milestones included in the collaboration agreement at the
inception of the 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 are commensurate with the
enhanced value of each delivered item as a result of the Company’s specific performance to achieve
the milestones. There is considerable effort underway to meet the specified milestones and
complete the development of Amigal. 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 relate 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.
</div>
</div>
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<!-- Begin Block Tagged Note 9 - us-gaap:RestructuringAndRelatedActivitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Note 9. Restructuring Charges</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table summarizes the restructuring charges and utilization for the nine months
ended September 30, 2011 (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="30%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Balance</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>as of</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>as of</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Cash</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Charges</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Payments</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Adjustments</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>30, 2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Facilities
consolidation
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">268</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(172</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">96</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
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<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>Note 10. Subsequent Events</b>
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<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company evaluated events that occurred subsequent to September 30, 2011 and there were no
material recognized or non-recognized subsequent events during this period.
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