Amicus Therapeutics(FOLD) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited consolidated financial information for the specified periods Item 1. Consolidated Financial Statements and Notes (unaudited) This section presents the unaudited consolidated financial statements of Amicus Therapeutics, Inc. for the periods ended June 30, 2021, and December 31, 2020, including balance sheets, statements of operations, comprehensive loss, changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies and specific financial line items Consolidated Balance Sheets This section presents the company's financial position, including assets, liabilities, and equity, at specific dates | Metric | Dec 31, 2020 (in thousands) | Jun 30, 2021 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Assets | $886,520 | $786,892 | $(99,628) | | Cash and cash equivalents | $163,240 | $176,538 | $13,298 | | Investments in marketable securities | $320,029 | $206,530 | $(113,499) | | Total Liabilities | $600,140 | $572,982 | $(27,158) | | Total Stockholders' Equity | $286,380 | $213,910 | $(72,470) | Consolidated Statements of Operations This section details the company's revenues, expenses, and net loss over specific reporting periods | Metric (in thousands) | Q2 2021 | Q2 2020 | YoY Change | YoY % Change | | :-------------------------------- | :------ | :------ | :--------- | :----------- | | Net product sales | $77,413 | $62,353 | $15,060 | 24.2% | | Gross profit | $69,033 | $55,677 | $13,356 | 24.0% | | Research and development | $63,003 | $69,611 | $(6,608) | -9.5% | | Selling, general, and administrative | $42,276 | $34,657 | $7,619 | 22.0% | | Loss from operations | $(38,834) | $(51,345) | $12,511 | -24.4% | | Net loss attributable to common stockholders | $(51,225) | $(52,492) | $1,267 | -2.4% | | Net loss per common share (basic and diluted) | $(0.19) | $(0.20) | $0.01 | -5.0% | | Metric (in thousands) | H1 2021 | H1 2020 | YoY Change | YoY % Change | | :-------------------------------- | :------ | :------ | :--------- | :----------- | | Net product sales | $143,815 | $122,878 | $20,937 | 17.0% | | Gross profit | $128,896 | $109,650 | $19,246 | 17.6% | | Research and development | $127,120 | $158,731 | $(31,611) | -19.9% | | Selling, general, and administrative | $89,002 | $74,872 | $14,130 | 18.9% | | Loss from operations | $(91,889) | $(129,402) | $37,513 | -29.0% | | Net loss attributable to common stockholders | $(116,889) | $(141,440) | $24,551 | -17.4% | | Net loss per common share (basic and diluted) | $(0.44) | $(0.55) | $0.11 | -20.0% | Consolidated Statements of Comprehensive Loss This section reports the company's net loss and other comprehensive income (loss) components | Metric (in thousands) | Q2 2021 | Q2 2020 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | Net loss | $(51,225) | $(52,492) | $1,267 | | Foreign currency translation adjustment gain (loss) | $235 | $(2,116) | $2,351 | | Unrealized gain on available-for-sale securities | $12 | $457 | $(445) | | Comprehensive loss | $(50,978) | $(54,151) | $3,173 | | Metric (in thousands) | H1 2021 | H1 2020 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | Net loss | $(116,889) | $(141,440) | $24,551 | | Foreign currency translation adjustment gain (loss) | $843 | $2,080 | $(1,237) | | Unrealized gain on available-for-sale securities | $12 | $248 | $(236) | | Comprehensive loss | $(116,034) | $(139,112) | $23,078 | Consolidated Statements of Changes in Stockholders' Equity This section outlines changes in the company's equity accounts, including capital and accumulated deficit | Metric (in thousands) | Dec 31, 2020 | Jun 30, 2021 | Change | | :-------------------------------- | :----------- | :----------- | :------- | | Total Stockholders' Equity | $286,380 | $213,910 | $(72,470) | | Additional Paid-In Capital | $2,308,578 | $2,364,494 | $55,916 | | Accumulated Deficit | $(2,045,462) | $(2,162,351) | $(116,889) | | Warrants | $12,387 | $0 | $(12,387) | - Warrants exercised generated $19.23 million in proceeds and eliminated the $12.39 million warrant liability[26][69] Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities | Metric (in thousands) | H1 2021 | H1 2020 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | Net cash used in operating activities | $(108,277) | $(141,460) | $33,183 | | Net cash provided by investing activities | $112,278 | $163,258 | $(50,980) | | Net cash provided by financing activities | $11,064 | $2,599 | $8,465 | | Net increase in cash, cash equivalents, and restricted cash | $13,626 | $20,921 | $(7,295) | | Cash, cash equivalents, and restricted cash at end of period | $179,788 | $167,262 | $12,526 | Notes to Consolidated Financial Statements This section provides detailed explanations of the company's significant accounting policies and financial statement line items Note 1. Description of Business Amicus Therapeutics is a global biotechnology company focused on discovering, developing, and delivering novel medicines for rare diseases, with a portfolio including Galafold for Fabry disease, AT-GAA for Pompe disease, and an industry-leading gene therapy pipeline. The company anticipates incurring losses but believes its current cash position and expected revenues are sufficient to achieve self-sustainability - Amicus Therapeutics is a global biotechnology company specializing in novel medicines for rare diseases, with a focus on Fabry disease (Galafold), Pompe disease (AT-GAA), and a growing gene therapy portfolio[35][36][37] - The company expects to incur losses through 2021 and beyond, with an accumulated deficit of $2.2 billion as of June 30, 2021, but believes current cash and expected revenues are sufficient for self-sustainability[38] Note 2. Summary of Significant Accounting Policies This note outlines the basis of presentation for the unaudited consolidated financial statements, prepared in accordance with U.S. GAAP for interim financial information. It details policies on consolidation, foreign currency transactions, use of estimates (including COVID-19 impact assessment), and the classification of cash, cash equivalents, marketable securities, and restricted cash. The company adopted ASU 2019-12 on January 1, 2021, with no material impact - Financial statements are prepared in accordance with U.S. GAAP for interim reporting, with all necessary recurring adjustments[39] - The company assesses COVID-19 impact on operations and financial results, noting no significant disruptions to date but acknowledging potential future negative impacts[38][44] - Cash equivalents are highly liquid investments with maturities of three months or less; marketable securities are available-for-sale fixed income investments with maturities greater than three months, reported at fair value[45] Note 3. Cash, Cash Equivalents, Marketable Securities, and Restricted Cash As of June 30, 2021, the company held $176.5 million in cash and cash equivalents and $206.5 million in marketable securities, totaling $383.1 million. These investments are primarily in high-quality commercial financial instruments, with unrealized losses considered temporary. Restricted cash amounted to $3.25 million | Asset (in thousands) | Jun 30, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $176,538 | $163,240 | | Marketable securities | $206,530 | $320,029 | | Total cash, cash equivalents, and marketable securities | $383,068 | $483,269 | | Restricted cash | $3,250 | N/A (not explicitly stated for Dec 31, 2020 in this table) | - Unrealized loss positions in marketable securities ($17.2 million as of June 30, 2021) are considered temporary impairments, not credit losses, and are recognized in other comprehensive gain (loss)[62] Note 4. Inventories Inventories, consisting of raw materials, work-in-process, and finished goods for Galafold, increased to $24.1 million at June 30, 2021, from $19.6 million at December 31, 2020. The company maintains a reserve for inventory | Inventory Component (in thousands) | Jun 30, 2021 | Dec 31, 2020 | | :--------------------------------- | :----------- | :----------- | | Raw materials | $7,619 | $5,547 | | Work-in-process | $11,306 | $7,693 | | Finished goods | $5,161 | $6,316 | | Total inventories | $24,086 | $19,556 | Note 5. Debt The company's long-term debt primarily consists of a $400 million Senior Secured Term Loan due 2026 and Convertible Notes. The net carrying value of long-term debt increased slightly to $390.4 million at June 30, 2021, from $389.3 million at December 31, 2020. Interest expense significantly increased due to the Senior Secured Term Loan | Debt Component (in thousands) | Jun 30, 2021 | Dec 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Net carrying value of Senior Secured Term Loan | $388,095 | $386,970 | | Net carrying value of Convertible Notes | $2,339 | $2,284 | | Total Long-term debt | $390,434 | $389,254 | | Interest Expense (in thousands) | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :------------------------------ | :------ | :------ | :------ | :------ | | Contractual interest expense | $7,604 | $3,410 | $15,125 | $6,990 | | Amortization of debt discount | $383 | $268 | $720 | $470 | | Amortization of deferred financing | $262 | $33 | $485 | $50 | Note 6. Stockholders' Equity During the first quarter of 2021, the company received $19.2 million in gross cash proceeds from the exercise of 2,554,999 warrants - Warrants exercised in Q1 2021 generated $19.2 million in gross cash proceeds[69] Note 7. Share-Based Compensation The company's share-based compensation plan includes stock options and restricted stock units (RSUs). Total unrecognized compensation cost for non-vested stock options was $36.0 million (expected over 3 years), and for unvested RSUs was $57.9 million (expected over 2 years) as of June 30, 2021. Total equity compensation expense for the six months ended June 30, 2021, was $32.09 million, up from $21.00 million in the prior year | Metric (in thousands) | H1 2021 | H1 2020 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | Total equity compensation expense | $32,090 | $21,004 | $11,086 | - Unrecognized compensation cost for non-vested stock options was $36.0 million (weighted average period of 3 years) and for unvested RSUs was $57.9 million (weighted average period of 2 years) as of June 30, 2021[73][74] Note 8. Assets and Liabilities Measured at Fair Value The company classifies its financial assets and liabilities within a fair value hierarchy (Level 1, 2, or 3). Cash is Level 1, marketable securities and debt are Level 2, and contingent consideration payable is Level 3. The fair value of contingent consideration payable increased to $27.3 million at June 30, 2021, from $25.8 million at December 31, 2020, with $19.8 million classified as current | Asset/Liability (in thousands) | Fair Value (Jun 30, 2021) | Fair Value (Dec 31, 2020) | Fair Value Hierarchy Level | | :-------------------------------- | :------------------------ | :------------------------ | :------------------------- | | Commercial paper | $147,339 | $217,095 | Level 2 | | Asset-backed securities | $20,680 | $9,438 | Level 2 | | Corporate debt securities | $12,039 | $39,513 | Level 2 | | U.S. government agency bonds | $26,071 | $53,582 | Level 2 | | Money market funds | $4,582 | $4,427 | Level 2 | | Contingent consideration payable | $27,317 | $25,825 | Level 3 | | Deferred compensation plan liability | $4,233 | $4,078 | Level 2 | - Contingent consideration payable, a Level 3 liability, increased to $27.3 million at June 30, 2021, with $19.8 million expected to be paid within the next twelve months[83][85] Note 9. Basic and Diluted Net Loss per Common Share The basic and diluted net loss per common share for the three months ended June 30, 2021, was $(0.19), an improvement from $(0.20) in the prior year. For the six months, it improved to $(0.44) from $(0.55). Potentially dilutive common stock equivalents were excluded from the diluted EPS calculation due to their anti-dilutive effect | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Net loss per common share (basic and diluted) | $(0.19) | $(0.20) | $(0.44) | $(0.55) | | Weighted average common shares outstanding | 266,398,516 | 257,973,329 | 265,384,865 | 257,548,623 | - Potentially dilutive common stock equivalents (options, convertible notes, warrants, RSUs) totaling 22.8 million shares as of June 30, 2021, were excluded from diluted EPS calculation due to their anti-dilutive effect[87] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the company's business, strategy, and recent progress, including commercial and clinical milestones. It details the consolidated results of operations for the three and six months ended June 30, 2021, compared to the prior year, and discusses the company's liquidity, capital resources, funding requirements, and financial uncertainties related to future payments Overview and Strategy This section outlines the company's business, strategic objectives, and operational focus - Amicus Therapeutics is a global biotechnology company focused on discovering, developing, and delivering novel medicines for rare diseases, including Fabry disease (Galafold), Pompe disease (AT-GAA), and a gene therapy portfolio[89][90][91] - The company's strategy is to create first- or best-in-class medicines for rare metabolic diseases through internal development, acquisition, or in-licensing, with a focus on expanding its genomic medicine pipeline[92] - COVID-19 has not significantly impacted operations, but the company observes increased lag times for Galafold initiation and acknowledges potential future negative impacts on results[93] Highlights of Progress This section summarizes key commercial, clinical, and financial achievements during the reporting period - Galafold revenue for the six months ended June 30, 2021, totaled $77.4 million, an increase of $15.1 million year-over-year, driven by growth in the U.S., Europe, and Japan markets[94] - Completed last patient, last visit in the global Phase 3 PROPEL study for AT-GAA in December 2020, reporting topline results in February 2021[94] - AT-GAA received Breakthrough Therapy Designation (FDA), Orphan Drug Designation (Japan), Promising Innovative Medicine (MHRA), and a positive scientific opinion through EAMS (MHRA)[94] - Presented initial clinical data from Phase 1/2 CLN3 gene therapy study suggesting early signs of disease stabilization and preclinical data for Fabry disease gene therapy candidate (AT-GTX-701) showing improved substrate reduction[94] - Maintained uninterrupted global supply chains for Galafold and clinical products during the COVID-19 pandemic[94] - Total cash, cash equivalents, and marketable securities were $383.1 million as of June 30, 2021, believed to be sufficient for self-sustainability based on current operating models[94] Product Pipeline Details This section provides detailed updates on the company's various product development programs and clinical trials Gene Therapy for Fabry Disease Amicus is developing a Fabry gene therapy (AT-GTX-701) for patients with non-amenable variants, leveraging a collaboration with Penn. Preclinical data showed the engineered hGLA AAV gene therapy (AT-GTX-701) demonstrated enhanced stability and significantly greater substrate reduction across Fabry disease-relevant tissues compared to wild-type constructs - Developing Fabry gene therapy (AT-GTX-701) for patients with non-amenable variants, showing enhanced stability and superior substrate reduction in preclinical studies[95] Novel ERT for Pompe Disease The AT-GAA program for Pompe disease, consisting of cipaglucosidase alfa and miglustat, completed its Phase 3 PROPEL study. While the primary endpoint (6-minute walk distance in the combined population) did not achieve statistical significance for superiority, AT-GAA showed nominally statistically significant and clinically meaningful superiority in slowing respiratory decline (FVC) and improvements in strength, coordination, and mobility (GSGC) compared to alglucosidase alfa. Switch patients showed significant improvements in 6-minute walk distance and stabilized respiratory function - AT-GAA is a novel ERT for Pompe disease, combining cipaglucosidase alfa (engineered enzyme) with miglustat (enzyme stabilizer)[96] - Phase 3 PROPEL study for AT-GAA completed, showing that while the primary endpoint (6-minute walk distance in combined population) did not achieve statistical significance for superiority (p=0.072), AT-GAA demonstrated nominally statistically significant superiority in slowing respiratory decline (FVC, p=0.023) and improvements in GSGC (p<0.05)[96] - In switch patients, AT-GAA treated patients walked 16.9 meters farther than baseline (vs. 0.0 meters for alglucosidase alfa, p=0.046) and showed a 0.1% absolute increase in FVC (vs. 4.0% decline for alglucosidase alfa, p=0.006)[97][98] Gene Therapy for Pompe Disease Amicus is advancing a next-generation gene therapy for Pompe disease through a collaboration with Penn. Preclinical data for engineered hGAA AAV gene therapy demonstrated more robust and consistent glycogen reduction in key tissues, including neuronal cells, compared to unmodified hGAA AAV gene therapy - Advancing a next-generation Pompe gene therapy; preclinical data shows engineered hGAA AAV gene therapy achieved more robust and consistent glycogen reduction in key tissues, including neuronal cells[101][102] Gene Therapy for Various Types of Batten Disease The company has two clinical programs (CLN6 and CLN3) and several preclinical programs for Batten disease. The CLN6 Phase 1/2 study showed AT-GTX-501 was generally well tolerated and demonstrated a meaningful effect in slowing disease progression in Hamburg Motor and Language scores. The CLN3 Phase 1/2 study for AT-GTX-502 showed initial safety and potential early signs of disease stabilization - CLN6 Batten disease AAV-CLN6 gene therapy (AT-GTX-501) Phase 1/2 study showed general tolerability and meaningful slowing of disease progression in motor and language scores[106] - CLN3 Batten disease AAV serotype AT-GTX-502 gene therapy Phase 1/2 study demonstrated initial safety and potential early signs of disease stabilization[107] CDKL5 Deficiency Disorder Amicus is researching a potential first-in-class genetic medicine for CDKL5 Deficiency Disorder (CDD), involving an engineered CDKL5 protein delivered as protein replacement or gene therapy, to address severe neurological impairment caused by CDKL5 protein deficiency - Researching a first-in-class genetic medicine for CDKL5 Deficiency Disorder (CDD) using an engineered CDKL5 protein for protein replacement or gene therapy[108] Other Preclinical Gene Therapies The company has active preclinical development programs for other gene therapies, including MPS IIIB and a next-generation MPS IIIA program, aiming to develop first- or best-in-class AAV gene therapies for these rare pediatric neurological lysosomal storage diseases - Active preclinical gene therapy programs include MPS IIIB and next-generation MPS IIIA, targeting rare pediatric neurological lysosomal storage diseases[109] Strategic Alliances and Arrangements This section discusses the company's approach to business development and external collaborations - Continuously evaluates business development opportunities (collaborations, partnerships, out-licensing, acquisitions) to build stockholder value and access resources for rare and orphan disease therapies[110] Consolidated Results of Operations This section analyzes the company's financial performance for the current and prior reporting periods Three Months Ended June 30, 2021 compared to June 30, 2020 Net product sales increased by $15.1 million (24.2%) to $77.4 million, driven by growth in the U.S., Europe, and Japan. Research and development expenses decreased by $6.6 million (9.5%) due to timing of clinical and manufacturing costs for the Pompe program and reduced personnel costs. Selling, general, and administrative expenses increased by $7.6 million (22.0%) due to higher personnel costs. Interest expense rose by $4.5 million due to the Senior Secured Loan. Net loss improved by $1.3 million | Metric (in thousands) | Q2 2021 | Q2 2020 | Change | % Change | | :-------------------------------- | :------ | :------ | :------- | :------- | | Net product sales | $77,413 | $62,353 | $15,060 | 24.2% | | Research and development | $63,003 | $69,611 | $(6,608) | -9.5% | | Selling, general, and administrative | $42,276 | $34,657 | $7,619 | 22.0% | | Interest expense | $(8,150) | $(3,635) | $(4,515) | 124.2% | | Net loss attributable to common stockholders | $(51,225) | $(52,492) | $1,267 | -2.4% | - R&D decrease primarily due to timing of clinical research and manufacturing costs for Pompe program and decreased personnel costs[113] Six Months Ended June 30, 2021 compared to June 30, 2020 Net product sales increased by $20.9 million (17.0%) to $143.8 million, driven by continued growth in key markets. Research and development expenses decreased by $31.6 million (19.9%) due to timing of Pompe clinical and manufacturing costs, gene therapy program spend, and personnel cost realignment. Selling, general, and administrative expenses increased by $14.1 million (18.9%) due to higher personnel costs. Interest expense rose by $8.8 million due to the Senior Secured Loan. Net loss improved by $24.6 million | Metric (in thousands) | H1 2021 | H1 2020 | Change | % Change | | :-------------------------------- | :------ | :------ | :------- | :------- | | Net product sales | $143,815 | $122,878 | $20,937 | 17.0% | | Research and development | $127,120 | $158,731 | $(31,611) | -19.9% | | Selling, general, and administrative | $89,002 | $74,872 | $14,130 | 18.9% | | Interest expense | $(16,142) | $(7,364) | $(8,778) | 119.2% | | Net loss attributable to common stockholders | $(116,889) | $(141,440) | $24,551 | -17.4% | - R&D decrease primarily due to timing of clinical research and manufacturing costs for Pompe program, decrease in gene therapy programs, and personnel cost realignment[117] Liquidity and Capital Resources This section assesses the company's financial liquidity, capital availability, and future funding needs Cash Flow Discussion This section provides a general overview of the company's cash flow activities, noting that detailed information is available in Note 3 - Cash, cash equivalents, and marketable securities totaled $383.1 million as of June 30, 2021[120] Net Cash Used in Operating Activities Net cash used in operating activities decreased to $108.3 million for the six months ended June 30, 2021, from $141.5 million in the prior year. This improvement was primarily due to a reduced net loss and higher stock compensation, partially offset by changes in operating assets and liabilities related to contract manufacturing and research payments | Metric (in thousands) | H1 2021 | H1 2020 | Change | | :-------------------------------- | :------ | :------ | :------- | | Net cash used in operating activities | $(108,277) | $(141,460) | $33,183 | - Decrease in cash used in operations driven by reduced net loss and $32.1 million in stock compensation, partially offset by $32.6 million decrease from changes in operating assets and liabilities[121] Net Cash Provided by Investing Activities Net cash provided by investing activities decreased to $112.3 million for the six months ended June 30, 2021, from $163.3 million in the prior year. This was mainly due to a lower net inflow from the sale and purchase of marketable securities | Metric (in thousands) | H1 2021 | H1 2020 | Change | | :-------------------------------- | :------ | :------ | :------- | | Net cash provided by investing activities | $112,278 | $163,258 | $(50,980) | | Sale and redemption of marketable securities | $258,767 | $210,139 | $48,628 | | Purchases of marketable securities | $(145,255) | $(45,005) | $(100,250) | Net Cash Provided by Financing Activities Net cash provided by financing activities significantly increased to $11.1 million for the six months ended June 30, 2021, from $2.6 million in the prior year. This was primarily driven by $19.2 million from warrant exercises and $6.7 million from stock option exercises, partially offset by $14.4 million in employee withholding taxes for restricted stock unit vesting | Metric (in thousands) | H1 2021 | H1 2020 | Change | | :-------------------------------- | :------ | :------ | :------- | | Net cash provided by financing activities | $11,064 | $2,599 | $8,465 | | Proceeds from warrants exercised | $19,230 | $0 | $19,230 | | Proceeds from stock options exercised, net | $6,661 | $10,734 | $(4,073) | | Payments of employee withholding taxes | $(14,438) | $(8,097) | $(6,341) | Funding Requirements The company expects continued operating losses due to significant R&D expenses, particularly for clinical trials. Future capital needs depend on the progress of drug candidates (AT-GAA, CLN6, CLN3), manufacturing costs, regulatory outcomes, commercialization efforts, and potential acquisitions. The current cash position is deemed sufficient for self-sustainability, but additional funding may be sought - Expects continued operating losses due to significant R&D expenses, especially for clinical trials[127] - Future capital requirements are influenced by clinical trial progress, manufacturing costs, regulatory approvals, commercialization, and business development activities[127] - Current cash position, including expected revenues, is believed to be sufficient for self-sustainability, but additional funding may be sought[128] Financial Uncertainties Related to Potential Future Payments The company has various potential future payment obligations, including development and regulatory milestones, sales-based milestones, and royalties, stemming from agreements with Celenex, Nationwide Children's, University of Pennsylvania, and GlaxoSmithKline. These payments could total significant amounts upon achievement of specified milestones - Potential future payments include up to $10 million in development milestones, $220 million in regulatory approval milestones, and $75 million in tiered sales milestones related to the Celenex acquisition[129] - Nationwide Children's is eligible for up to $7.8 million in development and sales-based milestones per product[130] - University of Pennsylvania is eligible for up to $88.0 million per indication in development and commercial milestones, plus royalties and $10.0 million annually for discovery research[131] - GlaxoSmithKline is eligible for post-approval and sales-based milestones up to $40 million, plus tiered mid-teens royalties in eight major markets outside the U.S. for Galafold[132] Critical Accounting Policies and Significant Judgments The company's financial statements rely on estimates and assumptions in accordance with U.S. GAAP. There were no significant changes to critical accounting policies or estimates during the six months ended June 30, 2021, as previously disclosed in the 2020 Annual Report on Form 10-K - Financial statements require estimates and assumptions, which are evaluated on an ongoing basis[133] - No significant changes to critical accounting policies or estimates during the six months ended June 30, 2021[134] Recent Accounting Pronouncements The company refers to Note 2 for details on recent accounting pronouncements - Refer to Note 2 for details on recent accounting pronouncements[135] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk exposure is to interest rate changes on its cash, cash equivalents, and marketable securities, which are high-quality, short-term instruments with minimal risk. A 1% change in interest rates would impact the investment portfolio by $0.7 million. Variable rate debt (Senior Secured Term Loan) also exposes the company to interest rate risk, with a 1% change impacting interest expense by $1.0 million. The company does not currently hedge these risks and expects no material impact from the LIBOR phase-out. Foreign exchange risk is also present but not hedged, with no material impact expected from a 10% change in rates - Primary market risk is interest rate changes on cash, cash equivalents, and marketable securities; a 1% change would impact the investment portfolio by $0.7 million[136] - Variable rate debt (Senior Secured Term Loan) exposes the company to interest rate risk; a 1% change in the average interest rate would result in a $1.0 million change in interest expense[137] - No current hedging activities for interest rate or foreign currency exchange rate risks; LIBOR phase-out not expected to have a material impact[136][138][139] Item 4. Controls and Procedures As of June 30, 2021, the Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective. There were no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2021[141] - No material changes in internal control over financial reporting occurred during the fiscal quarter[142] PART II. OTHER INFORMATION This section covers additional disclosures not included in the financial statements Item 1. Legal Proceedings On July 13, 2021, Teva Pharmaceuticals filed a lawsuit against the company alleging violations of the CREATES ACT, seeking monetary damages. The company believes the lawsuit is without merit and intends to vigorously defend itself - Teva Pharmaceuticals filed a lawsuit on July 13, 2021, alleging CREATES ACT violations, seeking monetary damages[143] - The company believes the lawsuit is without merit and will vigorously defend itself[143] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 - No material changes to risk factors since the Annual Report on Form 10-K for December 31, 2020[144] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities. The company purchased 55,830 shares of common stock during the three months ended June 30, 2021, at an average price of $9.84 per share, primarily for employee withholding taxes related to restricted stock awards - No unregistered sales of equity securities[145] | Period | Total Shares Purchased | Average Price Paid per Share | | :-------------------------------- | :--------------------- | :--------------------------- | | April 1, 2021 through April 30, 2021 | 5,406 | $10.02 | | May 1, 2021 through May 31, 2021 | 13,013 | $9.40 | | June 1, 2021 through June 30, 2021 | 37,411 | $10.16 | | Total (Q2 2021) | 55,830 | $9.84 | - Shares purchased were primarily for employee withholding taxes related to restricted stock awards[146] Item 3. Defaults Upon Senior Securities No defaults upon senior securities - No defaults upon senior securities[147] Item 4. Mine Safety Disclosures No mine safety disclosures - No mine safety disclosures[148] Item 5. Other Information No other information to disclose - No other information to disclose[149] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents - Includes certifications (31.1, 31.2, 32.1) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104)[150] SIGNATURES The report was signed by John F. Crowley, Chairman and Chief Executive Officer, and Daphne Quimi, Chief Financial Officer, on August 5, 2021 - Report signed by John F. Crowley (Chairman and CEO) and Daphne Quimi (CFO) on August 5, 2021[155]