Collaborative Agreements

12 Months Ended

Dec. 31, 2019

Penn

In October 2018, the Company expanded its gene therapy portfolio through a collaboration agreement with Penn to pursue research and development of novel gene therapies for four additional indications, including Pompe disease, Fabry disease, CDD and one additional undisclosed rare metabolic disorder.

In May 2019, the Company further expanded the collaboration from three to six programs for rare genetic diseases and now includes specifically: NPC, MPS IIIB, as well as a next generation program in MPS IIIA. This expanded collaboration with Penn also provides the Company with exclusive disease-specific access and option rights to develop potentially disruptive new gene therapy platform technologies and programs for most LDs and a broader portfolio of rare diseases, including Rett Syndrome, Angelman Syndrome, Myotonic Dystrophy, and select other muscular dystrophies. Under the expanded collaboration agreement with Penn, Penn is eligible to receive certain milestone, royalty and discovery research payments with respect to licensed products for each indication. Milestone payments are payable following the achievement of certain development and commercial milestone events in each indication, up to an aggregate of $86.5 million per indication. Royalty payments are based on net sales of licensed products on a licensed product-by-licensed product and country- by-country basis. The Company will provide $10.0 million each year during the five-year agreement to fund the discovery research program. In connection with the collaboration agreement, the Company made an upfront payment of $7 million in cash to Penn that was expensed to research and development expense in the Consolidated Statements of Operations.

GlaxoSmithKline

In November 2013, Amicus entered into the Revised Agreement with GlaxoSmithKline ("GSK"), pursuant to which Amicus has obtained global rights to develop and commercialize Galafold^® as a monotherapy and in combination with ERT for Fabry disease. The Revised Agreement amends and replaces in its entirety the earlier agreement entered into between Amicus and GSK in July 2012 ("Expanded Collaboration Agreement"). Under the terms of the Revised Agreement, there was no upfront payment from Amicus to GSK. For Galafold^® monotherapy, GSK is eligible to receive post-approval and sales-based milestones up to $40 million, as well as tiered royalties in the mid-teens in eight major markets outside the U.S. For the year ended December 31, 2019, the Company incurred approximately $15.5 million of royalty expenses under the revised agreement with GSK.

Under the terms of the Revised Agreement, GSK will no longer jointly fund development costs for all formulations of Galafold^®.

In evaluating the impact of both the Expanded Collaboration Agreement and the Revised Agreement, the Company applied the accounting guidance regarding the impact of potential future payments it may make in its role as a vendor (i.e., Amicus) to its customer (i.e., GSK) and evaluated if these potential future payments could be a reduction of revenue from GSK. If the potential future payments to GSK are as follows:


•	a payment for an identifiable benefit, and


•	the identifiable benefit is separable from the existing relationship between the Company and GSK, and


•	the identifiable benefit can be obtained from a party other than GSK, and


•	the Company can reasonably estimate the fair value of the identifiable benefit,

then the potential future payments would be treated separately from the collaboration and research revenue. However, if all these criteria are not satisfied, then the potential future payments are treated as a reduction of revenue.

Accordingly, the Company did not believe that, for accounting purposes, the new U.S. licensing rights to Galafold^® obtained from GSK under the Expanded Collaboration Agreement, nor the ex U.S. licensing rights to Galafold^® obtained from GSK under the Revised Agreement, represented a separate, identifiable benefit from the licenses in the Original Collaboration Agreement entered into between Amicus and GSK in 2010. The contingent amounts payable to GSK were not sufficiently separable from GSK's original license and the research and development reimbursements such that Amicus could not have entered into a similar exchange transaction with another party. Additionally, the Company cannot reasonably estimate the fair value of the worldwide licensing rights to Galafold^®.

The Company determined that the potential future payments to GSK would be treated as a reduction of revenue and that the total amount of revenue to be received under the arrangement is no longer fixed or determinable as the contingent milestone payments are subject to significant uncertainty.

As a result, the Company no longer recognized any of the upfront license fees and premiums on the equity purchase from GSK until such time as the arrangement consideration becomes fixed or determinable, because an indeterminable amount may ultimately be payable back to GSK. These amounts (the balance of the unrecognized upfront license fee and the premium on the equity purchases) are classified as deferred reimbursements on the balance sheet.

For the year ended December 31, 2019, under the GSK collaboration agreements, we paid $1.5 million in sales-based milestones. As of December 31, 2019, the Company recognized another $4.0 million for sales-based milestones that were met, invoiced and recorded in accounts payable, accrued expenses and other current liabilities and $10.2 million was recorded as deferred reimbursements in the Consolidated Balance Sheets. Additionally, the Company recognized a liability of $5.2 million related to royalties payable to GSK in accounts payable and accrued expenses in the Consolidated Balance Sheets.

The recognition of Research Revenue was also affected by the determination that the overall total arrangement consideration was no longer fixed and determinable, despite the fact that the research activities continued and that the research expense reimbursements by GSK to Amicus were received as the research activities related to the reimbursement had been completed. Therefore, the research reimbursements from GSK were recorded as deferred reimbursements on the balance sheet and would not be recognized until the total arrangement consideration becomes fixed and determinable.

As a result, all revenue recognition was suspended until the total arrangement consideration would become fixed and determinable. In addition, future milestone payments made by the Company will be applied against the balance of this deferred reimbursements account. Revenue recognition for research expense reimbursements, the original upfront license fee, and the equity premiums will resume once the total arrangement consideration becomes fixed and determinable which will occur when the balance of the deferred reimbursements account is sufficient to cover all the remaining contingent milestone payments.