Assets and Liabilities Measured at Fair Value

3 Months Ended

Mar. 31, 2013

Assets and Liabilities Measured at Fair Value

Assets and Liabilities Measured at Fair Value

Note 6.  Assets and Liabilities Measured at Fair Value

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

Level 1 — Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 — Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly.

Level 3 — Inputs that are unobservable for the asset or liability.

Cash, Money Market Funds and Marketable Securities

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 March 31, 2013.  No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the three months ended March 31, 2013.

Secured Debt

As disclosed in Note 5, the Company has a loan and security agreement with Silicon Valley Bank.  The carrying amount of the Company’s borrowings approximates fair value at March 31, 2013.  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.

Warrants

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 input, 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 and approximately 0.5 million warrants were exercised in 2012. The Company recognized the change in the fair value of the warrant liability as non-operating expense of $0.3 million for the three months ended March 31, 2013 and the resulting fair value of the warrant liability at March 31, 2013 was $1.2 million. The weighted average assumptions used in the Black-Scholes valuation model for the warrants are as follows:

	Three Months Ended March 31,
	2012			2013
Expected stock price volatility	72.6		%	98.8		%
Risk free interest rate	0.31		%	0.13		%
Expected life of warrants (years)	1.92			0.92
Expected annual dividend per share	$	0.00		$	0.00

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 December 31, 2012, are identified in the following table (in thousands):

	Level 1		Level 2		Total
Assets:
Cash/Money market funds	$	33,971	$	—	$	33,971
Corporate debt securities	—		42,497		42,497
Commercial paper	—		19,744		19,744
Certificate of deposit	—		2,910		2,910
	$	33,971	$	65,151	$	99,122

	Level 1		Level 2		Level 3		Total
Liabilities:
Secured debt	$	—	$	697	$	—	$	697
Warrants liability	—		—		908		908
	$	—	$	697	$	908	$	1,605

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 March 31, 2013, are identified in the following table (in thousands):

	Level 1		Level 2		Total
Assets:
Cash/Money market funds	$	26,736	$	—	$	26,736
Corporate debt securities	—		35,924		35,924
Commercial paper	—		21,741		21,741
Certificate of deposit	—		350		350
	$	26,736	$	58,015	$	84,751

	Level 1		Level 2		Level 3		Total
Liabilities:
Secured debt	$	—	$	597	$	—	$	597
Warrants liability	—		—		1,170		1,170
	$	—	$	597	$	1,170	$	1,767

The change in the fair value of the Level 3 liability was an increase of $2.4 million and $0.3 million for the three months ended March 31, 2012, and 2013 respectively.