10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

    x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

    ¨     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to         

Commission File Number 0-23155

SYNAGEVA BIOPHARMA CORP.

(Exact name of registrant as specified in its charter)

Delaware	56-1808663
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

128 Spring Street, Suite 520,

Lexington, MA 02421

(Address of principal executive offices, including zip code)

(781) 357-9900

Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of the registrant’s common stock as of November 1, 2012 was 24,308,844.

SYNAGEVA BIOPHARMA CORP.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (Unaudited) as of September 30, 2012 and December 31, 2011		2
	Consolidated Statements of Operations (Unaudited) for the three and nine months ended September  30, 2012 and 2011		3
	Consolidated Statements of Comprehensive Loss (Unaudited) for the three and nine months ended September 30, 2012 and 2011		4
	Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September  30, 2012 and 2011		5
	Notes to the Financial Statements (Unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		19
Item 4.	Controls and Procedures		19
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		19
Item 1A.	Risk Factors		19
Item 5.	Other Information		31
Item 6.	Exhibits		31
SIGNATURES

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PART I. FINANCIAL INFORMATION

Item1. Financial Statements

CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except per share amounts)

	September 30, 2012			December 31, 2011
Assets
Current assets:
Cash and cash equivalents	$	233,407		$	60,232
Accounts receivable		2,622			2,211
Taxes receivable		—			1,240
Prepaid expenses and other current assets		1,700			968
Total current assets		237,729			64,651
Property and equipment, net		3,997			1,256
Developed technology, net		6,441			8,796
Goodwill		8,535			8,535
Other assets		68			60
Total assets	$	256,770		$	83,298
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,234		$	1,507
Accrued expenses		4,827			5,003
Deferred revenue, short term		7,687			1,749
Total current liabilities		13,748			8,259
Deferred revenue, long term		—			991
Total liabilities	$	13,748		$	9,250
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, par value $0.001; 60,000 shares authorized at September 30, 2012 and December 31, 2011; 24,290 and 17,582 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively		24			18
Additional paid-in capital		386,603			189,874
Accumulated other comprehensive loss		(7	)		(4	)
Accumulated deficit		(143,598	)		(115,840	)
Total stockholders’ equity		243,022			74,048
Total liabilities and stockholders’ equity	$	256,770		$	83,298

The accompanying notes are an integral part of these financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues
Royalty revenue	$	2,132		$	—		$	5,028		$	—
Collaboration and license revenue		3,296			88			4,990			193
Other revenue		—			96			56			292
Total revenue		5,428			184			10,074			485
Operating expenses
Research and development		11,373			4,376			26,793			12,197
General and administrative		4,244			2,627			11,051			5,906
Total operating expenses		15,617			7,003			37,844			18,103
Loss from operations		(10,189	)		(6,819	)		(27,770	)		(17,618	)
Other income (expense), net		—			16			—			(183	)
Interest income (expense), net		7			(20	)		12			(27	)
Net loss	$	(10,182	)	$	(6,823	)	$	(27,758	)	$	(17,828	)
Basic and diluted net loss per share	$	(0.43	)	$	(92.21	)	$	(1.26	)	$	(143.77	)
Weighted average shares used in basic and diluted per share computations		23,825			74			21,984			124

The accompanying notes are an integral part of these financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited and in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net loss	$	(10,182	)	$	(6,823	)	$	(27,758	)	$	(17,828	)
Other comprehensive loss:
Foreign currency translation adjustments		1			0			(3	)		(1	)
Total other comprehensive loss		1			0			(3	)		(1	)
Comprehensive loss	$	(10,181	)	$	(6,823	)	$	(27,761	)	$	(17,829	)

The accompanying notes are an integral part of these financial statements.

4

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

	Nine Months Ended September 30,
	2012			2011
Cash flows from operating activities
Net Loss	$	(27,758	)	$	(17,828	)
Adjustments:
Depreciation and amortization		2,781			368
Stock compensation expense		3,067			292
Acquired in-process research and development		344			—
Revaluation of preferred stock warrants		—			183
Loss on disposal of property and equipment		32			—
Amortization of debt issuance costs		—			29
Changes in assets and liabilities:
Accounts receivable		(411	)		770
Taxes receivable, prepaid expenses, other current assets and other assets		501			(161	)
Accounts payable		(273	)		524
Accrued expenses and other liabilities		(655	)		1,077
Deferred revenue		4,947			2,927
Net cash used in operating activities		(17,425	)		(11,819	)
Cash flows from investing activities
Capital expenditures		(2,670	)		(527	)
Purchase of in-process research and development and other assets		(394	)		—
Net cash used in investing activities		(3,064	)		(527	)
Cash flows from financing activities
Proceeds from issuance of common stock, net of issuance costs		192,736			—
Proceeds from issuance of convertible notes		—			12,500
Payments of debt issuance costs		—			(34	)
Proceeds from exercise of stock options		933			106
Net cash provided by financing activities		193,669			12,572
Effect of exchange rate on cash		(5	)		(1	)
Net increase in cash and equivalents		173,175			225
Cash and equivalents at the beginning of period		60,232			14,715
Cash and equivalents at the end of period	$	233,407		$	14,940

The accompanying notes are an integral part of these financial statements.

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SYNAGEVA BIOPHARMA CORP.

NOTES TO THE FINANCIAL STATEMENTS

(In thousands, except per share amounts or as otherwise disclosed)

(Unaudited)

1. Nature of the Business

Synageva BioPharma Corp. (“Synageva” or the “Company”) is a clinical stage biopharmaceutical company focused on the discovery, development, and commercialization of therapeutic products for patients with life-threatening rare diseases and unmet medical need. Synageva has several protein therapeutics in its pipeline, including two enzyme replacement therapies for lysosomal storage disorders and additional programs for other serious genetic conditions for which there are currently no approved treatments. Its lead program, SBC-102, is a recombinant human lysosomal acid lipase (“LAL”) currently under clinical investigation in North America and the European Union (“EU”) for the treatment of patients with early onset and late onset LAL Deficiency, which is a rare, devastating disease that causes significant morbidity and mortality. Synageva currently evaluates SBC-102 in global clinical trials and SBC-102 has been granted orphan designations by the U.S. Food and Drug Administration (“FDA”), the European Medicines Agency, and the Japanese Ministry of Health, Labour and Welfare. Additionally, SBC-102 received “fast track” designation by the FDA. Synageva has not yet received approval to market this product and is not currently commercializing any other products.

The Company is subject to risks common to companies in the biopharmaceutical industry including, but not limited to, the successful development of products, clinical trial uncertainty, regulatory approval, fluctuations in operating results and financial risks, potential need for additional funding, protection of proprietary technology and patent risks, compliance with government regulations, dependence on key personnel and collaboration partners, competition, technological and medical risks and management of growth.

The Company has incurred losses since inception and at September 30, 2012, had an accumulated deficit of $143.6 million. The Company expects to incur losses over the next several years as it continues to expand its drug discovery, development efforts and pre-commercial activities. As a result of continuing losses, the Company may seek additional funding through a combination of public or private financing, collaborative relationships or other arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into new collaboration or license agreements. If we are unable to obtain additional funding on a timely basis, whether through sales of debt or equity or through third-party collaboration or license arrangements, we may be required to curtail or terminate some or all of our development programs, including some or all of our drug candidates.

Through September 30, 2012, the Company has funded its operations primarily from proceeds of the sale of stock, issuance of convertible notes, royalty proceeds and proceeds from government grants and collaboration agreements. On November 2, 2011, the Company completed a merger transaction (the “Reverse Merger”) with Trimeris, Inc., a Delaware Corporation (“Trimeris”) (see Note 2, Reverse Merger), which was accounted for as a business combination, through which it assumed certain assets and liabilities of the acquired entity, including $50.1 million in cash and cash equivalents and a royalty stream related to FUZEON, a product sold by F. Hoffman-La Roche Ltd. (“Roche”), which serves as further funding for the Company’s operations.

On January 10, 2012, the Company announced the closing of a $90.0 million underwritten public offering of approximately 3.6 million shares of common stock at a price of $25.18. The Company received net proceeds of approximately $84.6 million from this offering. In addition, on July 13, 2012, the Company announced the closing of a $115.0 million underwritten public offering of approximately 2.8 million shares of common stock at a price of $41.20. The Company received net proceeds of approximately $108.1 million from this offering. The Company intends to use the proceeds from these offerings for general corporate purposes, which may include working capital, capital expenditures, research and development expenditures, preclinical and clinical trial expenditures, commercial expenditures, acquisitions of new technologies or businesses that are complementary to our current technologies and business focus and investments. The Company expects that it will have sufficient cash and cash equivalents to sustain operations for at least the next twelve months.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for Quarterly Reports on Form 10-Q and do not include all of the information and note disclosures required by the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. The Financial Statements should therefore be read in conjunction with the Financial Statements and Notes thereto for the fiscal year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K/A filed with the SEC on April 24, 2012.

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The accompanying Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Financial Statements and accompanying disclosures. Although these estimates are based on management’s knowledge of current events and actions that the Company may undertake in the future, actual results may be different from those estimates. The Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair statement of results for these interim periods. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2012.

Reverse Merger

On November 2, 2011, Trimeris closed the Reverse Merger with Synageva BioPharma Corp., a privately held Delaware corporation (“Private Synageva”), pursuant to an Agreement and Plan of Merger and Reorganization, dated as of June 13, 2011 (the “Merger Agreement”), by and among Trimeris, Private Synageva and Tesla Merger Sub, Inc., a wholly owned subsidiary of Trimeris (“Merger Sub”). Pursuant to the Merger Agreement, Private Synageva became a wholly owned subsidiary of Trimeris through a merger of Merger Sub with and into Private Synageva, and the former stockholders of Private Synageva received shares of Trimeris that constituted a majority of the outstanding shares of Trimeris. In connection with the Reverse Merger, Trimeris changed its name to Synageva BioPharma Corp.

The Reverse Merger has been accounted for as a reverse acquisition under which Private Synageva was considered the acquirer of Trimeris. As such, the financial statements of Private Synageva are treated as the historical financial statements of the combined company, with the results of Trimeris being included from November 2, 2011. As a result of the Reverse Merger, historical common stock amounts and additional paid in capital have been retroactively adjusted.

Asset Acquisition

In the third quarter of fiscal 2012, the Company purchased certain assets, including IP rights and property, plant and equipment, for $0.4 million. The purchase has been accounted for as an asset acquisition, and approximately $0.3 million of the purchase price was allocated to the acquired in-process research and development, which was expensed in the quarter.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies during the three and nine months ended September 30, 2012, as compared to the significant accounting policies disclosed in the Company’s financial statements included in the Annual Report on Form 10-K/A for the year ended December 31, 2011.

Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (FASB) issued ASU No. 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (ASU 2012-02). This newly issued accounting standard allows an entity the option to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test for indefinite-lived intangibles other than goodwill. Under that option, an entity would no longer be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on that qualitative assessment, that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. This ASU is effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on our financial position or results of operations.

In May 2011, the FASB issued a new standard on fair value measurement and disclosure requirements. The new standard changes fair value measurement principles and disclosure requirements including measuring the fair value of financial instruments that are managed within a portfolio, the application of applying premiums and discounts in a fair value measurement, and additional disclosure about fair value measurements. The adoption of this guidance in the first quarter 2012 did not have a material effect on our financial statements.

In June 2011, the FASB issued a new standard on the presentation of comprehensive income. The new standard eliminated the alternative to report other comprehensive income and its components in the statement of changes in equity. Under the new standard, companies can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. The Company adopted the provisions of this guidance during the first quarter 2012.

In December 2011, the FASB issued Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The amendments in this update require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1,

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2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. Although we are still evaluating the impact of this standard, we do not expect its adoption to have a material impact on our financial position or results of our operations ..

Principles of Consolidation

Synageva’s Financial Statements include the accounts of Synageva and its wholly owned subsidiaries, Abbey BioPharma Corp., a Delaware corporation, and Synageva BioPharma Limited, an entity incorporated in the United Kingdom, which commenced operations in 1996 and May 2011, respectively. All intercompany accounts and transactions have been eliminated in consolidation.

3. Fair Value of Financial Instruments

Under current accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The current accounting guidance also establishes a hierarchy to categorize how fair value is measured and is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

Level 1	Quoted prices in active markets for identical assets or liabilities.
Level 2	Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011:

	September 30, 2012		Quoted Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents – money market fund	$	230,069	$	230,069	$	—	$	—

	December 31, 2011		Quoted Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents – money market fund	$	59,860	$	59,860	$	—	$	—

The change in the valuation of preferred stock warrants for the nine months ended September 30, 2011 is summarized below.

	Nine Months Ended September 30,
	2011
Fair value, beginning of year	$	12
Change in fair value		183
Fair value, end of period	$	195

The Company accounted for the warrants outstanding to purchase 31 shares of Series C-2 convertible preferred stock according to accounting standards regarding freestanding financial instruments with the characteristics of both liabilities and equities. Due to the redemption feature of the Series C-2 convertible preferred stock, these warrants were classified as liabilities. The warrants were revalued at each balance sheet date and any change in fair value was

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recorded as a component of other income or other expense. In connection with the Reverse Merger, the Series C-2 convertible preferred stock warrants were converted to common stock warrants, and a final mark to market calculation was performed. The common stock warrants were subsequently exercised in a net settlement transaction in the fourth quarter of fiscal 2011, resulting in the issuance of 10 shares of common stock.

4. Supplemental Balance Sheet Information

Accrued expenses consist of the following:

	September 30, 2012		December 31, 2011
Accrued compensation, benefits and withholdings	$	2,312	$	3,113
Clinical, manufacturing and scientific costs		1,229		819
Professional fees		399		619
Other		887		452
	$	4,827	$	5,003

5. Convertible Notes and Convertible Preferred Stock

Convertible Preferred Stock

As of December 31, 2010, of the 28,000 authorized shares of preferred stock, approximately 246 shares were designated as Series A-2 convertible preferred stock (“Series A-2 preferred stock”), approximately 4,169 shares were designated as Series B-2 convertible preferred stock (“Series B-2 preferred stock”), approximately 3,659 shares were designated as Series C-2 convertible preferred stock (“Series C-2 preferred stock”), and 18,000 shares were designated as Series D-2 preferred stock. As part of the Reverse Merger, these shares were exchanged for common stock of the combined entity, Synageva BioPharma Corp., as described in Note 2, “Reverse Merger,” at a ratio of approximately 0.413 shares of common stock for every share of previously issued preferred stock.

2011 Convertible Notes

In March 2011, the Company issued convertible notes (the “2011 Convertible Notes”) for proceeds of $12.5 million as the first tranche of a potential $25 million convertible note offering. The 2011 Convertible Notes were convertible into shares of Series D-2 preferred stock at the conversion price then applicable to the Series D-2 preferred stock or into a future series of preferred stock at its then applicable conversion price issued in conjunction with the next Qualified Offering (as defined in the 2011 Notes purchase agreement), at the election of the holders. The 2011 Convertible Notes had no stated interest rate. On November 2, 2011 as part of the completion of the Reverse Merger, the 2011 Convertible Notes were converted into Series D-2 preferred stock, prior to the conversion of all Private Synageva preferred and common shares outstanding into shares of the combined entity.

As of September 30, 2012 and December 31, 2011, the Company did not have any convertible notes or convertible preferred stock outstanding.

6. Share Based Payments

The Company’s stock-based compensation plans include the 1996 Stock Option Plan and the 2005 Stock Plan, as well as options outstanding under Trimeris, Inc.’s 1993 Plan and 2007 Stock Incentive Plan. The Board of Directors has the authority to determine to whom options will be granted, the number of shares, the term, and the exercise price.

At the Company’s annual meeting of stockholders held June 27, 2012, stockholders approved amendments to the 2005 Stock Plan to increase the number of shares of common stock available for issuance by 1.5 million shares, increasing the maximum number of shares that may be issued under the 2005 Stock Plan to approximately 3.0 million shares. Shares subject to outstanding awards under the 2005 Stock Plan totaled 2.3 million as of September 30, 2012.

In addition, at the Company’s annual meeting of stockholders held June 27, 2012, stockholders approved the 2012 Employee Stock Purchase Plan, which allows eligible employees to use payroll deductions to purchase shares of the Company’s common stock at a discount of 15%. The plan is considered a compensatory employee stock purchase plan, and will result in incremental stock-based compensation expense in future periods. The first option period began on August 1, 2012 and will conclude on December 31, 2012. Hereafter, option periods under the plan will generally run from January 1 to June 30 and July 1 to December 31 of each year.

9

Determining the Fair Value of Stock Options

The Company uses the Black-Scholes option pricing model to measure the fair value of its option awards. The fair value of each stock option grant is estimated on the date of grant. The expected life assumption is based on an analysis of reported data for a peer group of companies, the limited exercise historical experience at the Company, management’s expectations based on the length of time that an employee will stay at the Company, the vesting period of four years and the contractual term of ten years. Volatility has been determined based on an analysis of reported data for a peer group of companies that granted options with substantially similar terms. The risk-free interest rate is based on the rate of U.S. Treasury zero coupon rate with a remaining term approximating the expected term used as the input to the Black-Scholes option pricing model. Our Black-Scholes assumptions for options granted in the first half of fiscal 2012 were consistent with those disclosed in Note 9, Share Based Payments, of the Company’s financial statements included in the Annual Report on Form 10-K/A for the year ended December 31, 2011.

A summary of stock option activity under all equity plans for the three and nine months ended September 30, 2012 is as follows:

	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2011		2,371		$	15.34
Options granted		26			32.90
Options exercised		(82	)		3.48
Options canceled or expired		(11	)		16.03
Outstanding at March 31, 2012		2,304		$	15.96
Options granted		616			40.74
Options exercised		(136	)		1.27
Options canceled or expired		(34	)		112.92
Outstanding at June 30, 2012		2,750		$	21.03
Options granted		—			—
Options exercised		(123	)		3.84
Options canceled or expired		(34	)		22.72
Outstanding at September 30, 2012		2,593		$	21.82

The Company recognized stock-based compensation expense on all stock option awards for the three and nine months ended September 30, 2012 and 2011, as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Research and development	$	495	$	35	$	926	$	94
General and administrative		1,060		101		2,141		198
	$	1,555	$	136	$	3,067	$	292

7. Basic and Diluted Net Loss per Common Share

Basic net loss per common share has been computed by dividing net loss by the weighted average number of shares outstanding during the period. Diluted net income per share, if applicable, has been computed by dividing diluted net income by the diluted number of shares outstanding during the period. Except where the result would be antidilutive to loss from continuing operations, diluted net loss per share has been computed assuming the conversion of convertible obligations and the elimination of the related interest expense, the exercise of stock options and warrants, as well as their related income tax effects.

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The following table sets forth the computation of basic and diluted net loss per common share:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011(1)			2012			2011(1)
Numerator:
Net loss	$	(10,182	)	$	(6,823	)	$	(27,758	)	$	(17,828	)
Denominator
Weighted average common shares
Denominator for basic calculation		23,825			74			21,984			124
Denominator for diluted calculation		23,825			74			21,984			124
Net loss per share:
Basic	$	(0.43	)	$	(92.21	)	$	(1.26	)	$	(143.77	)
Diluted	$	(0.43	)	$	(92.21	)	$	(1.26	)	$	(143.77	)

(1) Per share computations for the three and nine months ended September 30, 2011 are based on Private Synageva’s historic common stock, which excludes preferred stock.

The Company’s potential dilutive securities which include convertible debt, convertible preferred stock, stock options, and warrants have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average common stock outstanding used to calculate both basic and diluted net loss per share are the same. The following shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as the effect of including such securities would be antidilutive (in thousands):

	September 30,
	2012		2011
Options to purchase common stock		2,593		1,524
Convertible preferred stock		—		25,997
Convertible preferred stock warrants		—		31
		2,593		27,552

8. License Agreements and Collaborations

Collaborations

In August 2011, the Company entered into a collaboration agreement with Mitsubishi Tanabe Pharma Corporation (“Mitsubishi Tanabe”) whereby the Company is utilizing its proprietary expression technology for the development of a certain targeted compound. The agreement included an upfront development payment to the Company of $3.0 million, on-going reimbursement or funding of development costs, estimated during the initial development period to be approximately $1.5 million, and the potential for an additional payment of $3.0 million due upon the successful completion of the initial development.

In March 2012, the Company entered into an agreement with Mitsubishi Tanabe to develop a second protein therapeutic. The agreement included an upfront license payment to the Company of $9.0 million and on-going reimbursement or funding of development costs, estimated during the initial development period to be approximately $0.8 million, as well as the potential for an additional payment of $3.0 million due upon successful completion of the initial development stage of the second program.

Under both agreements, Mitsubishi Tanabe has an option to obtain an exclusive royalty-bearing license, with the right to grant sublicenses, to further develop and commercialize the licensed compound (the “Option”). Additionally, upon exercise of the Option, the parties intend to negotiate a follow-on collaboration and license agreement that may include potential future development and commercial sales based milestone payments, and potential royalty payments. The Company determined that the Option is substantive as the decision to exercise is in the control of Mitsubishi Tanabe and is not essential to the functionality of the other deliverables in either agreement. Therefore, the Option was not considered to be a deliverable at the inception of either collaboration agreement. The Option terminates sixty days from date the Joint Steering Committee (“JSC”) determines whether the initial development was successful.

The Company evaluated the collaboration agreements in order to determine whether the deliverables at the inception of the agreements: (i) the upfront license payments, (ii) research services during the development periods, and (iii) JSC

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participation should be accounted for as a single unit or multiple units of accounting. The Company concluded that the upfront license payments do not have standalone value to Mitsubishi Tanabe because (i) Mitsubishi Tanabe does not have the ability to transfer or sublicense and (ii) the activities to be conducted during the development period are highly dependent on the Company’s unique knowledge and understanding of its proprietary technology which is critical to optimizing the compounds. The Company determined that the JSC is a deliverable through the development period. In both agreements, the Company concluded that there are two units of accounting which are being delivered over the same performance period.

Revenue recognized under the first and second Mitsubishi Tanabe development programs totaled $0.4 million and $2.9 million for the three months ended September 30, 2012, respectively, and $1.7 million and $3.3 million for the nine months ended September 30, 2012, respectively. Revenue is recognized using the proportional performance method. As of September 30, 2012, the deferred revenue balance includes $1.6 million and $6.0 million related to the first and second development programs, respectively.

9. Commitments and Contingencies

The Company accrues estimated liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of the claim assessment or damages can be reasonably estimated. Synageva expenses legal fees and IP-related and patent costs as they are incurred.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined under federal securities laws. Many of these statements can be identified by the use of words such as “believes,” “expects,” “anticipates,” “plans,” “may,” “will,” “projects,” “continues,” “estimates,” “potential,” “opportunity” or the negative versions of these terms and other similar expressions. Our actual results or experience could differ significantly from the forward-looking statements. Factors that could cause or contribute to these differences include those discussed in “Risk Factors,” in this Quarterly Report on Form 10-Q. You should carefully consider that information before you make an investment decision.

We cannot guarantee any future results, levels of activity, performance or achievements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Quarterly Report on Form 10- Q as anticipated, believed, estimated or expected. The forward-looking statements contained in this Quarterly Report on Form 10-Q represent our estimates as of the date of this Quarterly Report on Form 10-Q (unless another date is indicated) and should not be relied upon as representing our expectations as of any other date. While we may elect to update these forward-looking statements, we specifically disclaim any obligation to do so.

The following discussion of our financial condition and results of operations should be read in conjunction with our Financial Statements and the related Notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Overview

Synageva BioPharma Corp. (together with its subsidiaries, “we”, “our” or “us”) is a clinical stage biopharmaceutical company focused on the discovery, development, and commercialization of therapeutic products for patients with life-threatening rare diseases and unmet medical needs. Our management team is experienced in the development and commercialization of drugs for diseases with small patient populations, including clinical and translational research, working with payors to establish reimbursement, and designing and building commercial organizations to reach highly specialized physicians to facilitate patient identification. We have several protein therapeutics in our pipeline, including two enzyme replacement therapies for lysosomal storage disorders and two programs for life-threatening genetic conditions for which there are currently no approved treatments. Our lead program, SBC-102, is a recombinant human lysosomal acid lipase (“LAL”) currently under clinical investigation in North America and the European Union (“EU”) for the treatment of patients with early and late onset LAL Deficiency, which is a rare, devastating genetic disease that causes significant morbidity and mortality. We currently evaluate SBC-102 in global clinical trials and SBC-102 has been granted orphan designations by the U.S. Food and Drug Administration (“FDA”), the European Medicines Agency, and the Japanese Ministry of Health, Labour and Welfare. Additionally, SBC-102 received “fast track” designation by the FDA. We have not yet received approval to market this product and we are not currently commercializing any other products.

Financial Operations Overview

General

Our future operating results will depend on the progress of drug candidates currently in our research and development pipeline. The results of our operations will vary significantly from year to year and quarter to quarter and will depend largely on, among other factors, the cost and outcome of any preclinical development or clinical trials then being conducted.

Revenue

Royalty Revenue

Royalty revenue relates to amounts earned from the sale of FUZEON by F. Hoffman-La Roche Ltd. (“Roche”). The FUZEON royalty stream was acquired in our merger transaction (“Reverse Merger”) with Trimeris, Inc. (“Trimeris”) in the fourth quarter of fiscal 2011.

Collaboration and License Revenue

        Collaboration and license revenue primarily relates to our collaboration agreements with Mitsubishi Tanabe Pharma Corporation (“Mitsubishi Tanabe”) whereby we utilize our proprietary expression technology in two development programs, in exchange for upfront license payments, funded development, and the potential for additional payments upon the successful completion of the development programs. Under the first program, which was entered into in August 2011, we received an upfront license payment of $3.0 million, on-going funding of development costs, and the potential for an additional payment of $3.0 million due upon the successful completion of the initial development. Additionally, we entered into a second agreement in March 2012, where we received an upfront license payment of $9.0 million, on-going funding of development costs, and the potential for an additional payment of $3.0 million due upon the successful completion of the initial development stage of the second program. Under both agreements, Mitsubishi Tanabe has an option to obtain an exclusive royalty-bearing license, with the right to grant sublicenses, to further develop and commercialize the licensed compound. Upon exercise of the Option, the parties intend to negotiate a follow-on collaboration and license agreement that may include potential future development and commercial sales based milestone payments, and potential royalty payments.

Other Revenue

Other revenues relate to a National Institutes of Health (“NIH”) grant, which was completed in the first quarter of fiscal 2012.

Research and Development

We expense research and development costs as incurred. Research and development expense consists of costs incurred to discover, research and develop drug candidates, including personnel and facility-related expenses, outside contracted services including clinical trial costs, manufacturing and process development costs, research costs, outside consulting services and other external costs. Research and development expense includes any costs associated with generating collaboration or grant revenue.

General and Administrative

General and administrative expense consists primarily of salaries, stock-based compensation expense and other related costs for personnel in executive, finance, accounting, pre-commercial, business development, legal, information technology, corporate communications and human resource functions. We also expense patent costs and expenses associated with maintaining our intellectual property as incurred. Other costs include facility costs not otherwise included in research and development expense, insurance, and professional fees for legal, accounting and pre-commercial services.

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Results of Operations

Three and Nine Months Ended September 30, 2012 and 2011

Revenues

The following table presents total revenue for the three months ended September 30, 2012 and 2011, respectively (U.S. dollars in thousands):

	Three Months Ended September 30,
	2012		2011		$ Change			% Change
Royalty revenue	$	2,132	$	—	$	2,132			—	%
Collaboration and license revenue		3,296		88		3,208			3,645.5
Other revenue		—		96		(96	)		(100.0	)
Total revenue	$	5,428	$	184	$	5,244			2,850.0	%

Total revenues increased by approximately $5.2 million for the three months ended September 30, 2012, as compared to the comparable period of the prior year. The increase in revenues was primarily the result of FUZEON royalty revenue and higher collaboration revenue.

Royalty revenues of $2.1 million relate to the royalty payment earned from Roche, based on total worldwide net sales of FUZEON. We did not have any royalty revenue from FUZEON until after the Reverse Merger, which occurred in the fourth quarter of fiscal 2011. Collaboration and license revenue for the three months ended September 30, 2012 relates to revenue recognized from development programs with Mitsubishi Tanabe. For the three months ended September 30, 2012, we recognized $0.4 million and $2.9 million related to the first and second Mitsubishi Tanabe programs, respectively. For the three months ended September 30, 2011, collaboration and license revenue totaled $0.1 million and related to revenue recognized related to the first Mitsubishi Tanabe program. In the comparable period of the prior year, other revenue includes $0.1 million earned related to a NIH grant.

The following table presents total revenue for the nine months ended September 30, 2012 and 2011, respectively (U.S. dollars in thousands):

	Nine Months Ended September 30,
	2012		2011		$ Change			% Change
Royalty revenue	$	5,028	$	—	$	5,028			—	%
Collaboration and license revenue		4,990		193		4,797			2,485.5
Other revenue		56		292		(236	)		(80.8	)
Total revenue	$	10,074	$	485	$	9,589			1,977.1	%

Total revenues increased by approximately $9.6 million for the nine months ended September 30, 2012, as compared to the comparable period of the prior year. The increase in revenues was primarily the result of FUZEON royalty revenue of $5.0 million and higher collaboration revenue of $4.8 million. Collaboration and license revenue for the nine months ended September 30, 2012 primarily relate to revenues recognized from development programs with Mitsubishi Tanabe. For the nine months ended September 30, 2012, we recognized $1.7 million and $3.3 million related to the first and second Mitsubishi Tanabe programs, respectively. For the nine months ended September 30, 2011, collaboration and license revenue of $0.2 million primarily relates to revenue earned from an arrangement with Morphotek, which was completed in the first quarter of 2012, and, to a lesser extent, the first Mitsubishi Tanabe program. Other revenues relate to a NIH grant and totaled approximately $0.1 million and $0.3 million for the nine months ended September 30, 2012 and 2011, respectively.

While we expect FUZEON royalty revenues to decrease over time, year over year, for 2012, we expect royalty revenue to increase as compared to 2011, due to the inclusion of a full year of FUZEON royalty revenue in our results of operations. Additionally, we expect to recognize increased collaboration revenues in fiscal 2012 as a result of our development arrangements with Mitsubishi Tanabe. As of September 30, 2012, our deferred revenue balance relates to the upfront development payments under both of the Mitsubishi Tanabe collaboration agreements, totaling $7.7 million. We expect to recognize both the upfront development payments, which are included in deferred revenue, and the funded development payments related to both arrangements over the next year, in proportion to our performance under the arrangements.

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Research and Development Expenses

Research and development expenses for the three months ended September 30, 2012 and 2011 are summarized as follows (U.S. dollars in thousands):

	Three Months Ended September 30,
	2012		2011		$ Change		% Change
Compensation and benefits-related	$	2,719	$	1,486	$	1,233		83.0	%
Clinical trials and manufacturing		4,249		1,650		2,599		157.5
Other development related external services		1,724		650		1,074		165.2
Facilities and related		848		555		293		52.8
Acquired in-process research and development		344		—		344		—
Amortization expense – developed technology		994		—		994		—
Stock-based compensation expense		495		35		460		1,314.3
Total research and development expense	$	11,373	$	4,376	$	6,997		159.9	%

Research and development expense increased by approximately $7.0 million, or 159.9%, to $11.4 million for the three months ended September 30, 2012 as compared to $4.4 million for the three months ended September 30, 2011. The increase is primarily attributable to increased spending related to our lead program SBC-102 and includes higher compensation expense from hiring additional staff to move the SBC-102 program forward and increased clinical trial costs and manufacturing fees, as well as other development related external services, associated with on-going SBC-102 development. Additionally, in the third quarter of fiscal 2012, research and development expense includes $1.0 million of amortization related to the developed technology acquired in the Reverse Merger and $0.3 million related to acquired in-process research and development. We expect research and development expense to continue to increase as development for SBC-102 and our other programs continue.

Research and development expenses for the nine months ended September 30, 2012 and 2011 are summarized as follows (U.S. dollars in thousands):

	Nine months  Ended September 30,
	2012		2011		$ Change		% Change
Compensation and benefits-related	$	7,296	$	4,134	$	3,162		76.5	%
Clinical trials and manufacturing		10,292		4,418		5,874		133.0
Other development related external services		3,403		2,023		1,380		68.2
Facilities and related		2,178		1,528		650		42.5
Acquired in-process research and development		344		—		344		—
Amortization expense – developed technology		2,354		—		2,354		—
Stock-based compensation expense		926		94		832		885.1
Total research and development expense	$	26,793	$	12,197	$	14,596		119.7	%

Research and development expense increased by approximately $14.6 million, or 119.7%, to $26.8 million for the nine months ended September 30, 2012 as compared to $12.2 million for the nine months ended September 30, 2011. The increase is primarily attributable to increased spending related to our lead program SBC-102 and includes higher compensation expense from hiring additional staff to move the SBC-102 program forward and increased clinical trial costs and manufacturing fees, as well as other development related external services, associated with on-going SBC-102 development. Additionally, research and development expense includes $2.4 million of amortization related to the developed technology acquired in the Reverse Merger and $0.3 million related to acquired in-process research and development. We expect research and development expense to continue to increase as development for SBC-102 and our other programs continue.

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General and Administrative Expenses

General and administrative expenses for the three months ended September 30, 2012 and 2011 are summarized as follows (U.S. dollars in thousands):

	Three Months Ended September 30,
	2012		2011		$ Change			% Change
Compensation and benefits-related	$	1,963	$	1,048	$	915			87.3	%
External services		1,111		1,256		(145	)		(11.5	)
Facilities related and other		110		222		(112	)		(50.5	)
Stock-based compensation expense		1,060		101		959			949.5
Total general and administrative expense	$	4,244	$	2,627	$	1,617			61.6	%

General and administrative expense increased by approximately $1.6 million to $4.2 million for the three months ended September 30, 2012 as compared to $2.6 million for the comparable period of the prior year. The increase was primarily due to higher compensation-related expenses of $0.9 million and increased stock-based compensation expense of $1.0 million, resulting from hiring additional staff to support increased public company requirements and pre-commercial preparations.

General and administrative expenses for the nine months ended September 30, 2012 and 2011 are summarized as follows (U.S. dollars in thousands):

	Nine months Ended September 30,
	2012		2011		$ Change			% Change
Compensation and benefits-related	$	4,916	$	2,652	$	2,264			85.4	%
External services		3,647		2,708		939			34.7
Facilities related and other		347		348		(1	)		(0.3	)
Stock-based compensation expense		2,141		198		1,943			981.3
Total general and administrative expense	$	11,051	$	5,906	$	5,145			87.1	%

General and administrative expense increased by approximately $5.1 million to $11.1 million for the nine months ended September 30, 2012 as compared to $5.9 million for the comparable period of the prior year. The increase was primarily due to higher compensation-related expenses of $2.3 million and higher stock-based compensation expense of $1.9 million, resulting from hiring additional staff to support increased public company requirements and pre-commercial preparations. External service costs also contributed $0.9 million to the period-over-period increase in expense and were primarily related to increased accounting, pre-commercial activities and public company expenses.

Liquidity and Capital Resources

Sources of Liquidity

We have financed our operations to date primarily through the placement of our equity and debt securities and debt financings, and, to a lesser extent, license and royalty fees, upfront cash payments and research and development funding from collaborators, government grants and licensors. In November 2011, we acquired $50.1 million in cash as a result of the Reverse Merger with Trimeris. On January 10, 2012, we announced the closing of a $90.0 million underwritten public offering of approximately 3.6 million shares of our common stock at a price of $25.18. We received net proceeds of approximately $84.6 million from this offering. In addition, on July 13, 2012, we announced the closing of a $115.0 million, second underwritten public offering of approximately 2.8 million shares of common stock at a price of $41.20. We received net proceeds of approximately $108.1 million. We intend to use the net proceeds from these offerings for general corporate purposes, which may include working capital, capital expenditures, research and development expenditures, preclinical and clinical trial expenditures, commercial expenditures, acquisitions of new technologies or businesses that are complementary to our current technologies and business focus and investments.

We do not expect to generate any revenue from the direct sale of products currently in development for several years, if ever. As a result of our acquisition of Trimeris, we now receive royalties from the sale of FUZEON by Roche, which we expect to decrease over time. A significant portion of our revenues and/or cash flows from operations for the foreseeable future will be quarterly royalty payments from Roche based on sales of FUZEON, up-front license payments and funded research and development that we may receive under existing or new collaboration agreements, if any. Our ability to enter into new collaborations and our receipt of additional payments under our existing collaborations cannot be assured, nor can we predict the timing of any such arrangements or payments, as the case may be.

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As of September 30, 2012, our principal sources of liquidity consisted of cash and cash equivalents of approximately $233.4 million. Our cash equivalents are highly liquid investments with a maturity of three months or less at date of purchase and consist of investments in money market funds.

Cash Flows

The use of our cash flows for operations has primarily consisted of salaries and wages for our employees, facility and facility-related costs for our office, laboratory, and manufacturing facilities, fees paid in connection with preclinical studies, clinical studies, outsourced manufacturing, laboratory supplies, consulting fees, pre-commercial fees and legal fees. We expect that costs associated with clinical studies and manufacturing costs as well as pre-commercial planning costs will increase in future periods assuming that SBC-102 advances into further stages of clinical testing and our other preclinical candidates move forward in development.

Net cash used in operating activities was $17.4 million for the nine months ended September 30, 2012 and was primarily the result of a net loss of $27.8 million, which is discussed in further detail in “Results of Operations.” In addition, non-cash items and changes in certain operating assets and liabilities affected operating cash during the first half of fiscal 2012. Non-cash items partially offsetting net loss include depreciation of fixed assets of $0.4 million, amortization of developed technology of $2.4 million, stock-based compensation of $3.1 million and in-process research and development of $0.3 million. Changes in operating assets and liabilities resulted in a net source of cash of $4.2 million, which was primarily the result of increased deferred revenue of $4.9 million from December 31, 2011. The increase in deferred revenue in the period was primarily the result of the upfront license fees related to the second Mitsubishi Tanabe development program. Other significant uses of cash included decreased accounts payable and accrued expenses of $0.9 million from December 31, 2011.

Net cash used in operating activities was $11.8 million for the nine month period ended September 30, 2011 and was primarily the result of a net loss of $17.8 million, partially offset by non-cash items and changes in certain operating assets and liabilities. Non-cash items impacting operating cash included $0.4 million for depreciation and amortization of fixed assets, $0.3 million for stock-based compensation, and $0.2 million due to the revaluation of outstanding preferred stock warrants. Changes in operating assets and liabilities resulted in a net source of cash of $5.1 million, which was primarily the result of increased deferred revenue and accrued expenses of $2.9 million and $1.1 million from December 31, 2010, respectively. The increase in deferred revenue in the period was primarily the result of the upfront license fees related to the first Mitsubishi Tanabe development program. Other sources of cash included a net decrease of $0.6 million in accounts receivable, prepaid expense and other current assets due to receipt of grant funds earned in 2010 and an increase in accounts payable of $0.5 million from December 31, 2010.

We expect to continue to use cash in operations as we continue to seek to advance our orphan drug programs through clinical development and preclinical testing. In addition, in the future, we may owe royalties and other contingent payments to our licensors based on the achievement of developmental milestones, product sales, and other specified objectives.

Cash used in investing activities totaled $3.1 million and $0.5 million in the nine months ended September 30, 2012 and 2011, respectively, and primarily related to cash paid for capital expenditures. In addition, we paid $0.4 million for IP rights and other long-term assets in the nine-months ended September 30, 2012. We anticipate cash used in investing activities to continue to increase as we expand our production and development capabilities.

Financing activities provided cash of approximately $193.7 million for the nine months ended September 30, 2012, resulting from net cash received in secondary offerings of $192.7 million and proceeds from the exercise of stock options of $0.9 million.

In the comparable period of the prior year, financing activities provided $12.6 million, primarily as a result of cash from the issuance of convertible notes. In conjunction with the Reverse Merger, these notes were converted to common stock, and are no longer outstanding.

Funding Requirements

We have incurred significant losses since our inception. As of September 30, 2012, we had an accumulated deficit of approximately $143.6 million. Our cash and cash equivalents at September 30, 2012 totaled $233.4 million, as discussed above. We expect to use our existing cash and cash equivalents to continue our research and development programs and pre-commercialization activities and to fulfill our planned operating goals. In particular, our currently planned operating and capital requirements include the need for working capital to support our research and development activities for SBC-102 and other preclinical candidates that we are seeking to develop, and to fund our general and administrative and pre-commercial costs and expenses. We expect that we will have sufficient cash and cash equivalents to sustain operations for at least the next twelve months.

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Our ability to finance our operations into the future and to generate revenues will depend heavily on our ability to obtain favorable results in the ongoing clinical trials of SBC-102 and to successfully develop and commercialize SBC-102. We expect that our significant sources of cash flows from operations for the foreseeable future will be quarterly royalty payments from Roche based on sales of FUZEON and additional collaboration revenues, if any. Net sales of FUZEON by Roche have decreased in each of the last three years and are expected to continue to decline.

We may not be able to successfully enter into any new corporate collaborations and the timing, amount, and likelihood of us receiving additional payments under our current collaborations is highly uncertain. As a result, we cannot assure that we will attain any further funding from collaborations or licensing arrangements.

There are a number of factors that may adversely affect our planned future capital requirements and accelerate our need for additional financing, many of which are beyond our control, including the following:

• unanticipated costs in our research and development programs;

• the timing, receipt and amount of payments, if any, from current and potential future collaborators;

• the timing and amount of payments due to licensors of patent rights and technology used in our drug candidates; and

• unplanned costs to prepare, file, prosecute, maintain and enforce patent claims and other patent-related costs, including litigation costs and technology license fees.

We may seek additional funding through debt or equity financings. The fundraising environment for life science companies, in general, is highly volatile. Due to this and various other factors, including currently adverse general market conditions and the early-stage status of our development pipeline, additional funding may not be available on acceptable terms, if at all. In addition, the terms of any financing may be dilutive or otherwise adversely affect other rights of our stockholders. We also expect to seek additional funds through arrangements with collaborators, licensees or other third parties. These arrangements would generally require us to relinquish or encumber rights to some of our technologies or drug candidates, and we may not be able to enter into such arrangements on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, whether through sales of debt or equity or through third-party collaboration or license arrangements, we may be required to curtail or terminate some or all of our development programs, including some or all of our drug candidates.

Contractual Obligations and Requirements

As of September 30, 2012, our contractual obligations consisted primarily of operating leases for our headquarters and other facilities, and to a lesser extent, minimum contractual payments on licensed technology. There were no additional contractual commitments for capital purchases or other expenditures at September 30, 2012.

There have been no significant changes to our contractual obligations and requirements during the nine months ended September 30, 2012, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the SEC on March 22, 2012.

Off-Balance Sheet Arrangements

As of September 30, 2012, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies and Estimates

In preparing our Financial Statements in accordance with accounting principles generally accepted in the U.S. and pursuant to the rules and regulations promulgated by the SEC, we make assumptions, judgments and estimates that can have a significant impact on our net income/loss and affect the reported amounts of certain assets, liabilities, revenue and expenses, and related disclosures. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates. We also discuss our critical accounting policies and estimates with the Audit Committee of our Board of Directors.

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We believe that the assumptions, judgments and estimates involved in the revenue recognition, research and development expense, amortization of intangible assets, and income taxes have the greatest impact on our Financial Statements, so we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.

There have been no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2012, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the SEC on March 22, 2012.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our market risks during the nine months ended September 30, 2012 have not materially changed from those discussed in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the SEC on March 22, 2012.

Item 4. Controls and Procedures

(a) Controls and Procedures

An evaluation was carried out, under the supervision, and with the participation, of our management, including our Chief Executive Officer and our Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report.

Based on the evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b) Change in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act, during our most recently completed quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

On January 16, 2012, we instituted proceedings in the United Kingdom (“UK”) Patents Court with respect to an issued patent that relates generally to the use of LAL and may therefore be relevant to SBC-102. In the proceeding, we are seeking that the court declare the patent invalid, or that the current and anticipated activities related to our development and commercialization of SBC-102 do not infringe the patent. The UK Patents Court scheduled the trial for May 2013. While we believe that the patent is invalid due to the substantial body of prior art, we are unable to predict the outcome of this proceeding. We have also recently initiated proceedings in the French court with respect to the same patent. As with the UK proceedings, we are seeking that the court declare the patent invalid, or that the current and anticipated activities do not infringe the patent. The date for the trial has not yet been established by the French court.

Item 1A. Risk Factors.

You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

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Risks Related to Our Business

We are largely dependent on the success of our leading product candidate, SBC-102. All of our product candidates, including SBC-102, are still in either preclinical or clinical development. Clinical trials of our product candidates may not be successful. If we are unable to commercialize SBC-102, or experience significant delays in doing so, our business will be materially harmed.

Our business prospects are largely dependent upon the successful development and commercialization of SBC-102. In February 2011, we initiated Phase I/II clinical trials for SBC-102 to evaluate the safety and tolerability of SBC-102 in adult patients with liver dysfunction due to late onset LAL Deficiency. We began enrolling patients in May 2011 and completed enrollment in November 2011. We also initiated a Phase I/II clinical study in children with growth failure due to early onset LAL Deficiency in February 2011. Before we can commercialize product candidates, including SBC-102, we need to:

• conduct substantial research and development;

• undertake preclinical and clinical testing, sampling activity and other costly and time consuming measures;

• scale-up manufacturing processes; and

• pursue and obtain marketing and manufacturing approvals and, in some jurisdictions, pricing and reimbursement approvals.

This process involves a high degree of risk and takes many years. Our product development efforts with respect to a product candidate may fail for many reasons, including:

• failure of the product candidate in preclinical studies;

• delays or difficulty enrolling patients in clinical trials, particularly for disease indications with small patient populations;

• patients exhibiting adverse reactions to the product candidate or indications of other safety concerns;

• insufficient clinical trial data to support the effectiveness or superiority of the product candidate;

• inability to manufacture sufficient quantities of the product candidate for development or commercialization activities in a timely and cost-efficient manner, if at all;

• failure to obtain, or delays in obtaining, the required regulatory approvals for the product candidate, the facilities or the processes used to manufacture the product candidate; or

• changes in the regulatory environment, including pricing and reimbursement, that make development of a new product or of an existing product for a new indication no longer desirable.

Few research and development projects result in commercial products, and success in preclinical studies or early clinical trials often is not replicated in later studies.

We may decide to abandon development of a product candidate or service at any time, or it may be required to expend considerable resources repeating clinical trials or conducting additional trials, either of which would increase costs of development and delay any revenue from those programs.

In addition, a regulatory authority may deny or delay an approval because it is not satisfied with the structure or conduct of clinical trials or due to its assessment of the data we supply. A regulatory authority, for instance, may not believe that we have adequately addressed negative safety signals. Clinical data is subject to varied interpretations, and regulatory authorities may disagree with our assessments of data. In any such case, a regulatory authority could insist that we provide additional data, which could substantially delay or even prevent commercialization efforts, particularly if we are required to conduct additional pre-approval clinical studies.

Initial interim results from a clinical trial do not ensure that the trial will be successful and success in early stage clinical trials does not ensure success in later-stage clinical trials.

We will only obtain regulatory approval to commercialize a product candidate if we can demonstrate to the satisfaction of the FDA or the applicable non-U.S. regulatory authority, in well-designed and conducted clinical trials, that the product candidate is safe and effective and otherwise meets the appropriate standards required for approval for a particular indication. Clinical trials are lengthy, complex and extremely expensive processes with uncertain results. A failure of one or more clinical trials may occur at any stage of testing.

Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and initial results from a clinical trial do not necessarily predict final results. While results from our 4-week Phase I/II trial and long-term, open-label extension study of SBC-102 in adults with late onset LAL Deficiency were supportive of continued development of SBC-102, we cannot be assured that further trials will ultimately be successful. Results of further clinical trials may be disappointing.

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Even if early stage clinical trials are successful, we may need to conduct additional clinical trials for product candidates with patients receiving the drug for longer periods before we are able to seek approvals to market and sell these product candidates from the FDA and regulatory authorities outside the U.S. If we are not successful in commercializing any of our lead product candidates, or are significantly delayed in doing so, our business will be materially harmed.

We may find it difficult to enroll patients in our clinical trials.

SBC-102 is being developed to treat LAL Deficiency, which is very rare. Potential patients for our product candidates, including SBC-102 have not been diagnosed with the diseases being targeted by our product candidates. We may not be able to initiate or continue clinical trials if we are unable to locate a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other non-U.S. regulatory agencies. In addition, the process of finding and diagnosing patients may prove costly. We completed enrollment in November 2011 of our first clinical trial with SBC-102. We intend to enroll pediatric subjects into the Phase I/II study for early onset LAL deficiency, which we initiated in February 2011. Our inability to enroll a sufficient number of patients for any of our current or future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether.

If our preclinical studies do not produce positive results, if our clinical trials are delayed or if serious side effects are identified during drug development, we may experience delays, incur additional costs and ultimately be unable to commercialize our product candidates.

Before obtaining regulatory approval for the sale of our product candidates, we must conduct, at our own expense, extensive preclinical tests to demonstrate the safety of our product candidates in animals, and clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Preclinical and clinical testing is expensive, difficult to design and implement, and can take many years to complete. A failure of one or more preclinical studies or clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, preclinical testing and the clinical trial process, which could delay or prevent our receipt of regulatory approval for, or the commercialization of, our product candidates, including:

• our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide to conduct, or regulators may require, additional preclinical testing or clinical trials, or we may abandon projects that we expect to be promising;

• a regulatory authority or institutional review board may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;

• conditions imposed on us by the FDA or any non-U.S. regulatory authority regarding the scope or design of our clinical trials may require us to resubmit our clinical trial protocols to institutional review boards for re-inspection due to changes in the regulatory environment;

• the number of patients required for clinical trials may be larger than we anticipate or participants may drop out of clinical trials at a higher rate than we anticipate;

• our third-party contractors or clinical investigators may fail to comply with regulatory requirements or fail to meet their contractual obligations to us in a timely manner or at all;

• we might have to suspend or terminate one or more of our clinical trials if we, a regulatory authority or an institutional review board determine that the participants are being exposed to unacceptable health risks;

• a regulatory authority or institutional review board may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;

• the cost of our clinical trials may be greater than we anticipate;

• the supply or quality of our product candidates or other materials necessary to conduct our clinical trials may be insufficient or inadequate or we may not be able to reach agreements on acceptable terms with prospective contract manufacturing organizations;

• we may not be able to reach agreements on acceptable terms with prospective clinical research organizations; or

• the effects of our product candidates may not be the desired effects, may include undesirable side effects, or the product candidates may have other unexpected characteristics.

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If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate or are unable to successfully complete our clinical trials or other testing or if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

• be delayed in obtaining, or may not be able to obtain, marketing approval for one or more of our product candidates;

• obtain approval for indications that are not as broad as intended or entirely different than those indications for which we sought approval; or

• have the product removed from the market after obtaining marketing approval.

Our product development costs will also increase if we experience delays in testing or approvals. We do not know whether any preclinical tests or clinical trials will be initiated as planned, will need to be restructured or will be completed on schedule, if at all. Significant preclinical or clinical trial delays could also shorten the patent protection period during which we may have the exclusive right to commercialize our product candidates. Such delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products or product candidates.

We have neither obtained marketing approval, nor commercialized any of our current rare disease product candidates.

We have not obtained marketing approval nor commercialized any of our current product candidates and do not expect to receive marketing approval or generate revenue from the direct sale of our products, including SBC-102, for several years, if ever. We completed a 4-week Phase I/II clinical trial for SBC-102 in adults with late onset LAL Deficiency and continue to treat a portion of these patients as part of an open-label extension study but still have only limited experience in conducting clinical trials for SBC-102. Additionally, we are conducting preclinical studies with other product candidates for various other indications. Our limited experience might prevent us from successfully designing or implementing a clinical trial for any of these diseases. We may not be able to demonstrate that our product candidates meet the appropriate standards for regulatory approval. If we are not successful in conducting and managing our preclinical development activities or clinical trials or obtaining regulatory approvals, we might not be able to commercialize our lead product candidates, or might be significantly delayed in doing so, which will materially harm our business.

If we infringe the rights of third parties we might have to forgo selling our future products, pay damages, or defend litigation.

If our product candidates, methods, processes, or other technologies infringe the proprietary rights of other parties, we could incur substantial costs and might have to:

• obtain rights or licenses from such third parties, which might not be available on commercially reasonable terms, if at all;

• abandon an infringing product candidate;

• redesign products or processes to avoid infringement;

• stop using the subject matter claimed in the patents held by others;

• pay damages; and/or

• defend litigation or administrative proceedings which might be costly whether we win or lose, and which could result in a substantial diversion of financial and management resources.

Any of these events could substantially harm our earnings, financial condition, and operations.

Although no infringement, misappropriation, or similar claim or action is pending or threatened, we are aware of a patent issued by the European Patent Office, and subsequently validated in Great Britain, France, Germany, Italy and Spain, that relates generally to the use of LAL and may therefore be relevant to SBC-102. This patent is currently under opposition at the European Patent Office and the initial hearing has been scheduled for November 23, 2012. We believe that such patent does not currently affect our freedom to conduct clinical trials for SBC-102. We also believe that the patent is invalid due to a substantial body of prior art. We have recently taken additional proactive steps, including instituting proceedings in the UK Patents Court and the French court seeking a declaration that the issued patent is invalid or that the current anticipated activities related to our development and commercialization of SBC-102 do not infringe the patent. We also intend to take further steps to accelerate resolution of this matter, which further steps may include contacting the patentee, bringing additional prior art documents to the attention of the European Patent Office or other actions. The UK Patents Court scheduled a trial for May 2013. If the patent is maintained in unamended form by the European Patent Office, then our ability to commercialize SBC-102 in these countries could be adversely affected and/or halted until the patent expires,

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unless the patent is invalidated by the relevant national courts prior expiration. In addition, the same patentee has been granted a U.S. patent on the use of LAL to treat atherosclerosis, and has two pending patent applications in the U.S., which have currently been rejected by the U.S. patent office. Equivalent patent applications are also pending in Canada and Brazil. We believe that we will not be infringing this issued U.S. patent on atherosclerosis in commercializing SBC-102 for the indications for which we are seeking approval and that the issued U.S. patent is invalid due to the prior art described above. We further believe that, due to the substantial body of prior art, the pending applications will not grant with claims that would encompass our contemplated activities or, if they did, they would be invalid due to the prior art. If, however, these pending applications are granted in a form which covers SBC-102, then our ability to commercialize SBC-102 in these countries could be adversely affected and/or halted until the patent expires in these countries, unless a license is obtained to the patents or the patents are otherwise revoked.

If the market opportunities for our product candidates are smaller than we believe they are, our revenues may be adversely affected and our business may suffer.

We focus our research and product development on treatments for rare diseases. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on estimates.

Currently, most reported estimates of the prevalence of these diseases are based on studies of small subsets of the population of specific geographic areas, which are then extrapolated to estimate the prevalence of the diseases in the broader world population. These estimates may prove to be incorrect and new studies may change the estimated prevalence of these diseases.

The commercial success of any product candidate that we may develop, including SBC-102, will depend upon the degree of market acceptance by physicians, patients, third party payors and others in the medical community.

Any future product that we may bring to the market, including SBC-102, may not gain market acceptance by physicians, patients, third party payors and others in the medical community. If these rare disease products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of these product candidates, if approved for commercial sale, will depend on a number of factors, including:

• the prevalence and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling;

• the efficacy and potential advantages over alternative treatments;

• relative convenience and ease of administration;

• the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

• the strength of marketing and distribution support and timing of market introduction of competitive products;

• publicity concerning our products or competing products and treatments; and

• sufficient third party insurance coverage or reimbursement.

Even if a potential product displays a favorable efficacy and safety profile in preclinical and clinical trials, market acceptance of the product will not be known until after it is launched. Our efforts to educate the medical community and third party payors on the benefits of the product candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors.

Uncertainties relating to third-party reimbursement and health care reform measures could limit payments or reimbursements for future products that we may develop could materially adversely affect our business.

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In the U.S. and elsewhere, sales of prescription drugs depend in part on the consumer’s ability to obtain reimbursement for the cost of the drugs from third-party payors, such as private and government insurance programs. Third-party payors are increasingly challenging the prices charged for medical products and services in an effort to promote cost containment measures and alternative health care delivery systems. Our prospects for achieving profitability will depend heavily upon the availability of adequate reimbursement for the use of our approved product candidates from governmental and other third party payors, both in the U.S. and in other markets. Reimbursement by a third party payor may depend upon a number of factors, including the third party payor’s determination that use of a product is:

• a covered benefit under its health plan;

• safe, effective and medically necessary;

• appropriate for the specific patient;

• cost-effective; and

• neither experimental nor investigational.

Obtaining reimbursement approval for a product from each governmental or other third party payor is a time consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our products to each payor. We may not be able to provide data sufficient to gain acceptance with respect to reimbursement or might need to conduct post-marketing studies in order to demonstrate the cost-effectiveness of any future products to such payors’ satisfaction. Such studies might require us to commit a significant amount of management time and financial and other resources. Even when a payor determines that a product is eligible for reimbursement, the payor may impose coverage limitations that preclude payment for some uses that are approved by the FDA or non-U.S. regulatory authorities. In addition, there is a risk that full reimbursement may not be available for high priced products. Moreover, eligibility for coverage does not imply that any product will be reimbursed in all cases or at a rate that allows us to make a profit or even cover our costs. Interim payments for new products, if applicable, may also not be sufficient to cover costs and may not be made permanent.

We are exposed to product liability and preclinical and clinical liability risks which could place a substantial financial burden upon us, should we be sued, if we do not have adequate liability insurance or general insurance coverage for such a claim.

Our business exposes us to potential product liability and other liability risks that are inherent in the testing, manufacturing and marketing of pharmaceutical formulations and products. In addition, the use in our clinical trials of pharmaceutical formulations and products that our potential collaborators may develop and the subsequent sale of these formulations or products by us or our potential collaborators may cause us to bear a portion or all of the product liability risks. As is common for companies sponsoring such clinical testing, we carry product liability insurance. The limit of this insurance may in some instances may be insufficient to offset a negative judgment or settlement payment. As a result, a successful liability claim or series of claims brought against us could have a material adverse effect on our business, financial condition and results of operations.

We are subject to regulations regarding the manufacturing of therapeutic proteins.

We are subject to ongoing periodic unannounced inspections by the FDA, corresponding state agencies or non-U.S. regulatory authorities to ensure strict compliance with current good manufacturing practice (“cGMP”) and other government regulations and corresponding foreign standards. The cGMP requirements govern quality control and documentation policies and procedures. Complying with cGMP and non-U.S. regulatory requirements will require that we expend time, money, and effort in production, recordkeeping, and quality control to assure that the product meets applicable specifications and other requirements. We must also pass a pre-approval inspection prior to regulatory approval. Failure to pass a pre-approval inspection might significantly delay FDA approval of our products. If we fail to comply with these requirements, we would be subject to possible regulatory action and might be limited in the jurisdictions in which we are permitted to sell our products. As a result, our business, financial condition, and results of operations might be materially harmed.

We currently manufacture the therapeutic protein products used in the production of SBC-102; however, we have limited experience in manufacturing or procuring products in commercial quantities. We may not be able to manufacture enough product to conduct clinical trials or for later commercialization at an acceptable cost or at all.

Even if we receive regulatory approval of our rare disease product candidates, we may have to rely on third parties to manufacture the product and/or complete the manufacturing process, including to purify, finish and fill any product for commercial sale.

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We may have to rely on third parties to complete the manufacturing process. Our anticipated future reliance on a limited number of third-party manufacturers exposes us to the following risks:

• We might be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the FDA and other regulatory authorities must approve any replacement contractor. This approval would generally require new testing and compliance inspections. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our products after receipt of FDA approval, if any.

• Our third-party manufacturers might be unable to formulate and manufacture the relevant drugs in the volume and of the quality required to meet our clinical and commercial needs, if any.

• Our third-party contract manufacturers might not perform as agreed or might not remain in the contract manufacturing business for the time required to supply possible clinical trials or to successfully produce, store and distribute our products.

• Drug manufacturers are subject to ongoing periodic unannounced inspections by the regulatory, corresponding state agencies and non-U.S. regulatory authorities to ensure strict compliance with cGMP, and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’ compliance with these regulations and standards.

• If any third-party manufacturer makes improvements in the manufacturing process for the relevant products, we might not own, or might have to share, the intellectual property rights to the innovation with our licensors.

• We might compete with other companies for access to these manufacturers’ facilities and might be subject to manufacturing delays if the manufacturers give other clients higher priority than us.

Each of these risks could delay our clinical trials or the approval, if any, of our product candidates by the FDA or the commercialization of our product candidates and could result in higher costs or deprive us of potential product revenues. As a result, our business, financial condition, and results of operations might be materially harmed.

We face significant competition from other pharmaceutical and biotechnology companies. Our operating results will suffer if we fail to compete effectively.

The pharmaceutical and biotechnology industries are intensely competitive and subject to rapid and significant technological change. Our competitors include organizations such as major multinational pharmaceutical companies, established biotechnology companies and specialty pharmaceutical and generic drug companies. Many competitors have greater financial and other resources than we have, such as larger research and development staff, more extensive marketing, distribution, sales and manufacturing organizations and experience, more extensive clinical trial and regulatory experience, expertise in prosecution of intellectual property rights and access to development resources like personnel and technology. As a result, these companies may obtain regulatory approval more rapidly than we are able to and may be more effective in selling and marketing their products.

Our operations are subject to the economic, political, legal and business conditions in the countries in which we do business, and our failure to operate successfully or adapt to changes in these conditions could cause our operations to be limited or disrupted.

We have expanded our operations outside of the United States and expect to continue to do so in the future. Our current operations in foreign countries subject us to certain risks that could cause our operations to be limited or disrupted, including volatility in international economies, political instability, difficulties enforcing contractual and intellectual property rights, changes in laws, regulations or enforcement practices with respect to our business, compliance with tax, employment and labor laws, costs and difficulties in recruiting and retaining qualified managers and employees to manage and operate the business in local jurisdictions and costs and difficulties in managing and monitoring international operations.

Our business depends on protecting our intellectual property.

We are pursuing intellectual property protection for SBC-102 and other product candidates in the form of patent applications that have been and will continue to be filed in the U.S. and in other countries; however, there can be no assurance that patents will issue with the scope for which they are originally filed, if at all.

If we and our licensors do not obtain protection for our respective intellectual property rights and our products are not, or are no longer, protected by regulatory exclusivity protection, such as orphan drug protection, our competitors might be able to take advantage of our research, development, and manufacturing efforts to develop and commercialize competing drugs.

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Our success, competitive position, and future revenues, if any, depend in part on our ability and the abilities of our licensors to obtain and maintain patent protection for our products, methods, processes, and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights, and to operate without infringing on the proprietary rights of third parties. We currently hold various issued patents and exclusive rights to issued patents and own and have licenses to various patent applications, in each case in the U.S. as well as rights under foreign patents and patent applications. We anticipate filing additional patent applications both in the U.S. and in other countries, as appropriate. However, the patent process is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our products by obtaining and defending patents. These risks and uncertainties include the following:

• our patent rights might be challenged, invalidated, or circumvented, or otherwise might not provide any competitive advantage;

• our competitors, many of which have substantially greater resources than we do and many of which might make significant investments in competing technologies, might seek, or might already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell our potential products either in the U.S. or in international markets;

• as a matter of public policy regarding worldwide health concerns, there might be significant pressure on the U.S. government and other international governmental bodies to limit the scope of patent protection both inside and outside the U.S. for disease treatments that prove successful; and

• countries other than the U.S. might have less restrictive patent laws than the U.S., giving foreign competitors the ability to exploit these laws to create, develop, and market competing products.

In addition, the U.S. Patent and Trademark Office (“USPTO”) and patent offices in other jurisdictions have often required that patent applications concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only the specific innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges. Thus, even if we or our licensors are able to obtain patents, the patents might be substantially narrower than anticipated.

Patent and other intellectual property protection is crucial to the success of our business and prospects, and there is a risk that such protections will prove inadequate. Our business and prospects might be materially harmed if these protections prove insufficient.

On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law, including provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The USPTO has issued regulations and procedures to govern administration of the Leahy-Smith Act, but many of the substantive changes to patent law associated with the Leahy-Smith Act have only recently become effective and other changes will not become effective until early 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

We rely on trade secret protections through confidentiality agreements with our employees and third parties, and the breach of these agreements could adversely affect our business and prospects.

We rely on trade secrets, which we seek to protect, in part, through confidentiality and non-disclosure agreements with our employees, collaborators, suppliers, and other parties. There can be no assurance that these agreements will not be breached, that we would have adequate remedies for any such breach, or that our trade secrets will not otherwise become known to or independently developed by our competitors. We might be involved from time to time in litigation to determine the enforceability, scope, and validity of our proprietary rights. Any such litigation could result in substantial cost and divert management’s attention from operations. If any of these events occurs, or we otherwise lose protection for our trade secrets or proprietary know-how, the value of this information may be greatly reduced.

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We are dependent on certain license relationships.

We have licensed technology that is related to our proprietary expression technology from the University of Georgia, University of Minnesota and Pangenix and we might enter into additional licenses in the future. Licenses to which we are a party contain, and we expect that any future licenses will contain, provisions requiring up-front, milestone, and royalty payments to licensors and other conditions to maintaining the license rights. If we fail to comply with our obligations under any such license, the applicable licensor may have the right to terminate the license on relatively short notice and as a result, we would not be able to commercialize drug candidates or technologies that were covered by the applicable license. Also, the milestone and other payments associated with these licenses will make it less profitable for us to develop our drug candidates.

We will be dependent on orphan drug status to commercialize SBC-102, and a competitor may receive orphan drug marketing authorization prior to us for the same indication for which we are seeking approval.

We expect to rely heavily on the orphan drug exclusivity for SBC-102, which grants seven years of marketing exclusivity under the Federal Food, Drug, and Cosmetic Act, and up to 10 years of marketing exclusivity in Europe. While the orphan drug exclusivity for SBC-102 will provide market exclusivity in the U.S., Europe, and other countries, we will not be able to exclude other companies from manufacturing and/or selling drugs using the same active ingredient for the same indication beyond that timeframe. Furthermore, the marketing exclusivity in Europe can be reduced from 10 years to six years if the initial designation criteria have significantly changed since the market authorization of the orphan drug. Even if we have orphan drug exclusivity for a particular drug indication, we cannot guarantee that another company also with orphan drug exclusivity will not receive marketing authorization for the same indication before we do. If that were to happen, our applications for that indication may not be approved until the competing company’s period of exclusivity has expired. Even if we are the first to obtain marketing authorization for an orphan drug indication, there are circumstances under which a competing product may be approved for the same indication during the seven-year period of marketing exclusivity in the U.S., such as if the later product is shown to be clinically superior to our product, or if the later product is a different drug than SBC-102. Further, the seven-year marketing exclusivity in the U.S. would not prevent competitors from obtaining approval of the same compound for other indications or the use of other types of drugs for the same use as the orphan drug.

If we are unable to retain and recruit qualified scientists and advisors, or if any of our key executives, key employees or key consultants discontinues his or her employment or consulting relationship with us, it may delay our development efforts or otherwise harm our business.

The loss of any of our key executives, employees or key consultants could impede the achievement of our research and development objectives. Furthermore, recruiting and retaining qualified scientific personnel to perform research and development work in the future is critical to our success. We may be unable to attract and retain personnel on acceptable terms given the competition among biotechnology, biopharmaceutical, and health care companies, universities, and non-profit research institutions for experienced scientists and other disciplines. Competition for employees may impact our ability to recruit and retain qualified personnel in the future. Certain of our officers, directors, scientific advisors, and/or consultants or certain of the officers, directors, scientific advisors, and/or consultants hereafter appointed may from time to time serve as officers, directors, scientific advisors, and/or consultants of other biopharmaceutical or biotechnology companies. We may not maintain “key man” insurance policies on any of our officers or employees. We currently have employment contracts with our Chief Executive Officer, Sanj K. Patel, and other executive officers which provide for certain severance benefits. Consistent with our current employment policies, all of our employees are employed “at will” and, therefore, each employee may leave our employment at any time. If we are unable to retain our existing employees, including qualified scientific personnel, and attract additional qualified candidates, our business and results of operations could be adversely affected. We are not aware of any key personnel who intend to retire or otherwise leave us in the near future.

We derive a significant portion of our income from royalties on sales of FUZEON. If FUZEON sales continue to decline, our business will suffer.

Royalties on sales of FUZEON are currently a significant source of revenue for us. FUZEON competes with numerous existing therapies for the treatment of HIV. From 2007 through 2011, overall FUZEON net sales reported by our commercialization partner Roche have declined, totaling $112.2 million, $88.4 million and $50.7 million for fiscal 2009, 2010 and 2011, respectively. We cannot predict if or when sales levels for FUZEON will stabilize.

Uncertainties relating to third-party reimbursement and health care reform measures could limit payments or reimbursements for FUZEON, which could adversely affect our business.

Currently, because of the high cost of the treatment of HIV, many state legislatures are reassessing reimbursement policies for this therapy. If third-party payor reimbursements for FUZEON are limited or reduced, our results of operations will be adversely affected. In addition, emphasis in the U.S. on the reduction of the overall costs of health care through managed care has increased and will continue to increase the pressure to reduce the prices of pharmaceutical products.

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The wholesale acquisition cost of a one-year supply of FUZEON in the U.S. is approximately $32,500. A high drug price could also negatively affect patients’ ability to receive reimbursement coverage for FUZEON from third-party payors, such as private or government insurance programs. If Roche is unable to obtain and maintain reimbursement from a significant number of third-party payors, it would have a material adverse effect on our business, financial condition and results of operations.

Currently, FUZEON is covered by Medicaid in all 50 states in the U.S.. In addition, the AIDS Drug Assistance Programs in all 50 states and a majority of private insurers provide some amount of access to FUZEON. However, there are reimbursement challenges remaining. Some of the payors require patients to meet minimum medical requirements, such as maintaining certain cell levels associated with HIV, to receive reimbursement. Other payors limit the number of patients to which they will provide reimbursement for FUZEON, and other payors may require co-payments by the patient in order to receive reimbursement for FUZEON that are significantly higher than those required for other anti-HIV drugs.

Several major pharmaceutical companies have offered to sell their anti-HIV drugs at or below cost to certain countries in Africa and Least Developed Countries (as defined by the United Nations), which could adversely affect the reimbursement climate of, and the prices that may be charged for, HIV medications in the U.S. and the rest of the world. Third-party payors could exert pressure for price reductions in the U.S. and the rest of the world based on these lower costs offered in Africa and Least Developed Countries. This price pressure could limit the price that Roche would be able to charge for FUZEON, thereby adversely affecting our results of operations

If the sale of FUZEON infringes the proprietary rights of third parties, we may need to obtain licenses, pay damages or defend litigation.

If the sale of FUZEON infringes the proprietary rights of third parties, we could incur substantial costs and may have to:

• obtain licenses, which might not be available on commercially reasonable terms, if at all;

• pay damages; and/or

• defend litigation or administrative proceedings which might be costly whether we win or lose, and which could result in a substantial diversion of financial and management resources.

Any of these events could substantially harm our earnings, financial condition, and operations.

On November 20, 2007, Novartis Vaccines and Diagnostics, Inc. (“Novartis”) filed a lawsuit against us and Roche and certain of its affiliated entities, alleging infringement of the ‘271 Patent, related to the manufacture, sale and offer for sale of FUZEON. On September 23, 2010, we entered into a settlement agreement (the “Settlement Agreement”) with Roche and Novartis settling the lawsuit and the lawsuit was dismissed with prejudice from the Eastern District of North Carolina on September 28, 2010. Under the terms of the Settlement Agreement, we, in collaboration with Roche, have the right to continue to sell FUZEON under a license to Novartis’ ‘271 Patent in exchange for the payment of royalties to Novartis on net sales of FUZEON. We will share responsibility for payment of these royalties equally with Roche.

We may pursue rapid expansion of our workforce or diversify our business strategy through mergers, acquisitions, licensing arrangement or other contractual arrangements with third parties which may require substantial resources and substantial amounts of time from members of our senior management.

We may spend substantial resources to hire additional employees or pursue acquisitions of new technologies or businesses that are complementary to our current technologies or business focus through mergers, acquisitions, licensing arrangement or other contractual arrangements with third parties. Acquisitions involve numerous risks, including potential difficulties in the integration of acquired operations such as retaining key employees of the acquired business, integrating research and development programs, not meeting financial objectives, increased costs, undisclosed liabilities not covered by insurance or terms of acquisition, and diversion of management’s attention and resources in connection with an acquisition. No assurance can be given as to our success in identifying, executing, and integrating acquisitions in the future.

Our success will depend in part on relationships with third parties. Any adverse changes in these relationships could adversely affect our business, financial condition, or results of operations.

Our success will be dependent on our ability to maintain and renew business relationships with third parties and to establish new business relationships. There can be no assurance that our management will be able to maintain such business relationships, or enter into or maintain new business contracts and other business relationships, on acceptable terms, if at all.

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The failure to maintain important business relationships could have a material adverse effect on our business, financial condition, or results of operations.

Our charter documents and indemnification agreements require us to indemnify our directors and officers to the fullest extent permitted by law, which may obligate us to make substantial payments and to incur significant insurance-related expenses.

Our charter documents require us to indemnify our directors and officers to the fullest extent permitted by law. This could require us, with some legally prescribed exceptions, to indemnify our directors and officers against any and all expenses, judgments, penalties, fines, and amounts reasonably paid in defense or settlement of an action, suit, or proceeding brought against any of them by reason of the fact that he or she is or was our director or officer. In addition, expenses incurred by a director or officer in defending any such action, suit, or proceeding must be paid by us in advance of the final disposition of that action, suit or proceeding if we receive an undertaking by the director or officer to repay us if it is ultimately determined that he or she is not entitled to be indemnified. We have also entered into indemnification agreements with each of our directors and officers. In furtherance of these indemnification obligations, we maintain directors’ and officers’ insurance in the amount of $30,000,000. For future renewals, if we are able to retain coverage, we may be required to pay a higher premium for our directors’ and officers’ insurance than in the past and/or the amount of its insurance coverage may be decreased.

Risks Relating Our Financial Position and Capital Requirements

We may be unable to raise the substantial additional capital that we will need to further develop and commercialize our products.

As is typical of biotechnology companies at our stage of development, our operations consume substantial amounts of cash and we will need substantial additional funds to further develop and commercialize our products.

While we will need to seek additional funding, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties. These arrangements would generally require us to relinquish rights to some of our technologies, product candidates or products, and we may not be able to enter into such agreements, on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our development programs, including some or all of our product candidates.

We have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable future. We are a clinical-stage company with limited historical revenues, which makes it difficult to assess our future viability.

We are a clinical-stage biopharmaceutical company. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We continue to incur significant research and development and other expenses related to our ongoing operations. If any of our product candidates fail in clinical trials or do not gain regulatory approval, or if any of our product candidates, if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

Our ability to utilize Trimeris’ net operating loss and tax credit carryforwards in the future is subject to substantial limitations and may be further limited as a result of the Reverse Merger.

Federal and state income tax laws impose restrictions on the utilization of net operating loss (“NOL”) and tax credit carryforwards in the event that an “ownership change” occurs for tax purposes, as defined by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). In general, an ownership change occurs when shareholders owning 5% or more of a “loss corporation” (a corporation entitled to use NOL or other loss carryforwards) have increased their aggregate ownership of stock in such corporation by more than 50 percentage points during any three-year period. If an “ownership change” occurs, Section 382 of the Code imposes an annual limitation on the amount of post-ownership change taxable income that may be offset with pre-ownership change NOLs of the loss corporation experiencing the ownership change. The annual limitation is calculated by multiplying the loss corporation’s value immediately before the ownership change by the greater of the long-term tax-exempt rate determined by the IRS in the month of the ownership change or the two preceding months. This annual limitation may be adjusted to reflect any unused annual limitation for prior years and certain recognized built-in gains and losses for the year. Section 383 of the Code also imposes a limitation on the amount of tax liability in any post-ownership change year that can be reduced by the loss corporation’s pre-ownership change tax credit carryforwards.

29

On November 2, 2011, we completed the Reverse Merger which resulted in an “ownership change” of Trimeris. Trimeris previously experienced an “ownership change” in 2008. Accordingly, our ability to utilize Trimeris’ NOL and tax credit carryforwards may be substantially limited. These limitations could, in turn, result in increased future tax payments for us, which could have a material adverse effect on our business, financial condition.

Our management is required to devote substantial time to comply with public company regulations.

As a public company, we will incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), as well as rules implemented by the SEC and the NASDAQ Global Market, impose various requirements on public companies, including those related to corporate governance practices. Our management and other personnel will need to devote substantial time to these requirements. Certain members of our management do not have experience in addressing these requirements.

Sarbanes-Oxley requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, we will be required to perform system and process evaluation and testing of our internal controls over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of Sarbanes-Oxley (“Section 404”). We will incur substantial accounting and related expenses to comply with Section 404. We may need to hire additional accounting and financial staff to satisfy the ongoing requirements of Section 404. Moreover, if we are not able to comply with the requirements of Section 404, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the NASDAQ Global Market, the SEC, or other regulatory authorities.

We rely on Roche to timely deliver important financial information relating to sales of FUZEON. In the event that this information is inaccurate, incomplete, or not timely, we will not be able to meet our financial reporting obligations as required by the SEC.

Under the Amended and Restated Agreement by and between Roche and Trimeris, effective as of January 1, 2011 (the “Roche License Agreement”), Roche has exclusive control over the flow of information relating to sales of FUZEON that we require to meet our SEC reporting obligations. Roche is required under the Roche License Agreement to provide us with timely and accurate financial data related to sales of FUZEON so that we may meet our reporting requirements under federal securities laws. In the event that Roche fails to provide us with timely and accurate information, we may incur significant liability with respect to the federal securities laws, our disclosure controls and procedures under Sarbanes-Oxley may be inadequate, and we may be forced to restate our financial statements, any of which could adversely affect the market price of our common stock.

Risks Related to Ownership of Our Common Stock

The market price and trading volume of our common stock may be volatile.

The market price of our common stock could fluctuate significantly for many reasons, including the following factors:

• announcements of clinical or regulatory developments or technological innovations by us or our competitors,

• changes in our relationship with our licensors and other strategic partners,

• our quarterly operating results,

• declines in sales of FUZEON,

• developments in patent or other technology ownership rights,

• public concern regarding the safety of our products,

• additional funds may not be available on terms that are favorable to us and, in the case of equity financings, may result in dilution to our stock holders,

• government regulation of drug pricing, and

• general changes in the economy, the financial markets or the pharmaceutical or biotechnology industries.

30

Additional factors beyond our control may also have an impact on the price of our stock. For example, to the extent that other large companies within our industry experience declines in their stock price, our stock price may decline as well. In addition, when the market price of a company’s common stock drops significantly, stockholders often institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

Future sales of substantial amounts of our common stock, or the perception that such sales could occur, could adversely affect the market price of our common stock.

Future sales into the public market of substantial amounts of our common stock, or securities convertible or exchangeable into shares of our common stock, including shares of our common stock issued upon exercise of options and warrants, or perceptions that such sales could occur, could adversely affect the market price of our common stock and our ability to raise capital in the future.

Ownership of our common stock is highly concentrated, and it may prevent you and other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause our stock price to decline.

Our executive officers and directors, together with their respective affiliates, beneficially own or control approximately 38.5% of our issued and outstanding common stock. Accordingly, these executive officers, directors and their affiliates, acting individually or as a group, have substantial influence over the outcome of a corporate action requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transaction. These stockholders may also exert influence in delaying or preventing a change in control, even if such change in control would benefit our other stockholders. In addition, the significant concentration of stock ownership may adversely affect the market value of our common stock due to investors’ perception that conflicts of interest may exist or arise.

Anti-takeover provisions in our charter and bylaws may prevent or frustrate attempts by stockholders to change the board of directors or current management and could make a third-party acquisition of us difficult.

Our certificate of incorporation and bylaws contain provisions that may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock.

We have never declared or paid dividends on our common stock and do not anticipate paying dividends in the foreseeable future.

Our business requires significant funding, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Item 5. Other Information.

None.

Item 6. Exhibits.

31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Certification accompanies this report and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as amended.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document

31

101.CAL*	XBRL Taxonomy Extension Calculation Document
101.DEF *	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Link Document

* Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, the interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is otherwise not subject to liability under these sections.

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Synageva BioPharma Corp.
Date: November 6, 2012	By:	/s/ Sanj K. Patel
		Sanj K. Patel
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: November 6, 2012	By:	/s/ Carsten Boess
		Carsten Boess
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit Index

31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Certification accompanies this report and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as amended.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Document
101.DEF *	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Link Document

* Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, the interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is otherwise not subject to liability under these sections.

33

EX-31.1

Exhibit 31.1

Section 302 Certification

CERTIFICATION

I, Sanj K. Patel, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Synageva BioPharma Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated: November 6, 2012

/s/ Sanj K. Patel

Sanj K. Patel,

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Section 302 Certification

CERTIFICATION

I, Carsten Boess, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Synageva BioPharma Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated: November 6, 2012

/s/ Carsten Boess

Carsten Boess,

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned, as principal executive officer and principal financial officer of Synageva BioPharma Corp. (the “Company”), does hereby certify that to such officer’s knowledge:

(1) the Company’s Form 10-Q for the period ended September 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Company’s Form 10-Q for the period ended September 30, 2012 fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Sanj K. Patel

Sanj K. Patel

President and Chief Executive Officer

/s/ Carsten Boess

Carsten Boess

Chief Financial Officer

Date: November 6, 2012

* A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Synageva BioPharma Corp. and will be retained by Synageva BioPharma Corp. and provided to the Securities and Exchange Commission or its staff upon request.

XML

License Agreements and Collaborations (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended		3 Months Ended	9 Months Ended
	Mar. 30, 2012	Aug. 31, 2011	Sep. 30, 2012	Sep. 30, 2012
License Agreements and Collaborations Collaborations (Textual) [Abstract]
Upfront development payment to the company	$ 9.0	$ 3.0
Funding of development costs	0.8	1.5
Potential for an additional payment	3.0	3.0
Option terminates days				60 days
Revenue recognized under the First Total			0.4	1.7
Revenue recognized under the Second Total			2.9	3.3
Deferred revenue First			1.6	1.6
Deferred revenue Second			$ 6.0	$ 6.0

XML

Fair Value of Financial Instruments (Details Textual)	Nov. 01, 2012	Sep. 30, 2012	Dec. 31, 2011
Fair Value of Financial Instruments (Textual) [Abstract]
Warrants outstanding		31,000
Common stock issuance	10	24,290,000	17,582,000

XML

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

Under current accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The current accounting guidance also establishes a hierarchy to categorize how fair value is measured and is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

Level 1	Quoted prices in active markets for identical assets or liabilities.
Level 2	Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011:

	September 30, 2012		Quoted Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents – money market fund	$	230,069	$	230,069	$	—	$	—

	December 31, 2011		Quoted Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents – money market fund	$	59,860	$	59,860	$	—	$	—

The change in the valuation of preferred stock warrants for the nine months ended September 30, 2011 is summarized below.

	Nine Months Ended September 30,
	2011
Fair value, beginning of year	$	12
Change in fair value		183
Fair value, end of period	$	195

The Company accounted for the warrants outstanding to purchase 31 shares of Series C-2 convertible preferred stock according to accounting standards regarding freestanding financial instruments with the characteristics of both liabilities and equities. Due to the redemption feature of the Series C-2 convertible preferred stock, these warrants were classified as liabilities. The warrants were revalued at each balance sheet date and any change in fair value was recorded as a component of other income or other expense. In connection with the Reverse Merger, the Series C-2 convertible preferred stock warrants were converted to common stock warrants, and a final mark to market calculation was performed. The common stock warrants were subsequently exercised in a net settlement transaction in the fourth quarter of fiscal 2011, resulting in the issuance of 10 shares of common stock.

XML

Share Based Payments (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Operating expenses
Total operating expenses	$ 1,555	$ 136	$ 3,067	$ 292
Research and Development [Member]
Operating expenses
Total operating expenses	495	35	926	94
General and Administrative [Member]
Operating expenses
Total operating expenses	$ 1,060	$ 101	$ 2,141	$ 198

XML

Share Based Payments (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012
Summary of stock option activity under all equity plans
Beginning balance, number of shares	2,750	2,304	2,371
Options granted, number of shares		616	26
Options exercised, number of shares	(123)	(136)	(82)
Options canceled or expired, number of shares	(34)	(34)	(11)
Ending balance, number of shares	2,593	2,750	2,304
Beginning balance, weighted average exercise price	$ 21.03	$ 15.96	$ 15.34
Options granted, weighted average exercise price		$ 40.74	$ 32.90
Options exercised, weighted average exercise price	$ 3.84	$ 1.27	$ 3.48
Options canceled or expired, weighted average exercise price	$ 22.72	$ 112.92	$ 16.03
Ending balance, weighted average exercise price	$ 21.82	$ 21.03	$ 15.96

XML

Share Based Payments (Details Textual) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Jun. 27, 2012
Share Based Payments (Textual) [Abstract]
Vesting period	4 years
Contractual term	10 years
Additional number of shares of common stock available for issuance	1.5
maximum number of shares authorized under the plan		3.0
Shares subject to outstanding awards under the plan	2.3
Common stock at a discount	15.00%
Share based compensation arrangement by share based payment award options period description	The first option period began on August 1, 2012 and will conclude on December 31, 2012. Thereafter, option periods under the plan will generally run from January 1 to June 30 and July 1 to December 31 of each year.

XML

Basic and Diluted Net Loss Per Common Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Numerator:
Net loss	$ (10,182)	$ (6,823)	$ (27,758)	$ (17,828)
Denominator
Weighted average common shares Denominator for basic calculation	23,825	74	21,984	124
Weighted average common shares Denominator for diluted calculation	23,825	74	21,984	124
Net loss per share:
Basic	$ (0.43)	$ (92.21)	$ (1.26)	$ (143.77)
Diluted	$ (0.43)	$ (92.21)	$ (1.26)	$ (143.77)

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for Quarterly Reports on Form 10-Q and do not include all of the information and note disclosures required by the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. The Financial Statements should therefore be read in conjunction with the Financial Statements and Notes thereto for the fiscal year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K/A filed with the SEC on April 24, 2012.

The accompanying Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Financial Statements and accompanying disclosures. Although these estimates are based on management’s knowledge of current events and actions that the Company may undertake in the future, actual results may be different from those estimates. The Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair statement of results for these interim periods. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2012.

Reverse Merger

On November 2, 2011, Trimeris closed the Reverse Merger with Synageva BioPharma Corp., a privately held Delaware corporation (“Private Synageva”), pursuant to an Agreement and Plan of Merger and Reorganization, dated as of June 13, 2011 (the “Merger Agreement”), by and among Trimeris, Private Synageva and Tesla Merger Sub, Inc., a wholly owned subsidiary of Trimeris (“Merger Sub”). Pursuant to the Merger Agreement, Private Synageva became a wholly owned subsidiary of Trimeris through a merger of Merger Sub with and into Private Synageva, and the former stockholders of Private Synageva received shares of Trimeris that constituted a majority of the outstanding shares of Trimeris. In connection with the Reverse Merger, Trimeris changed its name to Synageva BioPharma Corp.

The Reverse Merger has been accounted for as a reverse acquisition under which Private Synageva was considered the acquirer of Trimeris. As such, the financial statements of Private Synageva are treated as the historical financial statements of the combined company, with the results of Trimeris being included from November 2, 2011. As a result of the Reverse Merger, historical common stock amounts and additional paid in capital have been retroactively adjusted.

Asset Acquisition

In the third quarter of fiscal 2012, the Company purchased certain assets, including IP rights and property, plant and equipment, for $0.4 million. The purchase has been accounted for as an asset acquisition, and approximately $0.3 million of the purchase price was allocated to the acquired in-process research and development, which was expensed in the quarter.

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies during the three and nine months ended September 30, 2012, as compared to the significant accounting policies disclosed in the Company’s financial statements included in the Annual Report on Form 10-K/A for the year ended December 31, 2011.

Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (FASB) issued ASU No. 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (ASU 2012-02). This newly issued accounting standard allows an entity the option to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test for indefinite-lived intangibles other than goodwill. Under that option, an entity would no longer be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on that qualitative assessment, that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. This ASU is effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on our financial position or results of operations.

In May 2011, the FASB issued a new standard on fair value measurement and disclosure requirements. The new standard changes fair value measurement principles and disclosure requirements including measuring the fair value of financial instruments that are managed within a portfolio, the application of applying premiums and discounts in a fair value measurement, and additional disclosure about fair value measurements. The adoption of this guidance in the first quarter 2012 did not have a material effect on our financial statements.

In June 2011, the FASB issued a new standard on the presentation of comprehensive income. The new standard eliminated the alternative to report other comprehensive income and its components in the statement of changes in equity. Under the new standard, companies can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. The Company adopted the provisions of this guidance during the first quarter 2012.

In December 2011, the FASB issued Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The amendments in this update require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. Although we are still evaluating the impact of this standard, we do not expect its adoption to have a material impact on our financial position or results of our operations .

Principles of Consolidation

Synageva’s Financial Statements include the accounts of Synageva and its wholly owned subsidiaries, Abbey BioPharma Corp., a Delaware corporation, and Synageva BioPharma Limited, an entity incorporated in the United Kingdom, which commenced operations in 1996 and May 2011, respectively. All intercompany accounts and transactions have been eliminated in consolidation.

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Basic and Diluted Net Loss Per Common Share (Details 1) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share, amount	2,593	27,552
Convertible preferred stock [Member]
Antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share, amount		25,997
Stock Options [Member]
Antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share, amount	2,593	1,524
Warrant [Member]
Antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share, amount		31

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Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 233,407	$ 60,232
Accounts receivable	2,622	2,211
Taxes receivable		1,240
Prepaid expenses and other current assets	1,700	968
Total current assets	237,729	64,651
Property and equipment, net	3,997	1,256
Developed technology, net	6,441	8,796
Goodwill	8,535	8,535
Other assets	68	60
Total assets	256,770	83,298
Current liabilities:
Accounts payable	1,234	1,507
Accrued expenses	4,827	5,003
Deferred revenue, short term	7,687	1,749
Total current liabilities	13,748	8,259
Deferred revenue, long term		991
Total liabilities	13,748	9,250
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, par value $0.001; 60,000 shares authorized at September 30, 2012 and December 31, 2011; 24,290 and 17,582 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively	24	18
Additional paid-in capital	386,603	189,874
Accumulated other comprehensive loss	(7)	(4)
Accumulated deficit	(143,598)	(115,840)
Total stockholders' equity	243,022	74,048
Total liabilities and stockholders' equity	$ 256,770	$ 83,298

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities
Net Loss	$ (27,758)	$ (17,828)
Adjustments:
Depreciation and amortization	2,781	368
Stock compensation expense	3,067	292
Acquired in-process research and development	344
Revaluation of preferred stock warrants		183
Loss on disposal of property and equipment	32
Amortization of debt issuance costs		29
Changes in assets and liabilities:
Accounts receivable	(411)	770
Taxes receivable, prepaid expenses, other current assets and other assets	501	(161)
Accounts payable	(273)	524
Accrued expenses and other liabilities	(655)	1,077
Deferred revenue	4,947	2,927
Net cash used in operating activities	(17,425)	(11,819)
Cash flows from investing activities
Capital expenditures	(2,670)	(527)
Purchase of in-process research and development and other assets	(394)
Net cash used in investing activities	(3,064)	(527)
Cash flows from financing activities
Proceeds from issuance of common stock, net of issuance costs	192,736
Proceeds from issuance of convertible notes		12,500
Payments of debt issuance costs		(34)
Proceeds from exercise of stock options	933	106
Net cash provided by financing activities	193,669	12,572
Effect of exchange rate on cash	(5)	(1)
Net increase in cash and equivalents	173,175	225
Cash and equivalents at the beginning of period	60,232	14,715
Cash and equivalents at the end of period	$ 233,407	$ 14,940

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Summary of Significant Accounting Policies (Details Textual) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012
Summary of Significant Accounting Policies (Textual) [Abstract]
Acquired in-process research and development	$ 300,000	$ 344,000
Purchase of certain assets and property, plant and equipment	$ 400,000

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Fair Value of Financial Instruments (Details 1) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2011
Valuation of preferred stock
Fair value, beginning of year	$ 12
Change in fair value	183
Fair value, end of period	$ 195

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Nature of the Business

9 Months Ended

Sep. 30, 2012

Nature of Business [Abstract]

Nature of the Business

1. Nature of the Business

Synageva BioPharma Corp. (“Synageva” or the “Company”) is a clinical stage biopharmaceutical company focused on the discovery, development, and commercialization of therapeutic products for patients with life-threatening rare diseases and unmet medical need. Synageva has several protein therapeutics in its pipeline, including two enzyme replacement therapies for lysosomal storage disorders and additional programs for other serious genetic conditions for which there are currently no approved treatments. Its lead program, SBC-102, is a recombinant human lysosomal acid lipase (“LAL”) currently under clinical investigation in North America and the European Union (“EU”) for the treatment of patients with early onset and late onset LAL Deficiency, which is a rare, devastating disease that causes significant morbidity and mortality. Synageva currently evaluates SBC-102 in global clinical trials and SBC-102 has been granted orphan designations by the U.S. Food and Drug Administration (“FDA”), the European Medicines Agency, and the Japanese Ministry of Health, Labour and Welfare. Additionally, SBC-102 received “fast track” designation by the FDA. Synageva has not yet received approval to market this product and is not currently commercializing any other products.

The Company is subject to risks common to companies in the biopharmaceutical industry including, but not limited to, the successful development of products, clinical trial uncertainty, regulatory approval, fluctuations in operating results and financial risks, potential need for additional funding, protection of proprietary technology and patent risks, compliance with government regulations, dependence on key personnel and collaboration partners, competition, technological and medical risks and management of growth.

The Company has incurred losses since inception and at September 30, 2012, had an accumulated deficit of $143.6 million. The Company expects to incur losses over the next several years as it continues to expand its drug discovery, development efforts and pre-commercial activities. As a result of continuing losses, the Company may seek additional funding through a combination of public or private financing, collaborative relationships or other arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into new collaboration or license agreements. If we are unable to obtain additional funding on a timely basis, whether through sales of debt or equity or through third-party collaboration or license arrangements, we may be required to curtail or terminate some or all of our development programs, including some or all of our drug candidates.

Through September 30, 2012, the Company has funded its operations primarily from proceeds of the sale of stock, issuance of convertible notes, royalty proceeds and proceeds from government grants and collaboration agreements. On November 2, 2011, the Company completed a merger transaction (the “Reverse Merger”) with Trimeris, Inc., a Delaware Corporation (“Trimeris”) (see Note 2, Reverse Merger), which was accounted for as a business combination, through which it assumed certain assets and liabilities of the acquired entity, including $50.1 million in cash and cash equivalents and a royalty stream related to FUZEON, a product sold by F. Hoffman-La Roche Ltd. (“Roche”), which serves as further funding for the Company’s operations.

On January 10, 2012, the Company announced the closing of a $90.0 million underwritten public offering of approximately 3.6 million shares of common stock at a price of $25.18. The Company received net proceeds of approximately $84.6 million from this offering. In addition, on July 13, 2012, the Company announced the closing of a $115.0 million underwritten public offering of approximately 2.8 million shares of common stock at a price of $41.20. The Company received net proceeds of approximately $108.1 million from this offering. The Company intends to use the proceeds from these offerings for general corporate purposes, which may include working capital, capital expenditures, research and development expenditures, preclinical and clinical trial expenditures, commercial expenditures, acquisitions of new technologies or businesses that are complementary to our current technologies and business focus and investments. The Company expects that it will have sufficient cash and cash equivalents to sustain operations for at least the next twelve months.

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Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	60,000,000	60,000,000
Common stock, shares issued	24,290,000	17,582,000
Common stock, shares outstanding	24,290,000	17,582,000

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Instruments [Abstract]

Financial assets and liabilities measured at fair value on a recurring basis

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011:

	September 30, 2012		Quoted Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents – money market fund	$	230,069	$	230,069	$	—	$	—

	December 31, 2011		Quoted Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents – money market fund	$	59,860	$	59,860	$	—	$	—

Valuation of preferred stock

The change in the valuation of preferred stock warrants for the nine months ended September 30, 2011 is summarized below.

	Nine Months Ended September 30,
	2011
Fair value, beginning of year	$	12
Change in fair value		183
Fair value, end of period	$	195

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 01, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	SYNAGEVA BIOPHARMA CORP
Entity Central Index Key	0000911326
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		24,308,844

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Supplemental Balance Sheet Information (Table)

9 Months Ended

Sep. 30, 2012

Supplemental Balance Sheet Information [Abstract]

Accrued expenses

Accrued expenses consist of the following:

	September 30, 2012		December 31, 2011
Accrued compensation, benefits and withholdings	$	2,312	$	3,113
Clinical, manufacturing and scientific costs		1,229		819
Professional fees		399		619
Other		887		452
	$	4,827	$	5,003

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Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Revenues
Royalty revenue	$ 2,132		$ 5,028
Collaboration and license revenue	3,296	88	4,990	193
Other revenue		96	56	292
Total revenue	5,428	184	10,074	485
Operating expenses
Research and development	11,373	4,376	26,793	12,197
General and administrative	4,244	2,627	11,051	5,906
Total operating expenses	15,617	7,003	37,844	18,103
Loss from operations	(10,189)	(6,819)	(27,770)	(17,618)
Other income (expense), net		16		(183)
Interest income (expense), net	7	(20)	12	(27)
Net loss	$ (10,182)	$ (6,823)	$ (27,758)	$ (17,828)
Basic and diluted net loss per share	$ (0.43)	$ (92.21)	$ (1.26)	$ (143.77)
Weighted average shares used in basic and diluted per share computations	23,825	74	21,984	124

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Share Based Payments

9 Months Ended

Sep. 30, 2012

Share Based Payments [Abstract]

Share Based Payments

6. Share Based Payments

The Company’s stock-based compensation plans include the 1996 Stock Option Plan and the 2005 Stock Plan, as well as options outstanding under Trimeris, Inc.’s 1993 Plan and 2007 Stock Incentive Plan. The Board of Directors has the authority to determine to whom options will be granted, the number of shares, the term, and the exercise price.

At the Company’s annual meeting of stockholders held June 27, 2012, stockholders approved amendments to the 2005 Stock Plan to increase the number of shares of common stock available for issuance by 1.5 million shares, increasing the maximum number of shares that may be issued under the 2005 Stock Plan to approximately 3.0 million shares. Shares subject to outstanding awards under the 2005 Stock Plan totaled 2.3 million as of September 30, 2012.

In addition, at the Company’s annual meeting of stockholders held June 27, 2012, stockholders approved the 2012 Employee Stock Purchase Plan, which allows eligible employees to use payroll deductions to purchase shares of the Company’s common stock at a discount of 15%. The plan is considered a compensatory employee stock purchase plan, and will result in incremental stock-based compensation expense in future periods. The first option period began on August 1, 2012 and will conclude on December 31, 2012. Hereafter, option periods under the plan will generally run from January 1 to June 30 and July 1 to December 31 of each year.

Determining the Fair Value of Stock Options

The Company uses the Black-Scholes option pricing model to measure the fair value of its option awards. The fair value of each stock option grant is estimated on the date of grant. The expected life assumption is based on an analysis of reported data for a peer group of companies, the limited exercise historical experience at the Company, management’s expectations based on the length of time that an employee will stay at the Company, the vesting period of four years and the contractual term of ten years. Volatility has been determined based on an analysis of reported data for a peer group of companies that granted options with substantially similar terms. The risk-free interest rate is based on the rate of U.S. Treasury zero coupon rate with a remaining term approximating the expected term used as the input to the Black-Scholes option pricing model. Our Black-Scholes assumptions for options granted in the first half of fiscal 2012 were consistent with those disclosed in Note 9, Share Based Payments, of the Company’s financial statements included in the Annual Report on Form 10-K/A for the year ended December 31, 2011.

A summary of stock option activity under all equity plans for the three and nine months ended September 30, 2012 is as follows:

	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2011		2,371		$	15.34
Options granted		26			32.90
Options exercised		(82	)		3.48
Options canceled or expired		(11	)		16.03
Outstanding at March 31, 2012		2,304		$	15.96
Options granted		616			40.74
Options exercised		(136	)		1.27
Options canceled or expired		(34	)		112.92
Outstanding at June 30, 2012		2,750		$	21.03
Options granted		—			—
Options exercised		(123	)		3.84
Options canceled or expired		(34	)		22.72
Outstanding at September 30, 2012		2,593		$	21.82

The Company recognized stock-based compensation expense on all stock option awards for the three and nine months ended September 30, 2012 and 2011, as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Research and development	$	495	$	35	$	926	$	94
General and administrative		1,060		101		2,141		198
	$	1,555	$	136	$	3,067	$	292

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Convertible Notes and Convertible Preferred Stock

9 Months Ended

Sep. 30, 2012

Convertible Notes and Convertible Preferred Stock [Abstract]

Convertible Notes and Convertible Preferred Stock

5. Convertible Notes and Convertible Preferred Stock

Convertible Preferred Stock

As of December 31, 2010, of the 28,000 authorized shares of preferred stock, approximately 246 shares were designated as Series A-2 convertible preferred stock (“Series A-2 preferred stock”), approximately 4,169 shares were designated as Series B-2 convertible preferred stock (“Series B-2 preferred stock”), approximately 3,659 shares were designated as Series C-2 convertible preferred stock (“Series C-2 preferred stock”), and 18,000 shares were designated as Series D-2 preferred stock. As part of the Reverse Merger, these shares were exchanged for common stock of the combined entity, Synageva BioPharma Corp., as described in Note 2, “Reverse Merger,” at a ratio of approximately 0.413 shares of common stock for every share of previously issued preferred stock.

2011 Convertible Notes

In March 2011, the Company issued convertible notes (the “2011 Convertible Notes”) for proceeds of $12.5 million as the first tranche of a potential $25 million convertible note offering. The 2011 Convertible Notes were convertible into shares of Series D-2 preferred stock at the conversion price then applicable to the Series D-2 preferred stock or into a future series of preferred stock at its then applicable conversion price issued in conjunction with the next Qualified Offering (as defined in the 2011 Notes purchase agreement), at the election of the holders. The 2011 Convertible Notes had no stated interest rate. On November 2, 2011 as part of the completion of the Reverse Merger, the 2011 Convertible Notes were converted into Series D-2 preferred stock, prior to the conversion of all Private Synageva preferred and common shares outstanding into shares of the combined entity.

As of September 30, 2012 and December 31, 2011, the Company did not have any convertible notes or convertible preferred stock outstanding.

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Fair Value of Financial Instruments (Details) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Financial assets and liabilities measured at fair value on recurring basis
Cash equivalents - money market fund	$ 230,069	$ 59,860
Quoted Prices in Active Markets (Level 1) [Member]
Financial assets and liabilities measured at fair value on recurring basis
Cash equivalents - money market fund	230,069	59,860
Significant Other Observable Inputs (Level 2) [Member]
Financial assets and liabilities measured at fair value on recurring basis
Cash equivalents - money market fund
Significant Unobservable Inputs (Level 3) [Member]
Financial assets and liabilities measured at fair value on recurring basis
Cash equivalents - money market fund

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Share Based Payments (Tables)

9 Months Ended

Sep. 30, 2012

Share Based Payments [Abstract]

Summary of stock option activity under all equity plans

A summary of stock option activity under all equity plans for the three and nine months ended September 30, 2012 is as follows:

	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2011		2,371		$	15.34
Options granted		26			32.90
Options exercised		(82	)		3.48
Options canceled or expired		(11	)		16.03
Outstanding at March 31, 2012		2,304		$	15.96
Options granted		616			40.74
Options exercised		(136	)		1.27
Options canceled or expired		(34	)		112.92
Outstanding at June 30, 2012		2,750		$	21.03
Options granted		—			—
Options exercised		(123	)		3.84
Options canceled or expired		(34	)		22.72
Outstanding at September 30, 2012		2,593		$	21.82

Recognized stock-based compensation expense on all stock option awards

The Company recognized stock-based compensation expense on all stock option awards for the three and nine months ended September 30, 2012 and 2011, as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Research and development	$	495	$	35	$	926	$	94
General and administrative		1,060		101		2,141		198
	$	1,555	$	136	$	3,067	$	292

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

9. Commitments and Contingencies

The Company accrues estimated liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of the claim assessment or damages can be reasonably estimated. Synageva expenses legal fees and IP-related and patent costs as they are incurred.

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Basic and Diluted Net Loss per Common Share

9 Months Ended

Sep. 30, 2012

Basic and Diluted Net Loss per Common Share [Abstract]

Basic and Diluted Net Loss per Common Share

7. Basic and Diluted Net Loss per Common Share

Basic net loss per common share has been computed by dividing net loss by the weighted average number of shares outstanding during the period. Diluted net income per share, if applicable, has been computed by dividing diluted net income by the diluted number of shares outstanding during the period. Except where the result would be antidilutive to loss from continuing operations, diluted net loss per share has been computed assuming the conversion of convertible obligations and the elimination of the related interest expense, the exercise of stock options and warrants, as well as their related income tax effects.

The following table sets forth the computation of basic and diluted net loss per common share:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011(1)			2012			2011(1)
Numerator:
Net loss	$	(10,182	)	$	(6,823	)	$	(27,758	)	$	(17,828	)
Denominator
Weighted average common shares
Denominator for basic calculation		23,825			74			21,984			124
Denominator for diluted calculation		23,825			74			21,984			124
Net loss per share:
Basic	$	(0.43	)	$	(92.21	)	$	(1.26	)	$	(143.77	)
Diluted	$	(0.43	)	$	(92.21	)	$	(1.26	)	$	(143.77	)

(1) Per share computations for the three and nine months ended September 30, 2011 are based on Private Synageva’s historic common stock, which excludes preferred stock.

The Company’s potential dilutive securities which include convertible debt, convertible preferred stock, stock options, and warrants have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average common stock outstanding used to calculate both basic and diluted net loss per share are the same. The following shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as the effect of including such securities would be antidilutive (in thousands):

	September 30,
	2012		2011
Options to purchase common stock		2,593		1,524
Convertible preferred stock		—		25,997
Convertible preferred stock warrants		—		31
		2,593		27,552

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License Agreements and Collaborations

9 Months Ended

Sep. 30, 2012

License Agreements and Collaborations [Abstract]

License Agreements and Collaborations

8. License Agreements and Collaborations

Collaborations

In August 2011, the Company entered into a collaboration agreement with Mitsubishi Tanabe Pharma Corporation (“Mitsubishi Tanabe”) whereby the Company is utilizing its proprietary expression technology for the development of a certain targeted compound. The agreement included an upfront development payment to the Company of $3.0 million, on-going reimbursement or funding of development costs, estimated during the initial development period to be approximately $1.5 million, and the potential for an additional payment of $3.0 million due upon the successful completion of the initial development.

In March 2012, the Company entered into an agreement with Mitsubishi Tanabe to develop a second protein therapeutic. The agreement included an upfront license payment to the Company of $9.0 million and on-going reimbursement or funding of development costs, estimated during the initial development period to be approximately $0.8 million, as well as the potential for an additional payment of $3.0 million due upon successful completion of the initial development stage of the second program.

Under both agreements, Mitsubishi Tanabe has an option to obtain an exclusive royalty-bearing license, with the right to grant sublicenses, to further develop and commercialize the licensed compound (the “Option”). Additionally, upon exercise of the Option, the parties intend to negotiate a follow-on collaboration and license agreement that may include potential future development and commercial sales based milestone payments, and potential royalty payments. The Company determined that the Option is substantive as the decision to exercise is in the control of Mitsubishi Tanabe and is not essential to the functionality of the other deliverables in either agreement. Therefore, the Option was not considered to be a deliverable at the inception of either collaboration agreement. The Option terminates sixty days from date the Joint Steering Committee (“JSC”) determines whether the initial development was successful.

The Company evaluated the collaboration agreements in order to determine whether the deliverables at the inception of the agreements: (i) the upfront license payments, (ii) research services during the development periods, and (iii) JSC participation should be accounted for as a single unit or multiple units of accounting. The Company concluded that the upfront license payments do not have standalone value to Mitsubishi Tanabe because (i) Mitsubishi Tanabe does not have the ability to transfer or sublicense and (ii) the activities to be conducted during the development period are highly dependent on the Company’s unique knowledge and understanding of its proprietary technology which is critical to optimizing the compounds. The Company determined that the JSC is a deliverable through the development period. In both agreements, the Company concluded that there are two units of accounting which are being delivered over the same performance period.

Revenue recognized under the first and second Mitsubishi Tanabe development programs totaled $0.4 million and $2.9 million for the three months ended September 30, 2012, respectively, and $1.7 million and $3.3 million for the nine months ended September 30, 2012, respectively. Revenue is recognized using the proportional performance method. As of September 30, 2012, the deferred revenue balance includes $1.6 million and $6.0 million related to the first and second development programs, respectively.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for Quarterly Reports on Form 10-Q and do not include all of the information and note disclosures required by the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. The Financial Statements should therefore be read in conjunction with the Financial Statements and Notes thereto for the fiscal year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K/A filed with the SEC on April 24, 2012.

The accompanying Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Financial Statements and accompanying disclosures. Although these estimates are based on management’s knowledge of current events and actions that the Company may undertake in the future, actual results may be different from those estimates. The Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair statement of results for these interim periods. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2012.

Reverse Merger

Reverse Merger

On November 2, 2011, Trimeris closed the Reverse Merger with Synageva BioPharma Corp., a privately held Delaware corporation (“Private Synageva”), pursuant to an Agreement and Plan of Merger and Reorganization, dated as of June 13, 2011 (the “Merger Agreement”), by and among Trimeris, Private Synageva and Tesla Merger Sub, Inc., a wholly owned subsidiary of Trimeris (“Merger Sub”). Pursuant to the Merger Agreement, Private Synageva became a wholly owned subsidiary of Trimeris through a merger of Merger Sub with and into Private Synageva, and the former stockholders of Private Synageva received shares of Trimeris that constituted a majority of the outstanding shares of Trimeris. In connection with the Reverse Merger, Trimeris changed its name to Synageva BioPharma Corp.

The Reverse Merger has been accounted for as a reverse acquisition under which Private Synageva was considered the acquirer of Trimeris. As such, the financial statements of Private Synageva are treated as the historical financial statements of the combined company, with the results of Trimeris being included from November 2, 2011. As a result of the Reverse Merger, historical common stock amounts and additional paid in capital have been retroactively adjusted.

Asset Acquisition

Asset Acquisition

In the third quarter of fiscal 2012, the Company purchased certain assets, including IP rights and property, plant and equipment, for $0.4 million. The purchase has been accounted for as an asset acquisition, and approximately $0.3 million of the purchase price was allocated to the acquired in-process research and development, which was expensed in the quarter.

Significant Accounting Policies

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies during the three and nine months ended September 30, 2012, as compared to the significant accounting policies disclosed in the Company’s financial statements included in the Annual Report on Form 10-K/A for the year ended December 31, 2011.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (FASB) issued ASU No. 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (ASU 2012-02). This newly issued accounting standard allows an entity the option to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test for indefinite-lived intangibles other than goodwill. Under that option, an entity would no longer be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on that qualitative assessment, that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. This ASU is effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on our financial position or results of operations.

In May 2011, the FASB issued a new standard on fair value measurement and disclosure requirements. The new standard changes fair value measurement principles and disclosure requirements including measuring the fair value of financial instruments that are managed within a portfolio, the application of applying premiums and discounts in a fair value measurement, and additional disclosure about fair value measurements. The adoption of this guidance in the first quarter 2012 did not have a material effect on our financial statements.

In June 2011, the FASB issued a new standard on the presentation of comprehensive income. The new standard eliminated the alternative to report other comprehensive income and its components in the statement of changes in equity. Under the new standard, companies can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. The Company adopted the provisions of this guidance during the first quarter 2012.

In December 2011, the FASB issued Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The amendments in this update require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. Although we are still evaluating the impact of this standard, we do not expect its adoption to have a material impact on our financial position or results of our operations .

Principles of Consolidation

Principles of Consolidation

Synageva’s Financial Statements include the accounts of Synageva and its wholly owned subsidiaries, Abbey BioPharma Corp., a Delaware corporation, and Synageva BioPharma Limited, an entity incorporated in the United Kingdom, which commenced operations in 1996 and May 2011, respectively. All intercompany accounts and transactions have been eliminated in consolidation.

Fair value measurement and disclosure requirements

In May 2011, the FASB issued a new standard on fair value measurement and disclosure requirements. The new standard changes fair value measurement principles and disclosure requirements including measuring the fair value of financial instruments that are managed within a portfolio, the application of applying premiums and discounts in a fair value measurement, and additional disclosure about fair value measurements. The adoption of this guidance in the first quarter 2012 did not have a material effect on our financial statements.

Presentation of comprehensive income

In June 2011, the FASB issued a new standard on the presentation of comprehensive income. The new standard eliminated the alternative to report other comprehensive income and its components in the statement of changes in equity. Under the new standard, companies can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. The Company adopted the provisions of this guidance during the first quarter 2012.

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The amendments in this update require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. Although we are still evaluating the impact of this standard, we do not expect its adoption to have a material impact on our financial position or results of our operations

XML

Nature of the Business (Details) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Jan. 10, 2012 Public Offering in January 2012 [Member]	Jul. 13, 2012 Public Offering in July 2012 [Member]
Nature of Business (Textual) [Abstract]
Accumulated deficit	$ (143,598,000)	$ (115,840,000)
Amount accounted for Business combination through cash and cash equivalents	50,100,000
Closure of underwritten public offering			90,000,000	115,000,000
Shares of common stock offered			3.6	2.8
Price per share of common stock offered			$ 25.18	$ 41.20
Net proceeds from public offering			$ 84,600,000	$ 108,100,000

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Supplemental Balance Sheet Information (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Accrued expenses
Accrued compensation, benefits and withholdings	$ 2,312	$ 3,113
Clinical, manufacturing and scientific costs	1,229	819
Professional fees	399	619
Other	887	452
Total Accrued expenses	$ 4,827	$ 5,003

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Consolidated Statements of Comprehensive Loss (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Consolidated Statements of Comprehensive Loss [Abstract]
Net loss	$ (10,182)	$ (6,823)	$ (27,758)	$ (17,828)
Other comprehensive loss:
Foreign currency translation adjustments	1	0	(3)	(1)
Total other comprehensive loss	1	0	(3)	(1)
Comprehensive loss	$ (10,181)	$ (6,823)	$ (27,761)	$ (17,829)

XML

Supplemental Balance Sheet Information

9 Months Ended

Sep. 30, 2012

Supplemental Balance Sheet Information [Abstract]

Supplemental Balance Sheet Information

4. Supplemental Balance Sheet Information

Accrued expenses consist of the following:

	September 30, 2012		December 31, 2011
Accrued compensation, benefits and withholdings	$	2,312	$	3,113
Clinical, manufacturing and scientific costs		1,229		819
Professional fees		399		619
Other		887		452
	$	4,827	$	5,003

XML

Convertible Notes and Convertible Preferred Stock (Details Textual) (USD $) Share data in Thousands, unless otherwise specified	1 Months Ended		9 Months Ended
	Nov. 30, 2011	Mar. 31, 2011	Sep. 30, 2011	Sep. 30, 2012	Dec. 31, 2011	Nov. 02, 2011	Sep. 30, 2012 Convertible preferred stock [Member]	Dec. 31, 2011 Convertible preferred stock [Member]	Dec. 31, 2010 Convertible preferred stock [Member]	Dec. 31, 2010 Series A-2 preferred stock [Member] Convertible preferred stock [Member]	Dec. 31, 2010 Series B-2 preferred stock [Member] Convertible preferred stock [Member]	Dec. 31, 2010 Series C-2 preferred stock [Member] Convertible preferred stock [Member]	Dec. 31, 2010 Series D-2 preferred stock [Member] Convertible preferred stock [Member]
Convertible Notes and Convertible Preferred Stock [Line Items]
Preferred stock, shares authorized									28,000	246	4,169	3,659	18,000
Convertible notes outstanding				$ 0	$ 0
Convertible preferred stock outstanding							0	0
Convertible Notes and Convertible Preferred Stock (Textual) [Abstract]
Exchange ratio related to the Reverse Merger	0.413
Convertible notes issued		12,500,000	12,500,000
Convertible note offering		$ 25,000,000
Stated interest rate						0.00%

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Basic and Diluted Net Loss Per Common Share (Tables)

9 Months Ended

Sep. 30, 2012

Basic and Diluted Net Loss per Common Share [Abstract]

Computation of basic and diluted net income per share

The following table sets forth the computation of basic and diluted net loss per common share:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011(1)			2012			2011(1)
Numerator:
Net loss	$	(10,182	)	$	(6,823	)	$	(27,758	)	$	(17,828	)
Denominator
Weighted average common shares
Denominator for basic calculation		23,825			74			21,984			124
Denominator for diluted calculation		23,825			74			21,984			124
Net loss per share:
Basic	$	(0.43	)	$	(92.21	)	$	(1.26	)	$	(143.77	)
Diluted	$	(0.43	)	$	(92.21	)	$	(1.26	)	$	(143.77	)

(1) Per share computations for the three and nine months ended September 30, 2011 are based on Private Synageva’s historic common stock, which excludes preferred stock.

Computations of diluted weighted average shares outstanding

The following shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as the effect of including such securities would be antidilutive (in thousands):

	September 30,
	2012		2011
Options to purchase common stock		2,593		1,524
Convertible preferred stock		—		25,997
Convertible preferred stock warrants		—		31
		2,593		27,552