What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-06 compared with 2024-08-07 · 160 added, 123 removed, 328 unchanged (46% of the section changed)

7 unchanged sentences

• our expectation that our partnerships with manufacturers will support our clinical and commercial manufacturing capacity for our Duchenne muscular dystrophy (“Duchenne”) gene therapy programs and Limb-girdle muscular dystrophy (“LGMD”) programs, while also acting as a manufacturing platform for potential future gene therapy programs, and our belief that our current network of manufacturing partners is able to fulfill the requirements of our commercial plan;

• our expectation that our partnerships with Catalent, Inc.

• our expectation that our partnership with Catalent, Inc.

(“Catalent”) will support our clinical and commercial manufacturing demand for our SRP-9001 Duchenne program and LGMD programs, while also acting as a manufacturing platform for potential future gene therapy programs;

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• the possible impact of regulations and regulatory decisions by the Food and Drug Administration (the “FDA”) and other regulatory agencies on our business as well as the development of our product candidates and our financial and contractual obligations;

• estimated timelines and milestones for the remainder of 2024 and beyond, including meeting with the FDA in the second half of 2024 with respect to SRP-5051;

• estimated timelines and milestones for the remainder of 2024 and beyond;

• our engagement with regulatory authorities outside of the U.S.

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AMONDYS 45 uses our PMO chemistry and exon-skipping technology to skip exon 45 of the dystrophin gene.

• ELEVIDYS (delandistrogene moxeparvovec-rokl), approved by the FDA on June 20, 2024, is an adeno-associated virus-based gene therapy for the treatment of ambulatory pediatric patients at least 4 years old with Duchenne with a confirmed mutation in the Duchenne gene.

• ELEVIDYS (delandistrogene moxeparvovec-rokl), approved by the FDA on June 20, 2024, is an adeno-associated virus-based (“AAV”) gene therapy for the treatment of ambulatory patients at least four years old with Duchenne with a confirmed mutation in the Duchenne gene.

ELEVIDYS is also approved for non-ambulatory patients under the accelerated approval pathway.

ELEVIDYS was previously granted accelerated approval by the FDA on June 22, 2023 for the treatment of ambulatory pediatric patients aged 4 through 5 years with Duchenne with a confirmed mutation in the Duchenne gene.

ELEVIDYS was previously granted accelerated approval by the FDA on June 22, 2023 for the treatment of ambulatory patients aged four through five years with Duchenne with a confirmed mutation in the Duchenne gene.

ELEVIDYS is contraindicated in patients with any deletion in exon 8 and/or exon 9 in the Duchenne gene.

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A summary description of our key product candidates, including those in collaboration with our strategic partners, is as follows:

• SRP-5051 uses our next-generation chemistry platform, cell-penetrating peptide-conjugated PPMO, and our exon-skipping technology to skip exon 51 of the dystrophin gene.

SRP-5051, a peptide conjugated PMO, is designed to bind to exon 51 of dystrophin pre-mRNA, resulting in exclusion of this exon during mRNA processing in patients with genetic mutations that are amenable to exon 51 skipping.

Exon skipping is intended to promote the production of an internally truncated but functional dystrophin protein.

In the fourth quarter of 2017, we commenced a first-in-human, single ascending dose, study for the treatment of Duchenne in patients who are amenable to exon 51 skipping.

In 2019, we commenced Study 5051-201.

In December 2020, we announced an interim analysis on clinical results from the 10 mg/kg and 20 mg/kg dose cohorts of Part A of Study 5051-201.

In May 2021, we announced results from the 30 mg/kg cohort of Part A of Study 5051-201.

We initiated Part B of Study 5051-201 in the fourth quarter of 2021.

In July 2022, the FDA placed Study 5051-201 on clinical hold following a serious adverse event of hypomagnesemia.

hold was lifted in August 2022.

We completed enrollment of Part B of Study 5051-201 in the first quarter of 2023.

In January 2024, we announced results from Part B of Study 5051-201.

We plan to meet with FDA to discuss next steps in the second half of 2024.

• SRP-9003 ( LGMD, gene therapy program).

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In June 2020, we announced safety and expression results from three clinical trial participants in the high-dose cohort measured at 60 days, and one-year functional data from three clinical trial participants in the low-dose cohort.

In September 2020, we announced six-month functional data from three clinical trial participants in the high-dose cohort, and eighteen-month functional data from three clinical trial participants in the low-dose cohort.

In September 2020, we announced six-month functional data from three clinical

trial participants in the high-dose cohort, and eighteen-month functional data from three clinical trial participants in the low-dose cohort.

In March 2021, we announced 24-month functional and expression data from the three clinical trial participants in the low-dose cohort and twelve-month functional data from the three clinical trial participants in the high-dose cohort.

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In January 2024, we announced that we had begun screening in Study SRP-9003-301, a Phase 3, multi-national, open-label study of SRP-9003.

• SRP-5051 uses our next-generation chemistry platform, cell-penetrating peptide-conjugated PPMO, and our exon-skipping technology to skip exon 51 of the dystrophin gene.

In 2019, we commenced Study 5051-201.

In November 2024, we announced that we discontinued development of SRP-5051 and our PPMO program for treatment of Duchenne.

Our pipeline includes more than 40 programs in various stages of pre-clinical and clinical development, reflecting our multifaceted approach and expertise in precision genetic medicine to make a profound difference in the lives of patients suffering from rare diseases.

Manufacturing, Supply and Distribution

We have developed proprietary state-of-the-art Chemistry, Manufacturing and Controls (“CMC”) capabilities that allow manufacturing and testing of our products and product candidates to support both clinical development as well as commercialization.

We continue to refine and optimize our manufacturing processes and test methods.

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Cash, Cash Equivalents, Restricted Cash and Investments

As of June 30, 2024, we had approximately $1,476.1 million of cash, cash equivalents, restricted cash and investments, consisting of $383.6 million of cash and cash equivalents, $1,076.9 million of short-term investments and $15.6 million of non-current restricted cash.

As of September 30, 2024, we had approximately $1,395.8 million of cash, cash equivalents, restricted cash and investments, consisting of $197.9 million of cash and cash equivalents, $1,182.3 million of investments, and $15.6 million of restricted cash.

We believe that our balance of cash, cash equivalents and investments is sufficient to fund our current operational plan for at least the next twelve months.

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• income tax.

There have been no changes to our critical accounting policies and significant estimates as detailed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

There have not been significant changes to our critical accounting policies and significant estimates as detailed in our Annual Report on Form 10-K for the year ended December 31, 2023, apart from additional monitoring of our valuation allowance, as noted below.

We follow the asset and liability method of accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for expected future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse.

A valuation allowance is recorded to reduce the net deferred tax asset to zero when it is more likely than not that the net deferred tax asset will not be realized.

As of September 30, 2024, we continued to maintain a full valuation allowance against all of our deferred tax assets, with the exception of deferred tax assets in certain foreign jurisdictions, based on management's evaluation of all available evidence, including our earnings history.

We will continue to monitor the realizability of our deferred tax assets in future periods.

We may release all or a portion of the valuation allowance in the near-term;

however, the release of the valuation allowance, as well as the exact timing and the amount of such release, continue to be subject to, among other things, our level of profitability, revenue growth and expectations regarding future profitability.

If and when we determine the valuation allowance should be released or reduced, the adjustment would result in a benefit to income tax expense for the period the release is recorded, which could have a material impact on net earnings.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination.

The calculation of our tax liabilities (or amount of reduction in our deferred tax assets from net operating loss carryover and research credit carryover) resulting from uncertain tax positions can involve significant judgment.

Further, the calculation may involve the application of complex tax regulations in a foreign jurisdiction.

Any significant impact as a result of changes in underlying facts, law, tax rates, tax audit, or review could lead to adjustments to our deferred tax asset, income tax expense, our effective tax rate, and/or our cash flow.

Although we believe that we have adequately provided for tax liabilities resulting from uncertain tax positions, the actual amounts paid, if any, could have a material impact on our results of operations.

Interest and penalties associated with uncertain tax positions are classified as a component of income tax expense.

Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

The following tables set forth selected unaudited condensed consolidated statements of income (loss) data for each of the periods indicated:

For the Three Months Ended

September 30,

(in thousands, except per share amounts)

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Total cost and expenses

Operating loss

Other income, net:

Other income, net

Gain from sale of Priority Review Voucher

Total other income, net

Operating income (loss)

Other income (loss), net:

Other income (expense), net

Total other income (loss), net

Income (loss) before income tax expense

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Earnings (loss) per share:

For the Six Months Ended

For the Nine Months Ended

September 30,

(in thousands, except per share amounts)

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For the Three Months Ended

September 30,

(in thousands)

Products, net

For the Six Months Ended

For the Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

not meaningful

Net product revenues for our products for the three and six months ended June 30, 2024 increased by $121.6 million and $249.5 million, respectively, compared with the three and six months ended June 30, 2023.

The increase primarily reflects $121.7 million and $255.7 million, respectively, of net product revenues associated with sales of ELEVIDYS during the three and six months ended June 30, 2024, which was approved by the FDA and launched in June 2023.

Net product revenues for our products for the three and nine months ended September 30, 2024 increased by $120.4 million and $370.0 million, respectively, compared with the three and nine months ended September 30, 2023.

The increases primarily reflect additional net product revenues of $111.9 million and $367.5 million, respectively, associated with sales of ELEVIDYS during the three and nine months ended September 30, 2024 due to an increase in demand following its June 2023 FDA approval and launch and expanded label in June 2024.

The following tables summarize the components of our collaboration and other revenues for the periods indicated:

For the Three Months Ended

September 30,

(in thousands)

Contract manufacturing

Royalty revenue

Amortization of performance obligations**

Contract manufacturing and other

Total collaboration and other

For the Six Months Ended

For the Nine Months Ended

September 30,

(in thousands)

Amortization of performance obligations**

Contract manufacturing and other

Contract manufacturing

Royalty revenue

Total collaboration and other

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Hoffman-La Roche Ltd.

For the three months ended June 30, 2024 and 2023, we recognized $2.4 million and $22.3 million of collaboration and other revenues, respectively.

The decrease is primarily driven by the amortization of the single, combined performance obligation under the Collaboration Agreement with Roche (the “Collaboration Agreement”) during the three months ended June 30, 2023, which was fully amortized as of December 31, 2023.

This was partially offset by royalty revenue from Roche included in contract manufacturing and other for the three months ended June 30, 2024.

Please refer to Note 3, License and Collaboration Agreements for further discussion of the Collaboration Agreement.

For the six months ended June 30, 2024 and 2023, we recognized $56.4 million and $44.3 million of collaboration and other revenues, respectively.

The increase is primarily due to the $48.0 million of collaboration revenue recognized in the six months ended June 30, 2024 related to Roche’s declined option to acquire the ex-US rights to a certain external, early stage Duchenne development program.

This was partially offset by the amortization of the single, combined performance obligation under the Collaboration Agreement during the six months ended June 30, 2023, which was fully amortized as of December 31, 2023.

In addition, in accordance with the Collaboration Agreement, the parties agreed to enter into a supply agreement in order for Sarepta to supply Roche with clinical and commercial batches of ELEVIDYS (the “Supply Agreement”).

For the three months ended September 30, 2024 and 2023, we recognized $37.4 million and $22.5 million of collaboration and other revenues, respectively.

In accordance with the Collaboration Agreement with Roche (the “Collaboration Agreement”), the parties agreed to enter into a supply agreement in order for us to supply Roche with clinical and commercial batches of ELEVIDYS (the “Supply Agreement”).

While the Supply Agreement is in the process of being negotiated, we delivered batches of commercial ELEVIDYS supply to Roche that were agreed upon on a purchase order-by-purchase order basis.

For the six months ended June 30, 2024, we recognized $8.4 million of contract manufacturing and other revenues, which is primarily related to these Roche shipments and royalty revenue from Roche, with no similar activity for the six months ended June 30, 2023.

For the three months ended September 30, 2024, we recognized $27.9 million of contract manufacturing revenue, which is related to these Roche shipments, with no similar activity during the three months ended September 30, 2023.

In addition, we recognized $9.5 million of royalty revenue from sales of ELEVIDYS by Roche, with no similar activity for the three months ended September 30, 2023.

This was partially offset by the amortization of the single, combined performance obligation under the Collaboration Agreement during the three months ended September 30, 2023, which was fully amortized as of December 31, 2023.

Please refer to Note 3, License and Collaboration Agreements for further discussion of the Collaboration Agreement.

For the nine months ended September 30, 2024 and 2023, we recognized $93.8 million and $66.8 million of collaboration and other revenues, respectively.

The increase is primarily due to $33.7 million of contract manufacturing revenue related to shipments of ELEVIDYS to Roche and $12.1 million of royalty revenue from sales of ELEVIDYS by Roche recognized in the nine months ended September 30, 2024, with no similar activity for the nine months ended September 30, 2023.

This was partially offset by an $18.8 million decrease in collaboration revenue recognized in the nine months ended September 30, 2024.

This decrease was due to the amortization of the single, combined performance obligation under the Collaboration Agreement recognized during the nine months ended September 30, 2023, which was fully amortized as of December 31, 2023, partially offset by Roche’s declined option to acquire the ex-US rights to a certain external, early stage Duchenne development program during the nine months ended September 30, 2024.

Cost of sales (excluding amortization of in-licensed rights)

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(“BioMarin”) and the University of Western Australia (“UWA”) for our PMO Products and to Nationwide Children’s Hospital (“Nationwide”) for ELEVIDYS.

Prior to receiving regulatory approval for EXONDYS 51, VYONDYS 53, AMONDYS 45 and ELEVIDYS by the FDA in September 2016, December 2019, February 2021 and June 2023, respectively, we expensed such manufacturing and material costs as research and development expenses.

For the PMO Products, all previously expensed manufacturing costs had been fully consumed prior to the three and six months ended June 30, 2024 and 2023.

For ELEVIDYS sold in the three and six months ended June 30, 2024, the majority of related manufacturing costs incurred had previously been expensed as research and development expenses, as such costs were incurred prior to the FDA approval of the product.

If product related costs had not previously been expensed as research and development expenses prior to receiving FDA approval, the incremental inventory costs related to ELEVIDYS sold, including products sold to Roche under the Collaboration Agreement, would have been approximately $15.9 million and $39.7 million for the three and six months ended June 30, 2024, respectively.

Prior to receiving regulatory approval for our products, we expensed manufacturing and material costs as research and development expenses.

For the PMO Products, all previously expensed manufacturing costs had been fully consumed prior to the three and nine months ended September 30, 2024 and 2023.

For ELEVIDYS sold in the three and nine months ended September 30, 2024, a portion of related manufacturing costs incurred had previously been expensed as research and development expenses, as such costs were incurred prior to FDA approval of the product.

For ELEVIDYS sold in the three and nine months ended September 30, 2023, the majority of related manufacturing costs incurred had previously been expensed as research and development expenses, as such costs were incurred prior to FDA approval of the product.

If product related costs had not previously been expensed as research and development expenses prior to receiving FDA approval, the incremental inventory costs related to ELEVIDYS sold, including products sold to Roche under the Collaboration Agreement, would have been approximately $29.1 million and $68.8 million for the three and nine months ended September 30, 2024, respectively.

The following table summarizes the components of our cost of sales (excluding amortization of in-licensed rights) for each of the periods indicated:

For the Three Months Ended

September 30,

(in thousands)

Inventory costs related to products sold (excluding products sold to Roche**)

Inventory costs related to products sold to Roche**

Royalty payments

Total cost of sales (excluding amortization of in-licensed rights)

For the Six Months Ended

For the Nine Months Ended

September 30,

(in thousands)

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** See above for further details regarding product supply sold to Roche via contract manufacturing under our Collaboration Agreement.

The cost of sales (excluding amortization of in-licensed rights) for the three months ended June 30, 2024 increased by $10.4 million, or 31%, compared with the same period in 2023.

The change primarily reflects cost of sales related to ELEVIDYS for the three months ended June 30, 2024, following its FDA approval and launch in June 2023, with no similar activity for the same period of 2023.

The cost of sales (excluding amortization of in-licensed rights) for the six months ended June 30, 2024 increased by $26.0 million, compared with the same period in 2023.

The change primarily reflects cost of sales related to ELEVIDYS for the six months ended June 30, 2024, following its FDA approval and launch in June 2023, with no similar activity for the same period of 2023 and an increase in royalty payments related to ELEVIDYS sales.

The cost of sales (excluding amortization of in-licensed rights) for the three and nine months ended September 30, 2024 increased by $54.7 million and $80.6 million, respectively, compared with the same periods in 2023.

The changes primarily reflect an increase in cost of sales related to ELEVIDYS due to an increase in demand following its June 2023 FDA approval and expanded label in June 2024, as well as increases in the write-offs of certain batches of our products not meeting our quality specifications.

For the three and nine months ended September 30, 2024, we recognized $13.7 million and $15.4 million, respectively, of cost of sales related to products sold to Roche under the Collaboration Agreement, with no similar activity for the same periods in 2023.

Research and development expenses

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For the Three Months Ended

September 30,

(in thousands)

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PPMO platform

Casimersen (exon 45)

Golodirsen (exon 53)

Casimersen (exon 45)

Other projects

2 unchanged sentences

Total research and development expenses

For the Six Months Ended

For the Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

Eteplirsen (exon 51)

PPMO platform

Other gene therapies

PPMO platform

Casimersen (exon 45)

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Total research and development expenses

not meaningful

The following tables summarize our research and development expenses by category for each of the periods indicated:

For the Three Months Ended

September 30,

(in thousands)

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*Beginning in the period ended March 31, 2024, we implemented an updated manufacturing absorption methodology that allocates the absorption of indirect manufacturing costs to their respective originating categories.

Research and development expenses by category, specifically, manufacturing expenses, compensation and other personnel expenses, facility- and technology-related expenses and professional services, have been reclassified for the period ended June 30, 2023 for comparability.

This reallocation has no impact on the total research and development expenses recognized.

Research and development expenses for the three months ended June 30, 2024 decreased by $62.2 million, or 26%, compared with the three months ended June 30, 2023.

The decrease was primarily driven by the following:

• $58.0 million decrease in manufacturing expenses primarily due to the capitalization of commercial batches of ELEVIDYS manufactured upon its approval in June 2023;

• $2.6 million decrease in clinical trial expenses primarily due to a ramp-down of the ESSENCE studies for AMONDYS 45 and VYONDYS 53;

• $2.4 million decrease in compensation and other personnel expenses primarily due to an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023, partially offset by changes in headcount;

• $1.8 million decrease in stock-based compensation expense primarily due to an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023, partially offset by the achievement of performance conditions related to certain restricted stock units with performance conditions (“PSUs”) during the three months ended June 30, 2024 and changes in the value of stock awards;

• $1.3 million decrease in pre-clinical expenses primarily due to a decrease in toxicology study activity in our PPMO and PMO platforms;

• $7.1 million decrease in research and other expenses primarily driven by $7.5 million of up-front payments as a result of the execution of certain research and license agreements in the three months ended June 30, 2023, with no similar up-front or milestone activity for the three months ended June 30, 2024.

This was partially offset by the termination of an external early stage Duchenne development program during the three months ended June 30, 2024;

• $10.2 million decrease in the offset to expense associated with a collaboration reimbursement from Roche due to timing and frequency of clinical supply costs and engineering runs for our SRP-9001 gene therapy programs.

For the Six Months Ended

Research and development expenses for the three months ended September 30, 2024 increased by $30.2 million, or 16%, compared with the three months ended September 30, 2023.

The increase was primarily driven by the following:

• $73.5 million increase in manufacturing expenses primarily due to $91.9 million of costs associated with the termination of the development, commercial manufacturing and supply agreement (the “Thermo Agreement”) related to Brammer Bio MA, LLC, an affiliate of Thermo Fisher Scientific, Inc.

(“Thermo”) in August 2024, partially offset by a decrease in activity for our PPMO platform and a decrease in clinical batches for our Eteplirsen program.

Please refer to Note 16, Commitments and Contingencies for further discussion of the Thermo Agreement;

• $9.5 million decrease in clinical trial expenses primarily due to a decrease in activity for our PPMO platform and a ramp-down of the ESSENCE studies for AMONDYS 45 and VYONDYS 53;

• $4.3 million decrease in stock-based compensation expense primarily due to an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023 and expanded label in June 2024, partially offset by changes in headcount;

• $1.8 million increase in professional services primarily due to an increase in reliance on third-party research and development contractors for clinical programs;

• $2.0 million decrease in pre-clinical expenses primarily due to a decrease in toxicology study activity in our PPMO platform;

• $4.1 million decrease in research and other expenses primarily due to milestone achievements in certain research and license agreements during the three months ended September 30, 2023, with no similar milestone activity for the three months ended September 30, 2024;

• $26.6 million increase in the offset to expense associated with a collaboration reimbursement from Roche, primarily due to reimbursable costs associated with the termination of the Thermo Agreement during the three months ended September 30, 2024, with no similar activity for the three months ended September 30, 2023.

This was partially offset by a decrease in clinical supply costs due to timing for our SRP-9001 gene therapy programs.

For the Nine Months Ended

September 30,

(in thousands)

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This reallocation has no impact on the total research and development expenses recognized.

Research and development expenses for the six months ended June 30, 2024 decreased by $107.5 million, or 22%, compared with the six months ended June 30, 2023.

Research and development expenses for the nine months ended September 30, 2024 decreased by $77.3 million, or 11%, compared with the nine months ended September 30, 2023.

The decrease was primarily driven by the following:

• $106.7 million decrease in manufacturing expenses primarily due to the capitalization of commercial batches of ELEVIDYS manufactured upon its approval in June 2023;

• $3.0 million decrease in compensation and other personnel expenses primarily due to an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023, partially offset by changes in headcount;

• $1.9 million decrease in stock-based compensation expense primarily due to an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023, partially offset by the achievement of performance conditions related to certain PSUs during the six months ended June 30, 2024 and changes in the value of stock awards;

• $1.3 million decrease in pre-clinical expenses primarily due to a decrease in toxicology study activity in our PPMO and PMO platforms;

• $5.3 million decrease in research and other expenses primarily driven by $7.8 million of up-front payments as a result of the execution of certain research and license agreements in the six months ended June 30, 2023, with no similar up-front or milestone activity for the six months ended June 30, 2024.

This was partially offset by the termination of an external early stage Duchenne development program during the six months ended June 30, 2024;

• $8.8 million decrease in the offset to expense associated with a collaboration reimbursement from Roche due to timing and frequency of clinical supply costs and engineering runs for our SRP-9001 gene therapy programs.

• $33.2 million decrease in manufacturing expenses primarily due to the capitalization of commercial batches of ELEVIDYS manufactured upon its approval in June 2023, a decrease in clinical batches for our Eteplirsen program and a decrease in activity for our PPMO platform, partially offset by $91.9 million of costs associated with the termination of the Thermo Agreement.

Please refer to Note 16, Commitments and Contingencies for further discussion of the Thermo Agreement;

• $8.8 million decrease in clinical trial expenses primarily due to a ramp-down of the ESSENCE studies for AMONDYS 45 and VYONDYS 53 and our EMBARK study, partially offset by an increased patient enrollment and site activation for our EXPEDITION and EMERGENE studies during the nine months ended September 30, 2024;

• $2.5 million decrease in compensation and other personnel expenses primarily due to an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023 and expanded label in June 2024, partially offset by changes in headcount;

• $1.5 million increase in facility- and technology-related expenses primarily due to our continuing expansion efforts, partially offset by an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023 and expanded label in June 2024;

• $6.2 million decrease in stock-based compensation expense primarily due to an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023 and expanded label in June 2024, partially offset by the achievement of performance conditions related to certain restricted stock units with performance conditions (“PSUs”) during the nine months ended September 30, 2024 and changes in headcount;

• $2.4 million increase in professional services primarily due to an increase in reliance on third-party research and development contractors for clinical programs, partially offset by a decrease in regulatory-related consulting services subsequent to ELEVIDYS approval in June 2023 and expanded label in June 2024;

• $3.3 million decrease in pre-clinical expenses primarily due to a decrease in toxicology study activity in our PPMO platform, partially offset by an increase in toxicology study activity in our LGMD gene therapy programs;

• $9.4 million decrease in research and other expenses primarily due to timing of achievement of certain up-front and milestone payments, partially offset by an increase in sponsored research with certain institutions during the nine months ended September 30, 2024;

• $17.8 million increase in the offset to expense associated with a collaboration reimbursement from Roche due to reimbursable costs associated with the termination of the Thermo Agreement during the nine months ended September 30, 2024, with no similar activity for the nine months ended September 30, 2023.

This was partially offset by a decrease in clinical supply costs due to timing for our SRP-9001 gene therapy programs.

Selling, general and administrative expenses

3 unchanged sentences

For the Three Months Ended

September 30,

(in thousands)

5 unchanged sentences

Total selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended June 30, 2024 increased by $20.2 million, or 17%, compared with the three months ended June 30, 2023.

Selling, general and administrative expenses for the three months ended September 30, 2024 increased by $7.3 million, or 6%, compared with the three months ended September 30, 2023.

This increase was primarily driven by the following:

• $6.2 million increase in professional service expenses primarily related to the continued efforts to commercialize ELEVIDYS and ongoing litigation matters;

• $2.5 million increase in professional service expenses primarily related to the continued efforts to commercialize ELEVIDYS, partially offset by lower expenses related to ongoing litigation matters;

• $2.9 million increase in compensation and other personnel expenses primarily due to changes in headcount;

• $4.9 million increase in stock-based compensation expense primarily related to the achievement of performance conditions related to certain PSUs during the three months ended June 30, 2024;

• $1.6 million increase in facility- and technology-related expenses primarily due to our continuing expansion efforts.

• $4.9 million increase in other expenses primarily due to the timing of charitable contribution activity.

For the Six Months Ended

For the Nine Months Ended

September 30,

(in thousands)

5 unchanged sentences

Total selling, general and administrative expenses

Selling, general and administrative expenses for the six months ended June 30, 2024 increased by $36.5 million, or 16%, compared with the six months ended June 30, 2023.

Selling, general and administrative expenses for the nine months ended September 30, 2024 increased by $43.8 million, or 13%, compared with the nine months ended September 30, 2023.

This increase was primarily driven by the following:

• $10.8 million increase in professional service expenses primarily related to ongoing litigation matters and the continued efforts to commercialize ELEVIDYS;

• $13.3 million increase in professional service expenses primarily related to the continued efforts to commercialize ELEVIDYS and ongoing litigation matters;

• $8.3 million increase in compensation and other personnel expenses primarily due to changes in headcount;

• $4.5 million increase in stock-based compensation expense primarily related to the achievement of performance conditions related to certain PSUs during the six months ended June 30, 2024;

• $4.1 million increase in stock-based compensation expense primarily related to the achievement of performance conditions related to certain PSUs during the nine months ended September 30, 2024;

• $5.8 million increase in facility- and technology-related expenses primarily due to our continuing expansion efforts;

3 unchanged sentences

Each in-licensed right is being amortized on a straight-line basis over the remaining life of the relevant patent from the date the related fee was incurred, either the regulatory approval of or the first commercial sale of the applicable product.

For the three and six months ended June 30, 2024, we recorded amortization of in-licensed rights of approximately $0.6 million and $1.2 million, respectively.

For the three and six months ended June 30, 2023, we recorded amortization of in-licensed rights of approximately $0.2 million and $0.4 million, respectively.

Other income, net

Other income, net primarily consists of interest expense on our debt facilities, interest income on our cash, cash equivalents and investments, amortization of investment premium or accretion of investment discount, unrealized gain or loss from our investment in our strategic investments and change in the fair value of contingent consideration related to regulatory-related contingent payments meeting the definition of a derivative.

For the three and nine months ended September 30, 2024, we recorded amortization of in-licensed rights of approximately $0.6 million and $1.8 million, respectively.

For the three and nine months ended September 30, 2023, we recorded amortization of in-licensed rights of approximately $0.4 million and $0.8 million, respectively.

Other income (expense), net

Other income (expense), net primarily consists of interest expense on our debt instruments, interest income on our cash, cash equivalents and investments, amortization of investment premium or accretion of investment discount, unrealized gain or loss from our investment in our strategic investments, the changes in the fair value of the derivative assets associated with the capped call options for our $570.0 million aggregate principal amount of senior convertible notes due on November 15, 2024 (the “2024 Notes”) and the changes in the fair value of contingent consideration related to regulatory-related contingent payments meeting the definition of a derivative liability.

Our cash equivalents and investments consist of money market funds, corporate bonds, commercial paper, government and government agency debt securities and certificates of deposit.

For the three months ended June 30, 2024 and 2023, other income, net, was $14.3 million and $16.9 million, respectively.

The decrease is primarily related to a decrease in accretion of investment discount, net.

For the six months ended June 30, 2024 and 2023, other income, net was $20.8 million and $29.6 million, respectively.

The decrease is primarily due to a change of $10.1 million in the fair value of contingent consideration during the six months ended June 30, 2024.

For the three months ended September 30, 2024, other income, net, was $11.8 million and for the three months ended September 30, 2023, other expense, net was $12.3 million.

The change is primarily due to the impairment of a strategic investment during the three months ended September 30, 2023, with no similar activity during the three months ended September 30, 2024.

For the nine months ended September 30, 2024 and 2023, other income, net was $32.6 million and $17.3 million, respectively.

The change is primarily due to the impairment of a strategic investment during the nine months ended September 30, 2023, with no similar activity during the nine months ended September 30, 2024.

This change was partially offset by a decrease in interest income due to the investment mix of our investment portfolio and an increase in the fair value of derivatives, primarily related to contingent consideration.

Income tax expense

Income tax expense for the three and six months ended June 30, 2024 was approximately $7.1 million and $12.4 million, respectively.

Income tax expense for the three and six months ended June 30, 2023 was approximately $9.4 million and $13.4 million, respectively.

Income tax expense for the three and six months ended June 30, 2024 and 2023 relates to state, federal and foreign income taxes.

Income tax expense for the three and nine months ended September 30, 2024 was approximately $0.4 million and $12.8 million, respectively.

Income tax expense for the three and nine months ended September 30, 2023 was approximately $7.8 million and $21.2 million, respectively.

Income tax expense for the three and nine months ended September 30, 2024 and 2023 relates to state, federal and foreign income taxes for which available tax losses or credits were not available to offset.

As of September 30, 2024, we continued to maintain a full valuation allowance against our deferred tax assets, with the exception of deferred tax assets in certain foreign jurisdictions.

We continue to monitor the available evidence relative to recovery of our deferred tax assets and whether such evidence would be sufficient to conclude that it is more likely than not that such deferred tax assets may be partially or fully recoverable.

If we were to remove our valuation allowance in part or full, any such adjustment could have a material impact on our effective tax rate in the applicable period and beyond.

Liquidity and Capital Resources

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The following table summarizes our financial condition for each of the periods indicated:

June 30, 2024

September 30, 2024

December 31, 2023

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Short-term investments

Non-current investments

Restricted cash

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Total working capital

For the periods ended June 30, 2024 and December 31, 2023, our principal sources of liquidity were primarily derived from sales of our products, net proceeds from sale of the ELEVIDYS priority review voucher, net proceeds from our offering of 1.25% convertible senior notes due on September 15, 2027 (“2027 Notes”), proceeds from the partial settlement of capped call options associated with the exchange of a portion of the 2024 Notes for shares of our common stock and our collaboration arrangement with Roche.

not meaningful

For the periods ended September 30, 2024 and December 31, 2023, our principal sources of liquidity were primarily derived from sales of our products, net proceeds from sale of the ELEVIDYS Priority Review Voucher, net proceeds from our offering of 1.25% convertible senior notes due on September 15, 2027 (“2027 Notes”), proceeds from the partial settlement of capped call options associated with the exchange of a portion of the 2024 Notes for shares of our common stock and our collaboration arrangement with Roche.

Our principal uses of cash are research and development expenses, manufacturing costs, selling, general and administrative expenses, investments, capital expenditures, business development transactions, settlement of long-term debt and other working capital requirements.

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While our contractual obligations, commitments and debt service requirements over the next several years are significant, we intend to continue to fund our short-term financing needs and working capital requirements from cash flows of operating activities as well as cash on hand and such sources are anticipated to be adequate to fund working capital requirements for at least twelve months from the date these unaudited condensed consolidated financial statements were issued.

Beyond June 30, 2025, our cash requirements will depend extensively on our ability to advance our research, development and commercialization of product candidates.

Beyond September 30, 2025, our cash requirements will depend extensively on our ability to advance our research, development and commercialization of product candidates.

We may seek additional financings primarily from, but not limited to, the sale and issuance of equity and debt securities, the licensing or sale of our technologies, and entering into additional government contracts and/or funded research and development agreements.

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We have entered into long-term contractual arrangements from time to time for our facilities, the provision of goods and services, and issuance of debt securities, among others.

Additional information regarding our obligations under debt and manufacturing arrangements are provided in Note 10, Indebtedness and Note 15, Commitments and Contingencies to the unaudited condensed consolidated financial statements contained in Item 1.

Additional information regarding our obligations under debt, lease and manufacturing arrangements are provided in Note 10, Indebtedness , Note 13, Leases and Note 16, Commitments and Contingencies to the unaudited condensed consolidated financial statements contained in Item 1.

There have been no material changes to our obligations under leasing arrangements as reported in our Annual Report on Form 10-K for the year ended December 31, 2023.

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Payments under these agreements generally become due and payable upon the achievement of certain development, regulatory or commercial milestones.

Because the achievement of these milestones is not probable, and payment is not required as of June 30, 2024, such contingencies have not been recorded in our unaudited condensed consolidated financial statements.

Because the achievement of these milestones is not probable, and payment is not required as of September 30, 2024, such contingencies have not been recorded in our unaudited condensed consolidated financial statements.

Amounts related to contingent milestone payments are not yet considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory approval and commercial milestones.

The following table summarizes our cash flow activity for each of the periods indicated:

For the Six Months Ended

For the Nine Months Ended

September 30,

(in thousands)

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Operating Activities

Cash used in operating activities, which consists of our net income (loss) adjusted for non-cash items and changes in net operating assets and liabilities, totaled $227.1 million and $331.6 million for the six months ended June 30, 2024 and 2023, respectively.

Cash used in operating activities for the six months ended June 30, 2024 was primarily driven by the net income of $42.6 million, adjusted for the following non-cash items:

Cash used in operating activities, which consists of our net income (loss) adjusted for non-cash items and changes in net operating assets and liabilities, totaled $297.8 million and $446.3 million for the nine months ended September 30, 2024 and 2023, respectively.

Cash used in operating activities for the nine months ended September 30, 2024 was primarily driven by the net income of $76.2 million, adjusted for the following non-cash items:

• $134.6 million in stock-based compensation expense;

• $62.7 million in non-cash termination charges as a result of the Thermo Agreement termination;

• $27.3 million in depreciation and amortization expense;

• $10.1 million change in the fair value of contingent consideration;

• $12.3 million reduction in the carrying amount of the right of use assets;

• $8.6 million charge related to the change in the fair value of derivatives;

• $5.6 million in other items.

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• $233.5 million increase in inventory primarily due to capitalized inventory related to ELEVIDYS;

• $39.4 million increase in other assets primarily due to an increase in the collaboration receivable related to Roche;

• $35.4 million decrease in deferred revenue primarily related to the collaboration with Roche;

• $15.3 million decrease in accounts payable, accrued expenses, lease liabilities and other liabilities, primarily due to the timing and invoicing of payments with our contract research organizations and contract manufacturing organizations and payments on accrued employee compensation costs.

These amounts were partially offset by the following:

• $6.6 million decrease in other assets primarily due to a decrease in the collaboration receivable related to Roche;

• $40.3 million decrease in accounts receivable due to a reduction in payment terms for product sales related to ELEVIDYS.

Cash used in operating activities for the six months ended June 30, 2023 was primarily driven by the net loss of $540.7 million, adjusted for the following non-cash items:

• $34.2 million increase in accounts receivable due to an increase in payment terms for product sales related to the PMO Products;

• $13.6 million decrease in accounts payable, accrued expenses, lease liabilities and other liabilities, primarily due to the timing and invoicing of payments with our contract research organizations and contract manufacturing organizations.

Cash used in operating activities for the nine months ended September 30, 2023 was primarily driven by the net loss of $581.6 million, adjusted for the following non-cash items:

• $387.3 million in loss on debt extinguishment related to the exchange of 2024 Notes;

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• $33.0 million in depreciation and amortization expense;

• $9.3 million in other items.

• $27.8 million in impairments associated with our strategic investments;

• $16.1 million in other non-cash items.

These amounts were partially offset by the gain of $102.0 million recorded from the sale of the ELEVIDYS Priority Review Voucher and $32.8 million in accretion of investment discount, net.

The net cash outflow from changes in our operating assets and liabilities was primarily driven by the following:

• $93.7 million decrease in accounts payable, accrued expenses, lease liabilities and other liabilities, primarily due to the $54.0 million shortfall payment to Thermo Fisher Scientific, Inc.

made during the six months ended June 30, 2023, payments to Catalent for raw materials and the overall timing and invoicing of payments;

• $111.2 million decrease in accounts payable, accrued expenses, lease liabilities and other liabilities, primarily due to the $54.0 million shortfall payment to Thermo made during the nine months ended September 30, 2023, payments to Catalent for raw materials and the overall timing and invoicing of payments;

• $104.2 million increase in accounts receivable due to sales of ELEVIDYS and an increase in the demand of our PMO Products;

• $66.8 million decrease in deferred revenue related to the collaboration with Roche;

• $27.0 million increase in inventory due to the addition of capitalized inventory after the approval of ELEVIDYS in June 2023, partially offset by a decrease in inventory for our PMO Products;

• $22.2 million increase in accounts receivable due to an increase in the demand of our PMO Products.

These amounts were partially offset by $11.0 million decrease in other assets and manufacturing-related deposits and prepaids primarily due to a decrease in the collaboration receivable related to Roche and timing of manufacturing prepaids.

• $53.6 million increase in inventory due to the addition of capitalized inventory after the approval of ELEVIDYS in June 2023.

These amounts were partially offset by a $7.9 million decrease in manufacturing-related deposits and prepaids primarily due to the timing and usage of manufacturing prepaids.

Investing Activities

Cash provided by investing activities was $120.3 million and $109.1 million for the six months ended June 30, 2024 and 2023, respectively.

Cash provided by investing activities for the six months ended June 30, 2024 primarily consisted of $739.2 million from the maturity and sale of available-for-sale securities, partially offset by $547.3 million of purchases of available-for-sale securities, $61.6 million of purchases of property and equipment and $10.0 million of purchases of intangible assets.

Cash provided by investing activities for the six months ended June 30, 2023 primarily consisted of $102.0 million of net proceeds related to the sale of the ELEVIDYS Priority Review Voucher and $864.5 million from the maturity and sale of available-for-sale securities, partially offset by $829.8 million of purchases of available-for-sale securities and $27.4 million of purchases of property and equipment.

Cash used in investing activities was $8.6 million and $101.4 million for the nine months ended September 30, 2024 and 2023, respectively.

Cash used in investing activities for the nine months ended September 30, 2024 primarily consisted of $936.7 million of purchases of available-for-sale securities, $98.9 million of purchases of property and equipment and $10.0 million of purchases of intangible assets, partially offset by $1,037.0 million from the maturity and sale of available-for-sale securities.

Cash used in investing activities for the nine months ended September 30, 2023 primarily consisted of $1,475.4 million of purchases of available-for-sale securities, $57.1 million of purchases of property and equipment and $11.2 million of purchases of intangible assets, partially offset by $102.0 million of net proceeds related to the sale of the ELEVIDYS Priority Review Voucher and $1,340.3 million from the maturity of available-for-sale securities.

Financing Activities

Cash provided by financing activities was $62.1 million and $107.7 million for the six months ended June 30, 2024 and 2023, respectively.

Cash provided by financing activities for the six months ended June 30, 2024 consisted of $62.1 million in proceeds from exercise of options and purchase of stock under our Employee Stock Purchase Program.

Cash provided by financing activities for the six months ended June 30, 2023 consisted of $80.6 million in partial settlement of capped call share options for the 2024 Notes and $33.9 million in proceeds from exercise of options and purchase of stock under our Employee Stock Purchase Program, partially offset by $6.9 million in third-party debt conversion costs related to the 2024 Notes Exchange.

Cash provided by financing activities was $75.8 million and $123.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Cash provided by financing activities for the nine months ended September 30, 2024 consisted of $75.8 million in proceeds from exercise of options and purchase of stock under our Employee Stock Purchase Program.

Cash provided by financing activities for the nine months ended September 30, 2023 consisted of $80.6 million in partial settlement of capped call share options for the 2024 Notes and $49.3 million in proceeds from exercise of options and purchase of stock under our Employee Stock Purchase Program, partially offset by $6.9 million in third-party debt conversion costs related to the exchange of 2024 Notes.

Quantitative and Qualitat ive Disclosures about Market Risk

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Our cash is primarily deposited in and invested through highly rated financial institutions in the U.S.

As of June 30, 2024, we had approximately $1,476.1 million of cash, cash equivalents, restricted cash and investments, comprised of $383.6 million of cash and cash equivalents, $1,076.9 million of short-term investments and $15.6 million non-current restricted cash.

As of September 30, 2024, we had approximately $1,395.8 million of cash, cash equivalents, restricted cash and investments, comprised of $197.9 million of cash and cash equivalents, $1,182.3 million of investments, and $15.6 million of restricted cash.

The Company only holds debt securities classified as available-for-sale.

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The potential change in fair value for interest rate sensitive instruments has been assessed on a hypothetical 10 basis point adverse movement across all maturities.

As of June 30, 2024, we estimate that such hypothetical 10 basis point adverse movement would result in a hypothetical loss in fair value of approximately $0.4 million to our interest rate sensitive instruments.

As of September 30, 2024, we estimate that

such hypothetical 10 basis point adverse movement would result in a hypothetical loss in fair value of approximately $0.6 million to our interest rate sensitive instruments.

Our $1,150.0 million aggregate principal amount of our 2027 Notes has a fixed interest rate of 1.25% per annum, payable semi-annually in cash on each March 15 and September 15 and our $91.6 million aggregate principal amount of our 2024 Notes has a fixed interest rate of 1.5% per annum, payable semi-annually in cash on each May 15 and November 15, and therefore are not subject to fluctuations in market interest rates.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis