Sarepta Therapeutics, Inc. 10-Q

Item 1. Financial Statements SAREPTA THERAPEUTICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except share and per share amounts) As of June 30, 2020 As of December 31, 2019 Assets Current assets: Cash and cash equivalents $ 1,639,959 $ 835,080 Short-term investments 421,349 289,668 Accounts receivable 104,028 90,879 Inventory 179,650 171,379 Other current assets 114,435 81,907 Total current assets 2,459,421 1,468,913 Property and equipment, net 153,340 129,620 Intangible assets, net 13,105 12,497 Right of use assets 74,197 37,933 Other non-current assets 182,980 173,859 Total assets $ 2,883,043 $ 1,822,822 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 91,660 $ 68,094 Accrued expenses 159,088 185,527 Deferred revenue, current portion 89,311 3,303 Other current liabilities 14,837 7,843 Total current liabilities 354,896 264,767 Long-term debt 694,156 681,900 Lease liabilities 72,401 47,720 Deferred revenue, net of current portion 708,476 — Other non-current liabilities 10,248 10,248 Total liabilities 1,840,177 1,004,635 Commitments and contingencies (Note 15) Stockholders’ equity: Preferred stock, $ 0.0001 par value, 3,333,333 shares authorized; none issued and outstanding — — Common stock, $ 0.0001 par value, 198,000,000 shares authorized; 78,432,246 and 75,184,863 issued and outstanding at June 30, 2020 and December 31, 2019, respectively 8 8 Additional paid-in capital 3,505,165 3,112,130 Accumulated other comprehensive income, net of tax 6 50 Accumulated deficit ( 2,462,313 ) ( 2,294,001 ) Total stockholders’ equity 1,042,866 818,187 Total liabilities and stockholders’ equity $ 2,883,043 $ 1,822,822 See accompanying notes to unaudited condensed consolidated financial statements. 3 SAREPTA THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited, in thousands, except per share amounts) For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 2020 2019 Revenues: Products, net $ 111,344 $ 94,668 $ 211,792 $ 181,679 Collaboration 26,019 — 39,245 — Total revenues 137,363 94,668 251,037 181,679 Cost and expenses: Cost of sales (excluding amortization of in-licensed rights) 13,341 15,919 25,963 27,982 Research and development 188,522 113,266 324,666 203,819 Selling, general and administrative 73,688 67,393 156,456 127,959 Acquired in-process research and development — 173,240 — 173,240 Amortization of in-licensed rights 165 217 331 433 Total cost and expenses 275,716 370,035 507,416 533,433 Operating loss ( 138,353 ) ( 275,367 ) ( 256,379 ) ( 351,754 ) Other income (loss): Gain from sale of Priority Review Voucher — — 108,069 — Other expense, net ( 12,447 ) ( 862 ) ( 19,867 ) ( 1,034 ) Total other (loss) income ( 12,447 ) ( 862 ) 88,202 ( 1,034 ) Loss before income tax expense ( 150,800 ) ( 276,229 ) ( 168,177 ) ( 352,788 ) Income tax expense 20 174 135 258 Net loss ( 150,820 ) ( 276,403 ) ( 168,312 ) ( 353,046 ) Other comprehensive (loss) income: Unrealized (losses) gains on investments, net of tax ( 618 ) 63 ( 44 ) 181 Total other comprehensive (loss) income ( 618 ) 63 ( 44 ) 181 Comprehensive loss $ ( 151,438 ) $ ( 276,340 ) $ ( 168,356 ) $ ( 352,865 ) Net loss per share - basic and diluted $ ( 1.93 ) $ ( 3.74 ) $ ( 2.18 ) $ ( 4.85 ) Weighted average number of shares of common stock used in computing basic and diluted net loss per share 77,968 73,958 77,200 72,850 See accompanying notes to unaudited condensed consolidated financial statements. 4 SAREPTA THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited, in thousands) Accumulated Additional Other Total Common Stock Paid-In Comprehensive Accumulated Stockholders' Shares Amount Capital Income (Loss) Deficit Equity Balance at December 31, 2019 75,185 $ 8 $ 3,112,130 $ 50 $ ( 2,294,001 ) $ 818,187 Exercise of options for common stock 97 — 3,687 — — 3,687 Vest of restricted stock units 98 — — — — — Issuance of common stock to Roche, net of issuance costs 2,522 — 312,053 — — 312,053 Issuance of common stock under employee stock purchase plan 56 — 3,795 — — 3,795 Stock-based compensation — — 24,024 — — 24,024 Unrealized gains from available-for-sale securities, net of tax — — — 574 — 574 Net loss — — — — ( 17,492 ) ( 17,492 ) Balance at March 31, 2020 77,958 $ 8 $ 3,455,689 $ 624 $ ( 2,311,493 ) $ 1,144,828 Exercise of options for common stock 449 — 21,860 — 21,860 Vest of restricted stock units, net of cancellations 25 — — — — Stock-based compensation — — 27,616 — — 27,616 Unrealized losses from available-for-sale securities, net of tax — — — ( 618 ) — ( 618 ) Net loss — — — — ( 150,820 ) ( 150,820 ) Balance at June 30, 2020 78,432 $ 8 $ 3,505,165 $ 6 $ ( 2,462,313 ) $ 1,042,866 Accumulated Additional Other Total Common Stock Paid-In Comprehensive Accumulated Stockholders' Shares Amount Capital (Loss) Income Deficit Equity Balance at December 31, 2018 71,072 $ 7 $ 2,611,294 $ ( 99 ) $ ( 1,578,926 ) $ 1,032,276 Exercise of options for common stock 382 — 9,973 — — 9,973 Grant of restricted stock awards and vest of restricted stock units, net of cancellations 35 — — — — — Shares withheld for taxes ( 7 ) — ( 889 ) — — ( 889 ) Issuance of common stock for cash, net of offering costs 2,604 — 365,264 — — 365,264 Issuance of common stock under employee stock purchase plan 48 — 2,326 — — 2,326 Stock-based compensation — — 16,139 — — 16,139 Unrealized gains from available-for-sale securities — — — 118 — 118 Net loss — — — — ( 76,643 ) ( 76,643 ) Balance at March 31, 2019 74,134 $ 7 $ 3,004,107 $ 19 $ ( 1,655,569 ) $ 1,348,564 Exercise of options for common stock 176 — 7,092 — — 7,092 Grant of restricted stock awards and vest of restricted stock units, net of cancellations 18 — — — — — Issuance of common stock for cash, net of offering costs — — 89 — — 89 Stock-based compensation — — 19,762 — — 19,762 Unrealized gains from available-for-sale securities — — — 63 — 63 Net loss — — — — ( 276,403 ) ( 276,403 ) Balance at June 30, 2019 74,328 $ 7 $ 3,031,050 $ 82 $ ( 1,931,972 ) $ 1,099,167 5 SAREPTA THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) For the Six Months Ended June 30, 2020 2019 Cash flows from operating activities: Net loss $ ( 168,312 ) $ ( 353,046 ) Adjustments to reconcile net loss to cash flows from operating activities: Gain from sale of Priority Review Voucher, net of commission ( 108,069 ) — Acquired in-process research and development — 173,240 Depreciation and amortization 13,004 11,113 Reduction in the carrying amounts of the right of use assets 5,389 2,951 Amortization of investment discount ( 1,928 ) ( 5,800 ) Non-cash interest expense 12,217 10,513 Stock-based compensation 51,640 35,901 Other ( 800 ) 892 Changes in operating assets and liabilities, net: Net increase in accounts receivable ( 13,149 ) ( 7,937 ) Net increase in inventory ( 8,271 ) ( 31,124 ) Net increase in other assets ( 44,309 ) ( 87,708 ) Net increase in deferred revenue 794,484 — Net (decrease) increase in accounts payable, accrued expenses and other liabilities ( 11,709 ) 25,768 Net cash provided by (used in) operating activities 520,187 ( 225,237 ) Cash flows from investing activities: Purchase of property and equipment ( 28,289 ) ( 32,945 ) Proceeds from sale of Priority Review Voucher, net of commission 108,069 — Purchase of available-for-sale securities ( 756,738 ) ( 731,288 ) Maturity and sale of available-for-sale securities 626,980 1,225,847 Acquisition of Myonexus Therapeutics, Inc., net of cash acquired — ( 172,556 ) Other ( 1,927 ) ( 1,454 ) Net cash (used in) provided by investing activities ( 51,905 ) 287,604 Cash flows from financing activities: Proceeds from issuance of common stock to Roche, net of offering costs 312,053 — Proceeds from sale of common stock, net of offering costs — 365,353 Proceeds from exercise of stock options and purchase of stock under the Employee Stock Purchase Program 29,342 19,391 Taxes paid related to net share settlement of equity awards ( 4,798 ) ( 889 ) Net cash provided by financing activities 336,597 383,855 Increase in cash, cash equivalents and restricted cash 804,879 446,222 Cash, cash equivalents and restricted cash: Beginning of period 843,645 370,829 End of period $ 1,648,524 $ 817,051 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 1,639,959 $ 808,591 Restricted cash in other assets 8,565 8,460 Total cash, cash equivalents and restricted cash $ 1,648,524 $ 817,051 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 15,032 $ 4,275 Supplemental schedule of non-cash investing activities and financing activities: Right of use asset and lease liability additions $ 37,586 $ — Sale of available-for-sale securities included in investment receivable $ — $ 20,000 Intangible assets and property and equipment included in accrued expenses $ 9,032 $ 3,128 See accompanying notes to unaudited condensed consolidated financial statements. 6 SAREPTA THERAPEUTICS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION AND NATURE OF BUSINESS Sarepta Therapeutics, Inc. (together with its wholly-owned subsidiaries, “Sarepta” or the “Company”) is a commercial-stage biopharmaceutical company focused on helping patients through the discovery and development of unique RNA-targeted therapeutics, gene therapy and other genetic therapeutic modalities for the treatment of rare diseases. Applying its proprietary, highly-differentiated and innovative technologies, and through collaborations with its strategic partners, the Company is developing potential therapeutic candidates for a broad range of diseases and disorders, including Duchenne muscular dystrophy (“DMD”), Limb-girdle muscular dystrophies (“LGMDs”), Mucopolysaccharidosis type IIIA (“MPS IIIA”) and other neuromuscular and central nervous system disorders. Its first and second commercial products in the U.S., EXONDYS 51 (eteplirsen) Injection (“EXONDYS 51”) and VYONDYS 53 (golodirsen) Injection (“VYONDYS 53”) were granted accelerated approval by the U.S. Food and Drug Administration (the “FDA”) on September 19, 2016 and December 12, 2019, respectively. EXONDYS 51 and VYONDYS 53 are indicated for the treatment of DMD in patients who have a confirmed mutation of the DMD gene that is amenable to exon 51 and exon 53 skipping, respectively. EXONDYS 51 and VYONDYS 53 use the Company’s phosphorodiamidate morpholino oligomer (“PMO”) chemistry and exon-skipping technology to skip exon 51 and exon 53, respectively, of the dystrophin gene. Exon skipping is intended to promote the production of an internally truncated but functional dystrophin protein. As of June 30, 2020, the Company had approximately $ 2,070.9 million of cash, cash equivalents and investments, consisting of $ 1,640.0 million of cash and cash equivalents, $ 421.3 million of short-term investments, and $ 9.6 million of restricted cash and investments. The Company believes that its balance of cash, cash equivalents and investments as of the date of the issuance of this report is sufficient to fund its current operational plan for at least the next twelve months, though it may pursue raising additional cash resources through public or private debt and equity financings, seek additional government contracts and establish collaborations with or license its technology to other companies. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS Basis of Presentation The accompanying unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), reflect the accounts of Sarepta Therapeutics, Inc. and its wholly-owned subsidiaries. All intercompany transactions between and among its consolidated subsidiaries have been eliminated. Management has determined that the Company operates in one segment: discovering, developing, manufacturing and delivering therapies to patients with rare diseases. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2019 which are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission on February 26, 2020. The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year. Estimates and Uncertainties The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of accounts receivable from customers, cash held at financial institutions and cash equivalents and investments. As of June 30, 2020, the majority of the Company’s accounts receivable arose from product sales in the U.S. and all customers have standard payment terms that generally require payment within 60 to 91 days . Outside of the U.S., the majority of the Company’s customers have payment terms ranging between 45 and 150 days . Three individual customers accounted for 50 %, 39 % and 10 % of net product revenues for the three months ended June 30, 2020 and 47 %, 40 % and 11 % of net product revenues for the six 7 months ended June 30, 2020 . Three individual customers accounted for 43 %, 43 % and 12 % of net product revenues for the three months ended June 30, 2019 and 42 %, 41 % and 14 % of net product revenues for the six months ended June 30, 2019 . Three individual customers accounted for 46 %, 41 % and 9 % of accounts receivable from product sales as of June 30, 2020 and 45 %, 37 % and 11 % of accounts receivable from product sales as of December 31, 2019 . The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in its customers’ credit profile. As of June 30, 2020 , the Company believes that such customers are of high credit quality. As of June 30, 2020, the Company’s cash was concentrated at three financial institutions in the U.S., which potentially exposes the Company to credit risks. However, the Company does not believe that there is significant risk of non-performance by the financial institutions. Significant Accounting Policies For details about the Company’s accounting policies, please read Note 2, Summary of Significant Accounting Policies and Recent Accounting Pronouncements of the Annual Report on Form 10-K for the year ended December 31, 2019. Collaboration revenue The Company’s collaboration revenue is generated from its collaboration arrangement with F. Hoffman-La Roche Ltd. (“Roche”). For more information, please read Note 3, Collaboration and License Agreements . At the inception of a collaboration arrangement, the Company first assesses whether the contractual arrangement is within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to determine whether the arrangement involves a joint operating activity and involves two (or more) parties that are both active participants in the activity and exposed to significant risks and rewards dependent on the commercial success of such activity. Then the Company determines whether the collaboration arrangement in its entirety represents a contract with a customer as defined by ASC 606, Revenue from Contracts with Customers (“ASC 606”). If only a portion of the collaboration arrangement is potentially with a customer, the Company applies the distinct good or service unit-of-account guidance in ASC 606 to determine whether there is a unit of account that should be accounted for under ASC 606. For the units of account in the collaboration arrangement that do not represent a vendor-customer relationship, the Company will (i) consider applying other GAAP, including by analogy, or (ii) if there is no appropriate analogy, consistently apply a reasonable and rational accounting policy election. In general, by analogy to ASC 606, the Company identifies the performance obligations within the collaboration arrangement and identifies and allocates the transaction price the Company expects to receive on a relative standalone selling price basis to each performance obligation. The residual approach is used to determine estimated standalone selling prices when the selling price is uncertain. Variable consideration, consisting of development and regulatory milestones, will be included in the transaction price only if the Company expects to receive such consideration and if it is probable that the inclusion of the variable consideration will not result in a significant reversal in the cumulative amount of revenue recognized under the arrangement. Sales-based royalty and milestone payments are excluded from the transaction price the Company expects to receive until the underlying sales occur because the license to the Company’s intellectual property is deemed to be the predominant item to which the royalties or milestones relate as it is the primary driver of value in its collaboration arrangement. For the recognition of revenue associated with each performance obligation, if the Company determines ASC 606 is not appropriate to apply by analogy, the Company will apply a reasonable, rational, and consistently applied accounting policy election to faithfully depict the transfer of services to the collaboration partner over the estimated performance period. Up-front payments from a collaboration partner are recognized as deferred revenue when received and recognized as revenue over the estimated performance period. Reimbursement payments from a collaboration partner associated with research and development cost sharing provisions in a collaboration arrangement are recognized as the related expense is incurred and classified as an offset to research and development expense. The Company's collaboration arrangements may contain options which provide the collaboration partner with the right to obtain additional licenses. If an arrangement contains customer options, by analogy to ASC 606, the Company evaluates the customer options to determine whether they represent material rights, which may include options to acquire additional goods or services for free or at a discount. If the customer options are determined to represent material rights, they are recognized as a separate performance obligation at inception of the arrangement. The Company allocates a portion of the transaction price of the collaboration arrangement to material rights based on the relative standalone selling price. Amounts allocated to material rights are not recognized as revenue until related options are exercised or expire. Key assumptions to determine the standalone selling price of units of account in a collaboration arrangement include, but are not limited to, forecasted revenues, development timelines, incremental costs related to the arrangement, discount rates and probabilities of technical and regulatory success. 8 Leases In accordance with ASC 842, Leases (“ASC 842”), components of a lease should be bifurcated between lease components and non-lease components. The fixed and in-substance fixed contract consideration identified must then be allocated based on the relative standalone price to the lease and non-lease components. However, ASC 842 provides entities with a practical expedient that allows them to make an accounting policy election to not separate lease and non-lease components by class of underlying asset. In using this expedient, entities would account for each lease component and the related non-lease component together as a single component. For new and amended real estate leases beginning after January 1, 2019, the Company has elected to account for the lease and non-lease components together for existing classes of underlying assets and allocates the contract consideration to the lease component only. In contrast, the Company does not apply the practical expedient for embedded leases in manufacturing and supply agreements with certain of its contract manufacturing organizations and has instead allocated contract consideration between the lease and non-lease components based on their relative standalone price. There have not been any other material changes to the Company’s accounting policies through June 30, 2020. Recent Accounting Pronouncements Not yet adopted In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, “ Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, which is intended to simplify the accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. The new standard will be effective beginning January 1, 2021. As of June 30, 2020, the Company is continuing to evaluate the potential impact this ASU may have on its financial position and results of operations upon adoption. Recently adopted In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. This ASU removed the following disclosure requirements: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; and (3) the valuation processes for Level 3 fair value measurements. Additionally, this update added the following disclosure requirements: (1) the changes in unrealized gains and losses for the period included in other comprehensive income and loss for recurring Level 3 fair value measurements held at the end of the reporting period; and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 was effective beginning January 1, 2020. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, “ Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract”. This ASU requires a customer in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance contained in ASC Subtopic 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. ASU No. 2018-15 was effective beginning January 1, 2020. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements . In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” . This ASU requires that credit losses for financial instruments measured at amortized cost be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. ASU 2016-13 was effective beginning January 1, 2020. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements. The Company has no historical write-offs of its accounts receivable and its terms range from 60 to 91 days for sales within the U.S. and 45 and 150 days for the majority of sales outside the U.S. The Company monitors the creditworthiness of its customers and payments such that it can properly assess and respond to changes in the customers’ credit profile or any specific issues. Upon adoption and as of June 30, 2020, the Company believes that such customers are of high credit quality and the expected credit losses are insignificant. 9 In November 2018, the FASB issued ASU 2018-18, “ Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 60 6” . Th is ASU : (i) clarif ies that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when the collaborative arrangement participant is a customer , (ii) provides guidance specifying that a distinct good or service is the unit of account for evaluating whether a transaction is with a customer, and (iii) precludes a company from presenting transactions with a collaborative arrangement participant that are not in the scope of ASC 606 together with revenue from contracts with customers . The new standard was effective beginning January 1, 2020. The Company presents collaboration revenue separate from product revenues. 3. LICENSE AND COLLABORATION AGREEMENTS Roche Holding A.G. On December 21, 2019, the Company entered into a license, collaboration and option agreement with Roche and a stock purchase agreement with an affiliate of Roche (collectively, the “Roche Agreement”), providing Roche with exclusive commercial rights to SRP-9001, the Company’s investigational gene therapy for DMD, outside the U.S. The Company retains all rights to SRP-9001 in the U.S. and will perform all development activities within the joint global development plan necessary to obtain and maintain regulatory approvals for SRP-9001 in the U.S. and the EU. Further: (i) research and development expenses incurred under the joint global development plan will be equally shared between the Company and Roche, (ii) Roche is solely responsible for all costs incurred in connection with any development activities (other than those within the joint global development plan) that are necessary to obtain or maintain regulatory approvals outside the U.S, and (iii) the Company will continue to be responsible for the manufacturing of clinical and commercial supplies of SRP-9001. The Company has also granted Roche options to acquire ex-U.S. rights to certain future DMD-specific programs (the “Options”) in exchange for separate option exercise payments, milestone and royalty considerations, and cost sharing provisions. The agreement became effective on February 4, 2020 (“Effective Date”). Within 10 days of the Effective Date, the Company received an aggregate of approximately $ 1.2 billion in cash consideration from Roche, consisting of an up-front payment and an equity investment in the Company. Additionally, the Company may receive up to $ 1.7 billion in development, regulatory and sales milestones related to SRP-9001. Upon commercialization, the Company is also eligible to receive tiered royalty payments based on net sales. The Roche Agreement is governed by a joint steering committee (“JSC”) formed by representatives from Roche and the Company. The JSC, among other activities, manages the overall strategic alignment between the parties, approves any material update to the joint global development plan and budget and oversees the operations of the subcommittees. The Company determined that the Roche Agreement represents a collaboration arrangement subject to the scope of ASC 808. To determine if the collaboration arrangement was also within the scope of ASC 606, using the unit of account guidance in ASC 606, the Company identified the distinct goods or services in the Roche Agreement and evaluated whether they were transferred to a customer. However, since the Company’s ordinary activities do not include contracting with third parties to provide them with research and development services, it was determined that the Roche Agreement was not within the scope of ASC 606. Thus, for recognition and measurement purposes, the Company must apply other GAAP, including by analogy, or if there is no appropriate analogy, apply a reasonable, rational and consistently applied accounting policy election. Accordingly, the Company has analogized to ASC 606 for the accounting for certain aspects of the Roche Agreement. Of the $1.2 billion cash received from Roche, $ 316.3 million was allocated to the 2,522,227 shares of the Company’s common stock issued to Roche based on the closing price when the shares were issued. Further, $ 485.0 million was allocated to the Options, as the Company determined that the option exercise payments (ranging from $ 20.0 million to $ 125.0 million per Option) are priced at a discount, resulting in material rights. The residual amount of $ 348.7 million was allocated to a single, combined performance obligation (“Combined Performance Obligation”) comprised of: (i) the license of IP relating to SRP-9001 transferred to Roche, (ii) the related research and development services provided under the joint global development plan, (iii) the services provided to manufacture clinical supplies of SRP-9001, and (iv) the Company’s participation in the JSC, because the Company determined that the license of IP and related activities were not capable of being distinct from one another. The Company recorded $ 312.1 million of common shares issued to Roche, based on the closing price of the Company’s stock on the date such shares were issued, net of direct transaction fees incurred of $ 4.3 million. This net amount is reflected as an increase to common stock and additional paid-in-capital in the accompanying unaudited condensed consolidated balance sheets. The $ 485.0 million allocated to the material rights associated with the Options was based on their estimated standalone selling prices, determined using an income approach of projected incremental discounted cash flows from each Option. The discounted cash flows incorporate the likelihood of success of the individual product candidates and the related commercial opportunity. The value assigned to the individual material rights is reflected as deferred revenue and will not be recognized until an option is either: (i) exercised by Roche, or (ii) expires. If exercised, the value of the material right will be aggregated with the option exercise price and recognized over the applicable performance period. If expired, the related transaction price will be recognized immediately. Through June 30, 2020, no options have been exercised or expired. 10 The $ 34 8 .7 million allocated to the Combined Performance Obligation was determined using the residual approach because the standalone selling price is uncertain. The Company recognizes revenue related to the Combined Performance Obligation on a straight-line basis over the expected performance period of the joint global development plan, which is expected to extend through the fourth quarter of 2023 . The Company believes this method represents the best depiction of the transfer of services to Roche, as the estimated full-time equivalent employees dedicated to the services is not expected to materially vary over the expected service period. Revenue relating to future development, regulatory and sales milestones will be recognized when the milestone is probable of achievement (which is typically when the milestone has occurred). Any royalties payable by Roche in the future will be recognized in the period earned. In addition, the Company determined that the supply of commercial product to Roche under the agreement is not priced at a discount and represents optional goods or services (i.e., a contingent promise). Accordingly, any revenues associated with the supply of commercial product in the future will be recognized in the period earned. The Company classifies all revenues recognized under the Roche Agreement as collaboration revenues within the unaudited condensed consolidated statements of operations and comprehensive loss. For the three and six months ended June 30, 2020, the Company recognized $ 26.0 million and $ 39.2 million of collaboration revenue, respectively, the majority of which relates to the Combined Performance Obligation. As of June 30, 2020, the Company has total deferred revenue of $ 797.7 million associated with the Roche Agreement, of which $ 89.2 million is classified as current. The portion of deferred revenue related to the separate material rights for the Options was $ 485.0 million as of June 30, 2020. The costs associated with co-development activities performed under the Roche Agreement are included in research and development expenses, with any reimbursement of costs by Roche reflected as a reduction of such expenses when the related expense is incurred. For the three and six months ended June 30, 2020, costs reimbursable by Roche and reflected as a reduction to research and development expenses were $ 8.9 million and $ 25.4 million, respectively, and $ 8.9 million is included in accounts receivable as of June 30, 2020. Research and Option Agreements During the three months ended June 30, 2020, the Company entered into multiple research and option agreements with third parties in order to develop various technologies and biologics that may be used in the administration of the Company’s genetic therapeutics, with aggregate up-front payments made by the Company of $ 12.0 million, which were recorded as research and development expense in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss for the three months ended June 30, 2020 . The agreements generally provide for research services related to preclinical development programs, and options to license the technology for clinical development. Prior to the options under these agreements being executed, the Company may be required to make up to $ 14.0 million in research milestone payments. Under these agreements, there are $ 129.0 million in potential option payments to be made by the Company upon the determination to exercise the options. Additionally, if the options for each agreement are executed, the Company would incur additional contingent obligations and may be required to make development, regulatory, and sales milestone payments and low-single-digit royalty payments based on the sales of the developed products upon commercialization. As of June 30, 2020, the Company has not exercised any options nor have any research milestone payments become probable of occurring. Milestone Obligations The Company has license and collaboration agreements in place for which it could be obligated to pay, in addition to the payment of up-front fees upon execution of the agreements, certain milestone payments as a product candidate proceeds from the submission of an investigational new drug application through approval for commercial sale and beyond. As of June 30, 2020, the Company may be obligated to make up to $ 3.2 billion in future development, regulatory, commercial and up-front royalty milestone payments associated with its license and collaboration agreements. These obligations exclude potential future option and milestone payments for options that have yet to be exercised within agreements entered into by the Company as of June 30, 2020, which are discussed above. For the three and six months ended June 30, 2020, the Company recognized up-front, development milestone, and other expenses of $ 12.8 million and $ 21.3 million, respectively, as research and development expense in the accompanying unaudited condensed consolidated statement of operations and comprehensive loss. For the three and six months ended June 30, 2019, the Company recognized up-front, development milestone, and other expenses of $ 14.4 million and $ 15.5 million, respectively, as research and development expense in the accompanying unaudited condensed consolidated statement of operations and comprehensive loss. 4. GAIN FROM SALE OF PRIORITY REVIEW VOUCHER In February 2020, the Company entered into an agreement with Vifor (International) Ltd. to sell the rare pediatric disease Priority Review Voucher (“PRV”) it received from the FDA in connection with the approval of VYONDYS 53. Following the early 11 termination of the applicable waiting period under the Hart -Scott-Rodino Antitrust Improvements Act of 1976, as amended, in March 20 20 , the Company completed its sale of the PR V and received proceeds of $ 108.1 million , net of commission , which was recorded as a gain from sale of the PRV as it did not have a carrying value at the time of the sale . 5. FAIR VALUE MEASUREMENTS The Company has certain financial assets and liabilities that are recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements. • Level 1 — quoted prices for identical instruments in active markets; • Level 2 — quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and • Level 3 — valuations derived from valuation techniques in which one or more significant value drivers are unobservable. The tables below present information about the Company’s financial assets and liabilities that are measured and carried at fair value and indicate the level within the fair value hierarchy of valuation techniques it utilizes to determine such fair value: Fair Value Measurement as of June 30, 2020 Total Level 1 Level 2 Level 3 (in thousands) Assets Money market funds $ 810,146 $ 810,146 $ — $ — Government and government agency bonds 927,471 927,471 — — Strategic equity investments 33,344 3,344 — 30,000 Certificates of deposit 1,001 1,001 — — Total assets $ 1,771,962 $ 1,741,962 $ — $ 30,000 Liabilities Contingent consideration $ 5,200 $ — $ — $ 5,200 Total liabilities $ 5,200 $ — $ — $ 5,200 Fair Value Measurement as of December 31, 2019 Total Level 1 Level 2 Level 3 (in thousands) Assets Money market funds $ 203,410 $ 203,410 $ — $ — Government and government agency bonds 809,159 809,159 — — Strategic equity investments 31,937 1,937 — 30,000 Certificates of deposit 1,001 1,001 — — Total assets $ 1,045,507 $ 1,015,507 $ — $ 30,000 Liabilities Contingent consideration $ 5,200 $ — $ — $ 5,200 Total liabilities $ 5,200 $ — $ — $ 5,200 The Company’s assets with fair value categorized as Level 1 within the fair value hierarchy include money market funds, government and government agency bonds, the Company’s strategic investment in Lysogene S.A. and certificates of deposit. Certain of the government and government agency bonds are publicly traded fixed income securities and are presented as cash equivalents on the unaudited condensed consolidated balance sheets as of June 30, 2020. 12 The Company’s asset with fair value categorized as Level 3 within the fair value hierarchy consists of a strategic investment in Series A preferred stock of Lacerta Therapeutics , Inc. (“Lacerta”) . For more information related to Lacerta, please read Note 3, License and Collaboration Agreements of the Company’s Annual Report on Form 10-K for the year ended December 31, 201 9 . The fair value of the asset was initially based on a cost approach corroborated by the Black-Scholes option pricing model. This fair value measurement was based upon significant inputs not observable in the market and therefore represented a Level 3 measurement. At the end of each reporting period, the fair value will be adjusted if Lacerta issues similar or identical equity securities or when there is a triggering event for impairment . There were no changes in the fair value of the Lacerta strategic investment during the six months ended June 30, 2020 . The Company’s contingent consideration liability with fair value categorized as Level 3 within the fair value hierarchy relate to the regulatory-related contingent payments to Myonexus Therapeutics, Inc. (“Myonexus”) selling shareholders as well as to an academic institution under a separate license agreement that meet the definition on a derivative. For more information related to Myonexus, please read Note 3, License and Collaboration Agreements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 . This amount was estimated through an income approach based on the probability-weighted expected cash flows that incorporated industry-based probability adjusted assumptions relating to the achievement of the milestone and thus the likelihood of making the payments. This fair value measurement was based upon significant inputs not observable in the market and therefore represented a Level 3 measurement. At the end of each reporting period, the fair value is adjusted to reflect the most current assumptions through earnings. There were no changes in the fair value of the contingent consideration during the six months ended June 30, 2020. As of June 30, 2020, the contingent consideration was recorded as a non-current liability on the Company’s unaudited condensed consolidated balance sheets. The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximated fair value because of the short-term maturity of these financial instruments. 6. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES The following table summarizes the Company’s financial assets with maturities of less than 90 days from the date of purchase included in cash equivalents in the unaudited condensed consolidated balance sheets for each of the periods indicated: As of June 30, 2020 As of December 31, 2019 (in thousands) Money market funds $ 810,146 $ 203,410 Government and government agency bonds 506,122 519,491 Total $ 1,316,268 $ 722,901 It is the Company’s policy to mitigate credit risk in its financial assets by maintaining a well-diversified portfolio that limits the amount of exposure as to maturity and investment type. The weighted average maturity of the Company’s available-for-sale securities as of June 30, 2020 and December 31, 2019 was approximately two months . The following tables summarize the Company’s cash, cash equivalents and short-term investments for each of the periods indicated: As of June 30, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in thousands) Cash and money market funds $ 1,133,837 $ — $ — $ 1,133,837 Government and government agency bonds 927,446 44 ( 19 ) 927,471 Total cash, cash equivalents and investments $ 2,061,283 $ 44 $ ( 19 ) $ 2,061,308 As reported: Cash and cash equivalents $ 1,639,961 $ 3 $ ( 5 ) $ 1,639,959 Short-term investments 421,322 41 ( 14 ) 421,349 Total cash, cash equivalents and investments $ 2,061,283 $ 44 $ ( 19 ) $ 2,061,308 13 As of December 31, 2019 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in thousands) Cash and money market funds $ 315,589 $ — $ — $ 315,589 Government and government agency bonds 809,090 71 ( 2 ) 809,159 Total cash, cash equivalents and investments $ 1,124,679 $ 71 $ ( 2 ) $ 1,124,748 As reported: Cash and cash equivalents $ 835,044 $ 36 $ — $ 835,080 Short-term investments 289,635 35 ( 2 ) 289,668 Total cash, cash equivalents and investments $ 1,124,679 $ 71 $ ( 2 ) $ 1,124,748 7. ACCOUNTS RECEIVABLE AND RESERVES FOR PRODUCT SALES The following table summarizes the components of the Company’s accounts receivable for the periods indicated: As of June 30, 2020 As of December 31, 2019 (in thousands) Product sales receivable, net of discounts and allowances $ 94,692 $ 90,409 Collaboration receivable 8,866 — Government contract receivables 470 470 Total accounts receivable, net $ 104,028 $ 90,879 The balance for government contract receivables for both periods presented is subject to government audit and will not be collected until the completion of the audit. The following tables summarize an analysis of the change in reserves for discounts and allowances for each of the periods indicated: Chargebacks Rebates Prompt Pay Other Accruals Total (in thousands) Balance, as of December 31, 2019 $ 588 $ 44,738 $ 1,506 $ 4,671 $ 51,503 Provision 4,480 25,664 2,952 4,349 37,445 Payments/credits ( 4,427 ) ( 27,617 ) ( 2,796 ) ( 5,719 ) ( 40,559 ) Balance, as of June 30, 2020 $ 641 $ 42,785 $ 1,662 $ 3,301 $ 48,389 Chargebacks Rebates Prompt Pay Other Accruals Total (in thousands) Balance, as of December 31, 2018 $ 1,378 $ 24,276 $ 538 $ 2,318 $ 28,510 Provision 4,874 21,004 2,240 2,233 30,351 Payments/credits ( 4,712 ) ( 15,002 ) ( 1,909 ) ( 2,854 ) ( 24,477 ) Balance, as of June 30, 2019 $ 1,540 $ 30,278 $ 869 $ 1,697 $ 34,384 The following table summarizes the total reserves included in the Company’s unaudited condensed consolidated balance sheets for the periods indicated: As of June 30, 2020 As of December 31, 2019 (in thousands) Reduction to accounts receivable $ 4,920 $ 6,254 Component of accrued expenses 43,469 45,249 Total reserves $ 48,389 $ 51,503 14 8. INVENTORY The following table summarizes the components of the Company’s inventory for the periods indicated: As of June 30, 2020 As of December 31, 2019 (in thousands) Raw materials $ 75,981 $ 82,030 Work in progress 100,046 88,031 Finished goods 3,623 1,318 Total inventory $ 179,650 $ 171,379 9. OTHER ASSETS The following table summarizes the Company’s other current assets for each of the periods indicated: As of June 30, 2020 As of December 31, 2019 (in thousands) Manufacturing-related deposits and prepaids $ 83,056 $ 54,276 Prepaid clinical and pre-clinical expenses 10,606 8,263 Prepaid income tax 5,270 2,114 Prepaid maintenance services 4,231 4,366 Prepaid research expenses 3,620 2,007 Leasehold improvement receivable 3,059 3,059 Prepaid insurance 1,371 2,573 Other 3,222 5,249 Total other current assets $ 114,435 $ 81,907 The following table summarizes the Company’s other non-current assets for each of the periods indicated: As of June 30, 2020 As of December 31, 2019 (in thousands) Manufacturing-related deposits and prepaids $ 133,353 $ 122,091 Strategic investments 33,344 31,937 Restricted cash and investments 9,566 9,566 Prepaid clinical expenses 4,680 4,665 Other 2,037 5,600 Total other non-current assets $ 182,980 $ 173,859 15 10. ACCRUED EXPENSES The following table summarizes the Company’s accrued expenses for each of the periods indicated: As of June 30, 2020 As of December 31, 2019 (in thousands) Product revenue related reserves $ 43,469 $ 45,249 Accrued employee compensation costs 28,643 43,240 Accrued contract manufacturing costs 22,307 27,622 Accrued clinical and pre-clinical costs 19,281 18,010 Accrued milestone expense 9,643 18,390 Accrued professional fees 9,585 10,707 Accrued property and equipment 8,792 1,181 Accrued royalties 7,053 6,301 Accrued collaboration cost sharing 3,918 9,000 Accrued interest expense 1,045 1,045 Other 5,352 4,782 Total accrued expenses $ 159,088 $ 185,527 11. STOCK-BASED COMPENSATION The following table summarizes the Company’s stock awards granted for each of the periods indicated: For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 2020 2019 Grants Weighted Average Grant Date Fair Value Grants Weighted Average Grant Date Fair Value Grants Weighted Average Grant Date Fair Value Grants Weighted Average Grant Date Fair Value Stock options 73,494 $ 73.16 155,265 $ 67.80 1,158,824 $ 57.84 1,145,499 $ 75.27 Restricted stock units 44,527 $ 143.84 81,000 $ 121.34 543,437 $ 116.70 405,630 $ 138.79 Stock-based Compensation Expense For the three months ended June 30, 2020 and 2019, total stock-based compensation expense was $ 27.6 million and $ 19.8 million, respectively. For the six months ended June 30, 2020 and 2019, total stock-based compensation expense was $ 51.6 million and $ 35.9 million, respectively. The following table summarizes stock-based compensation expense by function included within the unaudited condensed consolidated statements of operations and comprehensive loss: For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 2020 2019 (in thousands) Research and development $ 11,140 $ 6,923 $ 20,389 $ 12,010 Selling, general and administrative 16,476 12,839 31,251 23,891 Total stock-based compensation expense $ 27,616 $ 19,762 $ 51,640 $ 35,901 The following table summarizes stock-based compensation expense by grant type included within the unaudited condensed consolidated statements of operations and comprehensive loss: For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 2020 2019 (in thousands) Stock options $ 17,848 $ 13,777 $ 33,203 $ 25,234 Restricted stock awards/units 8,352 5,184 15,097 9,100 Employee stock purchase plan 1,416 801 3,340 1,567 Total stock-based compensation expense $ 27,616 $ 19,762 $ 51,640 $ 35,901 16 12. OTHER (LOSS) INCOME The following table summarizes other (loss) income for the periods indicated: For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 2020 2019 (in thousands) Interest expense $ ( 13,713 ) $ ( 7,426 ) $ ( 27,328 ) $ ( 14,761 ) Interest income 638 2,104 2,777 4,465 Amortization of investment discount 999 4,581 3,963 8,913 Gain from sale of Priority Review Voucher — — 108,069 — Other (expense) income ( 371 ) ( 121 ) 721 349 Total other (loss) income, net $ ( 12,447 ) $ ( 862 ) $ 88,202 $ ( 1,034 ) 13. LEASES The Company has real estate operating leases in Cambridge, Andover and Burlington, Massachusetts and Dublin and Columbus, Ohio that provide for scheduled annual rent increases throughout each lease’s term. There have been no significant changes to the real estate leases in the six months ended June 30, 2020. The Company has also identified embedded leases in its manufacturing and supply agreements with Catalent, Inc. (“Catalent”) and Thermo Fisher Scientific, Inc. (“Thermo”). For additional details relating to these two agreements, please read Note 21, Commitments and Contingencies of the Annual Report on Form 10-K for the year ended December 31, 2019. The Company determined that both the Catalent and Thermo agreements contain an embedded lease because the Company controls the use of the facilities and related equipment therein. The Company also determined that it does not control the facilities or related equipment during construction and, thus, the lease does not fall in the scope of “build-to-suit” accounting. The lease on two of the four dedicated clean room suites at Catalent and four of the eight dedicated clean room suites at Thermo commenced during the first and second quarter of fiscal 2020, respectively, which is when the dedicated clean room suites became available for use by the Company. Accordingly, the fixed and in-substance fixed contract consideration associated with the dedicated clean room suites was allocated to the lease and non-lease components. The lease component was determined based on the estimated standalone price of the leased clean rooms and the associated equipment based on available market and specific cost information. The non-lease component was determined using the residual estimation approach as the standalone price of the gene therapy manufacturing and supply services provided by both Catalent and Thermo is highly variable. Consequently, during the six months ended June 30, 2020, the Company recorded aggregate right of use (“ROU”) assets of $ 39.8 million and aggregate lease liabilities of $ 35.5 million relating to the dedicated clean room suites at both Catalent and Thermo. The ROU assets and lease liabilities were based on the present value of estimated future payments associated with the lease component of the Catalent and Thermo clean room suites at discount rates of 8.0 % and 7.5 %, respectively, representing the rate at which the Company could borrow on a collateralized basis the amount of the lease payments in a similar term. The difference between the ROU assets and the lease liabilities results from certain prepayments made to Catalent and Thermo by the Company prior to the commencement of the leases. The weighted average remaining lease term on the leases for the dedicated clean room suites range between 4.5 and 7.4 years. The total lease liability payments are expected to be paid in equal installments through the five-year and eight-year terms of the Catalent and Thermo agreements, respectively. The leases on the remaining two clean room suites at Catalent and four clean room suites at Thermo have not commenced as of June 30, 2020 because these clean room suites are not yet available for use by the Company. Accordingly, cumulative payments totaling $ 18.0 million and $ 43.1 million made to Catalent and Thermo, respectively, relating to the remaining clean room suites which have not become available to the Company have been recorded as other assets in the accompanying unaudited condensed consolidated balance sheets, a portion of which will be considered in the initial measurement of the cost of the ROU asset at the lease commencement date, currently anticipated to occur in the fourth quarter of 2020. For the three and six months ended June 30, 2020, the Company recorded aggregate operating lease costs of $ 2.0 million and $ 2.8 million related to the Catalent and Thermo embedded leases, respectively. For the three and six months ended June 30, 2020, the Company recorded aggregate variable lease costs of $ 3.6 million and $ 4.5 million, respectively. The operating lease costs and variable lease costs of the Thermo and Catalent embedded leases were included in research and development expense in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss. 17 14. NET LOSS PER SHARE Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding. For the three and six months ended June 30, 2020 and 2019, there were no differences between basic and diluted net loss per share since the effect of common stock equivalents would be anti-dilutive due to the net loss position and, therefore, would be excluded from the diluted net loss per share calculation. For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 2020 2019 (in thousands, except per share amounts) Net loss $ ( 150,820 ) $ ( 276,403 ) $ ( 168,312 ) $ ( 353,046 ) Weighted-average common shares outstanding - basic 77,968 73,958 77,200 72,850 Effect of dilutive securities* — — — — Weighted-average common shares outstanding - diluted 77,968 73,958 77,200 72,850 Net loss per share - basic and diluted $ ( 1.93 ) $ ( 3.74 ) $ ( 2.18 ) $ ( 4.85 ) * For the three and six months ended June 30, 2020 and 2019, stock options, RSAs, RSUs, and ESPP to purchase 10.0 million and 9.7 million shares of the Company’s common stock, respectively, were excluded from the diluted net loss per share calculation as their effect would have been anti-dilutive. The Company accounts for the effect of the 2024 Notes on diluted net earnings per share using the if-converted method as they may be settled in cash or shares at the Company’s option. While the closing price on June 30, 2020 exceeded the conversion price of $ 73.42 , the potential shares issuable under the 2024 Notes were excluded from the calculation of diluted loss per share as they were anti-dilutive using the if-converted method. In the period of conversion, the 2024 Notes will have no impact on diluted net earnings (loss) if they are settled in cash and will have an impact on diluted earnings per share if the Notes are settled in shares upon conversion and when the Company is in an income position. 15. COMMITMENTS AND CONTINGENCIES Manufacturing Obligations The following table summarizes the aggregate non-cancelable contractual obligations arising from the Company’s manufacturing obligations: As of June 30, 2020 (in thousands) 2020 (July - December) $ 369,149 2021 406,372 2022 65,450 2023 64,461 2024 64,461 Thereafter 185,911 Total manufacturing commitments* $ 1,155,804 * Total manufacturing commitments include both Catalent and Thermo Agreements. Related to the embedded leases at Catalent and Thermo that have commenced during the six months ended June 30, 2020, the Company recorded an ROU asset and a lease liability. Please see Note 13. Leases for further details. 18 Additionally, should the Company obtain regulatory approval for any drug product candidate produced as a part of the Company’s manufacturing obligations above, additional minimum batch requirements with the respective manufacturing parties would be required. Litigation In the normal course of business, the Company may from time to time be named as a party to various legal claims, actions and complaints, including matters involving securities, employment, intellectual property, effects from the use of therapeutics utilizing its technology, or others. For example, on August 30, 2019, Plaintiff Andrew Salinger filed a putative class action complaint against the Company and two of its current officers, Douglas S. Ingram and Sandesh Mahatme (collectively, the “Defendants”), in the United States District Court for the Southern District of New York. The complaint alleged that the Defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and SEC Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the Exchange Act, in connection with the Company’s disclosures related to golodirsen. The proposed class consisted of all persons or entities who acquired Company securities between September 6, 2017 and August 19, 2019. On December 17, 2019, the district court appointed Bernard Portnoy as lead plaintiff, and set a briefing schedule requiring the amended complaint to be filed on February 18, 2020 and requiring Defendants to answer or otherwise respond to the amended complaint on April 17, 2020. On February 13, 2020, the lead plaintiff filed a Notice of Voluntary Dismissal of his claims against all Defendants. On April 22, 2020, the Court endorsed the Notice of Voluntary Dismissal and closed the case. On January 7, 2020, Plaintiff Al Lutzker filed a stockholder derivative complaint, purportedly on behalf of the Company, against two of the Company’s current officers, Douglas S. Ingram and Sandesh Mahatme, and six current members of Company’s Board of Directors, M. Kathleen Behrens, Richard J. Barry, Michael W. Bonney, Mary Ann Gray, Claude Nicaise, and Hans Wigzell (collectively, the “Defendants”), in the United States District Court for the District of Delaware. The complaint asserted claims for breach of fiduciary duty, insider selling, unjust enrichment, waste of corporate assets, and violations of Section 14(a) of the Securities Exchange Act of 1934, and Rule 14a-9 promulgated thereunder, in connection with the Company’s disclosures related to golodirsen. On April 7, 2020, the plaintiff filed a Notice of Voluntary Dismissal of his claims against all Defendants, and the court closed the case. 19