What changed in this filing

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Item 9A. Controls and Procedures

2021-03-01 compared with 2020-02-26 · 482 added, 423 removed, 1088 unchanged (45% of the section changed)

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1 to the Amended and Restated Bylaws.

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sarepta Therapeutics, Inc.

Form of Specimen Certificate for Common Stock.

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Description of Registered Securities

Incorporated by Reference to Filings Indicated

AVI BioPharma, Inc.

2002 Equity Incentive Plan.

Incorporated by Reference to Filings Indicated

Sarepta Therapeutics, Inc.

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and Gilead Sciences, Inc.

Offer Letter dated December 3, 2012 by and between Sarepta Therapeutics, Inc.

and Alexander “Bo” Cumbo

Form of Severance Letter Agreement entered between Sarepta Therapeutics, Inc.

and each of Sandesh Mahatme, Alexander “Bo” Cumbo, David Tyronne Howton, Jr.

and Shamim Ruff

Employment Agreement, dated as of June 26, 2017, between Sarepta Therapeutics, Inc.

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Ingram and Sarepta Therapeutics, Inc., effective June 26, 2017

Incorporated by Reference to Filings Indicated

Amendment No.

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Performance Stock Option Award Agreement under the 2014 Employment Commencement Incentive Plan

Incorporated by Reference to Filings Indicated

Settlement Agreement between Sarepta Therapeutics, Inc., Sarepta International C.V.

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on the one hand and BioMarin Leiden Holding BV, BioMarin Nederlands BV and BioMarin Technologies BV on the other hand dated July 17, 2017

Letter Agreement by and between Sarepta Therapeutics, Inc.

and Catherine Stehman-Breen dated September 26, 2017

Base Call Option Transaction Confirmation, dated as of November 8, 2017, between Sarepta Therapeutics, Inc.

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and Goldman Sachs & Co.

General Release and Amendment to Separation Agreement between Sarepta Therapeutics, Inc.

Catherine Stehman-Breen dated April 12, 2018

Seventh Amendment to a Lease Agreement between the Company and ARE-MA Region No.

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2014 Employment Commencement Incentive Plan

Incorporated by Reference to Filings Indicated

Amendment No.

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dated December 17, 2018

Incorporated by Reference to Filings Indicated

Amendment No.

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and William F.

Incorporated by Reference to Filings Indicated

Amendment to Offer Letter by and between Sarepta

Therapeutics, Inc.

Amendment to Offer Letter by and between Sarepta Therapeutics, Inc.

and William F.

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2014 Employment Commencement Incentive Plan

Amendment No.

1 to the Sarepta Therapeutics, Inc.

2018 Equity Incentive Plan

Separation Agreement and General Release between Sandesh Mahatme and Sarepta Therapeutics, Inc.

First Amendment dated September 24, 2020 to Loan Agreement among Sarepta Therapeutics, Inc., BioPharma Credit PLC and BioPharma Credit Investments V (Master) LP dated December 13, 2019

Separation and Consulting Agreement and General Release between David T.

and Sarepta Therapeutics, Inc.

Promotion Letter dated December 14, 2020 by and between Sarepta Therapeutics, Inc.

and Louise Rodino-Klapac

Offer Letter dated April 19, 2018 by and between Sarepta Therapeutics, Inc.

and Louise Rodino-Klapac

Incorporated by Reference to Filings Indicated

Promotion Letter dated December 14, 2020 by and between Sarepta Therapeutics, Inc.

Offer Letter dated by December 18, 2014 and between Sarepta Therapeutics, Inc.

Offer Letter dated March 17, 2017 by and between Sarepta Therapeutics, Inc.

and Joseph Bratica

Subsidiaries of the Registrant.

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Ingram, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of the Company’s Executive Vice President, Chief Financial Officer and Chief Business Officer, Sandesh Mahatme, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of the Company’s Executive Vice President, Chief Financial Officer, Ian Estepan, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of the Company’s President and Chief Executive Officer, Douglas S.

Ingram, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification of the Company’s Executive Vice President, Chief Financial Officer and Chief Business Officer, Sandesh Mahatme, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification of the Company’s Executive Vice President, Chief Financial Officer, Ian Estepan, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

The following financial statements from the Annual Report on Form 10-K of Sarepta Therapeutics, Inc.

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

February 26, 2020

March 1, 2021

SAREPTA THERAPEUTICS, INC.

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KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Douglas S.

Ingram and Sandesh Mahatme, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file, any and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their and his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 26, 2020:

Ingram and Ian M.

Estepan, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file, any and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their and his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

/s/ Douglas S.

President, Chief Executive Officer and Director (Principal Executive Officer)

/s/ Sandesh Mahatme

Executive Vice President, Chief Financial Officer and Chief Business Officer (Principal Financial and Accounting Officer)

Sandesh Mahatme

Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

Kathleen Behrens

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Richard Barry

/s/ Michael W.

/s/ Mary Ann Gray

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Martin, Ph.D.

/s/ Claude Nicaise, MD

/s/ Claude Nicaise

Claude Nicaise, MD

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of lower of cost or net realizable value of raw materials inventory

As described in Note 2 and Note 8 to the consolidated financial statements, approximately 31%, or $71.7 million, of the Company’s total inventory balance is comprised of raw materials.

The Company periodically analyzes its raw materials inventories, and writes down obsolete or otherwise unmarketable inventory to its estimated net realizable value.

As discussed in Note 2, the Company periodically analyzes its raw materials inventories, and writes down obsolete or otherwise unmarketable inventory to its estimated net realizable value.

We identified the evaluation of lower of cost or net realizable value of raw materials inventory as a critical audit matter.

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Specifically, challenging auditor judgment was required to assess the potential impact the Company’s gene therapy technologies and competitor RNA-targeted therapeutic or gene therapy products could have on existing raw materials inventory.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s inventory valuation process, including controls related to the estimate of expected future demand for raw materials.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s inventory valuation process, including controls related to the estimate of expected future demand for raw materials.

We compared the Company’s prior period forecasted demand for raw materials to actual results to assess their ability to accurately estimate expected future demand.

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We also read publicly available information to identify information regarding other competitor entities with RNA-targeted therapeutic or gene therapy products that could impact the Company’s estimates of expected future demand.

Standalone selling prices of Options in the Roche Agreement

As described in Note 3 to the consolidated financial statements, the Company entered into a license, collaboration and option agreement with F.

Hoffman-La Roche Ltd.

(“Roche”) and a stock purchase agreement with an affiliate of Roche (collectively, the “Roche Agreement”) that became effective in February 2020.

Obligations were identified in the Roche Agreement, including obligations associated with the grant of options to Roche to acquire ex-U.S.

rights to certain future DMD-specific programs (the “Options”).

The initial transaction price was $1.2 billion and $485.0 million was allocated to the Options 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 each individual product candidate associated with the Options and a discount rate.

The transaction price allocated to the Options is recorded as deferred revenue and will not be recognized until an option is either:

(i) exercised by Roche, or (ii) expires.

We identified the determination of the standalone selling prices of the Options as a critical audit matter.

Specifically, testing the assumption regarding the likelihood of success for each individual product candidate and the discount rate, which are inputs to the estimate of projected incremental discounted cash flows, involved a high degree of subjectivity.

The standalone selling prices of the Options were challenging to audit due to the sensitivity of the calculation of projected incremental discounted cash flows to changes in the likelihood of success assumptions and discount rate.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to determine the standalone selling prices of the Options, including controls related to the development of the likelihood of success assumption s for each individual product candidate and the discount rate.

We performed sensitivity analyses over the likelihood of success assumptions to assess the impact of changes in those assumptions on the Company’s determination of the standalone selling prices of the Options.

We evaluated the likelihood of success assumptions by comparing them to industry benchmarks and data, as well as evaluated the relevance and reliability of information published by third-parties used to develop the assumptions.

We also evaluated the likelihood of success assumptions by comparing information contained in internal sources to the results of our inquiries of personnel with knowledge of the Company’s research and development activities.

We involved a valuation professional with specialized skills and knowledge, who assisted in evaluating the discount rate used by the Company, by comparing it against a discount rate that was independently developed using publicly available market data for comparable entities

We have served as the Company’s auditor since 2002.

Boston, Massachusetts

February 26, 2020

March 1, 2021

Sarepta Therapeutics, Inc.

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(in thousands, except share and per share amounts)

As of December 31,

Current assets:

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Intangible assets, net

Right of use assets, net

Right of use assets

Other non-current assets

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Accrued expenses

Deferred revenue, current portion

Other current liabilities

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Long-term debt

Lease liabilities

Lease liabilities, net of current portion

Deferred revenue, net of current portion

Contingent consideration

Other non-current liabilities

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Additional paid-in capital

Accumulated other comprehensive income (loss), net of tax

Accumulated other comprehensive income, net of tax

Accumulated deficit

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For the Year Ended December 31,

Products, net

Collaboration

Total revenues

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Operating loss

Other (loss) income:

Other expense, net

Other income (loss):

Gain from sale of Priority Review Voucher

Total other (loss) income

Loss on contingent consideration

Other expense, net

Total other income (loss)

Loss before income tax expense (benefit)

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Other comprehensive loss:

Unrealized gains (losses) on investments

Total other comprehensive income (loss)

Unrealized (losses) gains on investments

Total other comprehensive (loss) income

Comprehensive loss

Net loss per share — basic and diluted

Weighted average number of shares of common stock used in

computing basic and diluted net loss per share

Weighted average number of shares of common stock used

in computing basic and diluted net loss per share

See accompanying notes to consolidated financial statements.

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Shares withheld for taxes

Issuance of common stock for cash, net of offering

Issuance of common stock under employee stock

purchase plan

Equity component of convertible notes

Purchase of capped call share options

Issuance of common stock for cash, net of

offering costs

Issuance of common stock under employee

stock purchase plan

Stock-based compensation

Unrealized loss from available-for-sale securities

Unrealized gain from available-for-sale

BALANCE AT DECEMBER 31, 2018

Exercise of options for common stock

Grant of restricted stock awards and vest of restricted stock units, net of cancellations

Exercise of options and stock appreciation

rights for common stock

Grant of restricted stock awards and vest

of restricted stock units, net of cancellations

Shares withheld for taxes

Issuance of common stock for cash, net of offering

Issuance of common stock under employee stock

purchase plan

Issuance of common stock for cash, net of

offering costs

Issuance of common stock for

collaboration agreement

Issuance of common stock under employee

stock purchase plan

Stock-based compensation

Unrealized gain from available-for-sale securities

Unrealized gain from available-for-sale

BALANCE AT DECEMBER 31, 2019

Exercise of options and stock appreciation rights

for common stock

Grant of restricted stock awards and vest of

restricted stock units, net of cancellations

Exercise of options for common stock

Vest of restricted stock units/awards, net of

Shares withheld for taxes

Issuance of common stock for cash, net of offering

Issuance of common stock for collaboration

Issuance of common stock under employee stock

purchase plan

Issuance of common stock to Roche, net of

issuance costs

Issuance of common stock under employee

stock purchase plan

Stock-based compensation

Unrealized gain from available-for-sale securities

Unrealized (loss) from available-for-sale

BALANCE AT DECEMBER 31, 2020

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Adjustments to reconcile net loss to cash flows in operating activities:

Loss on contingent consideration

Gain from sale of Priority Review Voucher

Acquired in-process research and development

Non-cash up-front payment to StrideBio

Gain from sale of Priority Review Voucher

Depreciation and amortization

Reduction in the carry amounts of the right of use assets

Amortization of investment discount

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Net increase in other assets

Net increase in deferred revenue

Net increase in accounts payable, accrued expenses,

lease liabilities and other liabilities

Net cash used in operations

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Purchase of property and equipment

Purchase of intangible assets

Proceeds from sale of Priority Review Voucher

Purchase of available-for-sale securities

Maturity and sales of available-for-sale securities

Proceeds from sale of Priority Review Voucher

Purchase of restricted investment

Maturity of restricted investment

Acquisition of Myonexus Therapeutics, Inc., net of cash acquired

Net cash provided (used) in investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Proceeds from exercise of options and employee stock purchase program

Proceeds from issuance of common stock to Roche, net of offering costs

Proceeds from exercise of stock options and purchase of stock under the

Employee Stock Purchase Program

Taxes paid related to net share settlement of equity awards

Proceeds from sales of common stock, net of offering costs

Proceeds from December 2019 Term Loan

Repayment of June 2015 and July 2017 Term Loan

Proceeds from July 2017 Term Loan

Proceeds from term loans

Repayment of July 2017 Term Loan

Proceeds from revolving line of credit

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Repayment of mortgage loans and notes payable

Purchase of capped call options

Proceeds from convertible debt offering

Debt issuance costs

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Cash, cash equivalents and restricted cash:

Beginning of period

End of period

Beginning of year

Reconciliation of cash, cash equivalents and restricted cash:

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Cash paid during the period for income taxes

Supplemental schedule of non-cash investing activities and financing activities:

Supplemental schedule of non-cash activities:

Lease liabilities arising from obtaining right of use assets

Intangible assets and property and equipment included in accrued expenses

Shares withheld for tax included in accrued expenses

Accrued debt discount and issuance costs

Property and equipment included in accrued expenses

Accrued debt issuance costs

Reclassification of long term investments to short term investments

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(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 (“CNS”) disorders.

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”) and other neuromuscular and central nervous system (“CNS”) disorders.

Its first and second commercial products in the U.S., EXONDYS 51 (eteplirsen) Injection (“EXONDYS 51”) and VYONDYS 53 (golodirsen) Injection (“VYONDYS 53”), respectively, were granted accelerated approval by the U.S.

Food and Drug Administration (“FDA”) on September 19, 2016 and December 12, 2019, respectively.

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.

The Company’s third commercial product in the U.S., AMONDYS 45 (casimersen) Injection (“AMONDYS 45”), was granted accelerated approval by the FDA on February 25, 2021.

AMONDYS 45 is indicated for the treatment of DMD in patients who have a confirmed mutation of the DMD gene that is amenable to exon 45 skipping.

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

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

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Management has determined that the Company operates in one segment:

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 .

discovering, developing, manufacturing and delivering therapies to patients with rare diseases.

The Company’s CEO, as the chief operating decision-maker, manages and allocates resources to the operations of the Company on a total company basis.

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Consistent with this decision-making process, the Company’s CEO uses consolidated, single-segment financial information for purposes of evaluating performance, forecasting future period financial results, allocating resources and setting incentive targets.

In the opinion of the Company’s management, all adjustments of a normal recurring nature necessary for a fair presentation have been reflected.

Estimates and Uncertainties

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Fair Value Measurements

The Company has certain financial assets 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:

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;

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The fair value of the majority of the Company’s financial assets is categorized as Level 1 within the fair value hierarchy.

These assets include money market funds, publicly traded debt, and equity securities.

These assets include money market funds, and publicly traded debt and equity securities.

For additional information related to fair value measurements, please read Note 5, Fair Value Measurements to the consolidated financial statements.

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Available-For-Sale Debt Securities

Available-for-sale debt securities are recorded at fair value and unrealized gains and losses are included in accumulated other comprehensive income (loss) in stockholder’s equity.

Realized gains and losses are reported in other expense, net, on a specific identification basis.

Available-for-sale debt securities are recorded at fair value and unrealized gains and losses are included in accumulated other comprehensive income in stockholder’s equity.

Interest income and realized gains and losses are reported in other expense, net, on a specific identification basis.

Equity Investments

The Company’s equity investments include its investments in a publicly traded biotechnology company and a privately held biotechnology company and are included in other non-current assets in the Company’s consolidated balance sheets.

The equity investment in the publicly traded biotechnology company has a readily determinable fair value and is carried at fair value with changes in value recorded as a gain or loss in the Company’s consolidated statements of operations and comprehensive loss.

The equity investment in the privately held biotechnology company does not have readily determinable fair value and is measured at cost less any impairment, plus or minus changes resulting from observable price changes for the identical or a similar investment of the same issuer, which is recorded as a gain or loss on the Company’s consolidated statements of operations and comprehensive loss.

The Company’s equity investments include its investments in a publicly traded biotechnology company and privately held biotechnology companies and are included in other non-current assets in the Company’s consolidated balance sheets.

The equity investment in the publicly traded biotechnology company has a readily determinable fair value and is carried at fair value.

The equity investments in the privately held biotechnology companies do not have readily determinable fair values and are measured at cost less any impairment, plus or minus changes resulting from observable price changes for the identical or a similar investment of the same issuer.

Any change in the valuation of equity investments is recorded as a gain or loss on the Company’s consolidated statements of operations and comprehensive loss.

Accounts Receivable

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as well as certain distributors in the EU, Brazil, Israel and the Middle East.

The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in the customers’ credit profiles.

The Company provides reserves against trade receivables for estimated losses that may result from a customer’s inability to pay.

The Company has had no historical write-offs of its accounts receivable and its payment 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 financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in the customers’ credit profiles or any specific issues.

The Company provides reserves against trade receivables for expected credit losses that may result from a customer’s inability to pay.

Amounts determined to be uncollectible are written-off against the established reserve.

As of December 31, 2019, the credit profiles for the Company’s customers are deemed to be in good standing and an allowance for doubtful accounts receivable is not considered necessary.

As of December 31, 2020, the credit profiles for the Company’s customers are deemed to be in good standing and an allowance for credit losses is not considered necessary.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist of accounts receivable from customers and cash, cash equivalent and investments held at financial institutions.

For the year ended December 31, 2019 , the majority of the Company’s accounts receivable arose from product sales in the U.S.

and all customers have standard payment terms which generally require payment within 60 to 91 days .

Outside of the U.S., the payment terms range between 45 and 150 days .

Financial instruments which potentially subject the Company to concentrations of credit risk consist of accounts receivable from customers and cash.

Three individual customers accounted for 47 %, 39 % and 11 % of net product revenues for the year ended December 31, 2020, 43 %, 41 % and 13 % for the year ended December 31, 2019, and 42 %, 38 % and 18 % for the year ended December 31, 2018.

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As of December 31, 2020 , the Company believes that such customers are of high credit quality.

As of December 31, 2019 , the Company’s cash equivalents and investments were concentrated at three financial institutions.

The Company does not believe that there is significant risk of non-performance by the financial institutions.

As of December 31, 2020 , the Company’s cash was concentrated at three financial institutions, which exposes the Company to credit risks.

However, the Company does not believe that there is significant risk of non-performance by the financial institutions.

Inventories are stated at the lower of cost and net realizable value with cost determined on a first-in, first-out basis.

The Company capitalizes inventory costs associated with products following regulatory approval when future commercialization is considered probable and the future economic benefit is expected to be realized.

EXONDYS 51 and VYONDYS 53 inventory that may be used in clinical development programs is charged to research and development expense when the product enters the research and development process and no longer can be used for commercial purposes.

The Company periodically reviews its inventories for excess amounts or obsolescence and writes down obsolete or otherwise unmarketable inventory to its estimated net realizable value.

Additionally, though the Company’s product is subject to strict quality control and monitoring which it performs throughout the manufacturing processes, certain batches or units of product may not meet quality specifications resulting in a charge to cost of sales.

EXONDYS 51 and VYONDYS 53 inventory used in clinical development programs is charged to research and development expense when the product enters the research and development process and no longer can be used for commercial purposes.

The Company periodically analyzes its inventories for excess amounts or obsolescence and writes down obsolete or otherwise unmarketable inventory to its estimated net realizable value.

Additionally, though the Company’s product is subject to strict quality control and monitoring which the Company performs throughout the manufacturing processes, certain batches or units of product may not meet quality specifications resulting in a charge to cost of sales.

For products which are under development and have not yet been approved by regulatory authorities, purchased drug product is charged to research and development expense upon delivery.

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Property and Equipment

Property and equipment are initially recorded at cost, including the acquisition cost and all costs necessarily incurred to bring the asset to the location and working condition necessary for its intended use.

The cost of normal, recurring or periodic repairs and maintenance activities related to property and equipment are expensed as incurred.

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Office equipment

Manufacturing equipment

Software and computer equipment

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Impairment of Long-Lived Assets

Long-lived assets held and used by the Company, intangible assets with definite lives and equity investments without a readily determinable fair value are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable.

Long-lived assets held and used by the Company, intangible assets with definite lives, equity investments without a readily determinable fair value and right of use (“ROU”) assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable.

The Company evaluates recoverability of assets to be held and used by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the asset.

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The Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for the goods or services provided.

To determine revenue recognition for arrangements within the scope of ASC Topic 606, “Revenue from Contracts with Customers” (“ASC Topic 606”), the Company performs the following five steps:

To determine revenue recognition for arrangements within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company performs the following five steps:

(1) identify the contract with the customer;

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Variable Consideration

Product revenues are recorded at the net sales price (transaction price) which includes estimated reserves for variable consideration, such as Medicaid rebates, governmental chargebacks, including Public Health Service (“PHS”) chargebacks, prompt payment discounts, co-pay assistance and distribution fees.

Product revenues are recorded at the net sales price (transaction price) which includes estimated reserves for variable consideration, such as Medicaid rebates, governmental chargebacks, including PHS chargebacks, prompt payment discounts, co-pay assistance and distribution fees.

These reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contracts.

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Reserves for distribution fees result in an increase in a liability if payments are required of the Company or a reduction of accounts receivable if no payments are required of the Company.

Collaboration revenue

The Company’s collaboration revenue is primarily generated from its collaboration arrangement with F.

Hoffman-La Roche Ltd.

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 Topic 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.

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.

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.

Valuation of Product Options

The Company's collaboration arrangements may contain options which provide the collaboration partner with the right to obtain additional licenses.

If an arrangement contains product options, by analogy to ASC 606, the Company evaluates the product 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 product options in a collaboration arrangement include, but are not limited to, forecasted revenues, development timelines, incremental costs related to the arrangement, discount rates and likelihood of technical and regulatory success.

Research and Development

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The purchase price is equal to 85 % of the lower of the closing price of the Company’s common stock on the first business day and the last business day of the relevant purchase period.

The fair value of stock purchase rights are estimated using the Black-Scholes-Merton option-pricing model.

The fair value of stock purchase rights is estimated using the Black-Scholes-Merton option-pricing model.

The fair value of the look-back provision with the 15 % discount is recognized on a graded-vesting basis as stock-based compensation expense over the purchase period.

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At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

Leases with a term greater than 12 months are recognized on the balance sheet as ROU assets and short-term and long-term lease liabilities, as applicable.

The Company has elected not to recognize on the balance sheet leases with terms of 12 months or less.

Leases with a term greater than 12 months are recognized on the consolidated balance sheets as ROU assets and short-term and long-term lease liabilities, as applicable.

The Company has elected not to recognize on the consolidated balance sheets leases with terms of 12 months or less.

The Company typically only includes an initial lease term in its assessment of a lease arrangement.

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Operating lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected remaining lease term at lease commencement.

Lease cost for operating leases is recognized on a straight-line basis over the lease term as an operating expense.

The initial measurement of the lease liability is determined based on the future lease payments, which may include lease payments that depend on an index or a rate (such as the consumer price index or other market index).

The Company initially measures payments based on an index or rate by using the applicable rate at lease commencement and subsequent changes in such rates are recognized as variable lease costs.

Variable payments that do not depend on a rate or index are not included in the lease liability and are recognized as they are incurred.

Lease cost for operating leases is recognized on a straight-line basis over the lease term as an operating expense with unrecognized variable lease payments recognized as incurred.

Certain adjustments to the ROU asset may be required for items such as lease prepayments or incentives received.

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As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

In transition to ASC 842, the Company utilized the remaining lease term of its leases in determining the appropriate incremental borrowing rate.

In accordance with 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 respective relative fair values to the lease components and non - lease components.

However, ASC 842 provides a practical expedient that allows an accounting policy election to not separate lease and non - lease components by class of underlying asset.

In using this expedient, the lease component and non - lease component s are accounted for together as a single component.

For real estate leases, 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 .

This practical expedient is not elected for manufacturing facilities and equipment embedded in product supply arrangements.

Components of a lease are bifurcated between lease components and non-lease components.

The fixed and in-substance fixed contract consideration identified is then 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 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 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 leases embedded 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.

Embedded Derivatives

The Company evaluates certain of its financial and business development transactions to determine if embedded components of these contracts meet the definition of derivative under Topic ASC 815, “ Derivatives and Hedging ”.

In general, embedded derivatives are required to be bifurcated from the host instrument if (i) the embedded feature is not clearly and closely related to the host contract and (ii) the embedded feature, if considered a freestanding instrument, met the definition of a derivative.

The embedded derivative is reported on the balance sheets at its fair value.

The embedded derivative is

reported on the consolidated balance sheets at its fair value.

Any change in fair value, as determined at each measurement period, is recorded as a component of the consolidated statements of operations and comprehensive loss .

Contingent Consideration

Certain of the Company’s license and collaboration agreements include future payments that are contingent upon the receipt, or receipt and subsequent sale, of a Priority Review Voucher.

The Company has concluded that these contingent payments represent embedded derivatives.

The Company records a liability for such contingent payments at fair value on the date the agreements are effective.

The Company estimates the fair value of contingent consideration derivatives through a valuation model that includes 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.

Changes in the fair value of the contingent consideration derivatives can result from changes to one or multiple assumptions, including adjustments to the discount rates, the assumed development timeline and the probability of achievement of certain regulatory milestones.

The Company revalues its contingent consideration derivatives upon a material change to one or more of the assumptions discussed above.

Changes in the fair value of the Company’s contingent consideration derivatives are recognized in the Company’s consolidated statements of operations and comprehensive loss.

Such changes are classified as other income (loss) which corresponds to the classification of any gain recognized upon the actual sale of a Priority Review Voucher.

Commitments and Contingencies

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Recent Accounting Pronouncements

Not yet adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, “ Income Taxes (Topic 740):

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The Company is currently evaluating the potential impact this ASU may have on its financial position and results of operations upon adoption.

In November 2018, the FASB issued ASU 2018-18, “ Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 ”.

The amendments in this update clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer.

The new standard will be effective beginning January 1, 2020 and early adoption is permitted.

As of December 31, 2019, the Company has elected to early adopt this ASU and the adoption did not have a material impact on its financial position and results of operations.

In August 2020, the FASB issued ASU 2020-06, “ Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.” This ASU simplifies the complexity associated with applying U.S.

GAAP for certain financial instruments with characteristics of liabilities and equity.

More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exceptions for contracts in an entity’s own equity.

Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital.

Consequently, a convertible debt instrument, such as the Company’s 2024 Convertible Notes, will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives.

The new guidance also requires the if-converted method to be applied for all convertible instruments and requires additional disclosures.

This guidance is required to be adopted by January 1, 2022, and early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

The Company has elected to early adopt this guidance on January 1, 2021, using the modified retrospective method.

Under this transition method, the cumulative effect of accounting change will remove the impact of recognizing the equity component of the Company’s convertible notes (at issuance and the subsequent accounting impact of additional interest expense from debt discount amortization).

The cumulative effective of the accounting change will increase the carrying amount of the convertible notes by $ 96.8 million, accumulated deficit will be reduced by $ 60.2 million and additional paid-in capital will be reduced by $ 157.0 million.

Future interest expense of the 2024 convertible notes will be lower as a result of adoption of this guidance and diluted net loss per share will be computed using the if-converted method for this security.

Recently adopted

In August 2018, the FASB issued ASU No.

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(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.

2018-13 will be effective for fiscal years beginning after December 15, 2019 with early adoption permitted.

As of December 31, 2019, the Company has not elected to early adopt this guidance but does not expect that the adoption of this guidance will have a material effect on its consolidated financial statements.

unobservable inputs used to develop Level 3 fair value measurements.

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.

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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.

2018-15 will be effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

As of December 31, 2019, the Company has not elected to early adopt this guidance but believes that the adoption of this guidance will not have a material effect on its consolidated financial statements.

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.

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Measurement of Credit Losses on Financial Instruments” .

This ASU requires that credit losses 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.

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 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 will be effective for fiscal years beginning after December 15, 2019 with early adoption permitted , and requires adoption using a modified retrospective approach, with certain exceptions.

As of December 31, 2019, the Company has not elected to early adopt this guidance.

Based on the composition of the Company’s investment portfolio as of December 3 1 , 2019, current market conditions and historical credit loss activity, the adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

Additionally, for trade receivables, due to their short duration and the credit profile of the Company’s customers, the effect of transitioning from the incurred losses model to the expected losses model is not expected to be material.

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.

In November 2018, the FASB issued ASU 2018-18, “ Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 ”.

(i) clarifies 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.

LICENSE AND COLLABORATION AGREEMENTS

Roche Holding A.G.

On December 21, 2019, the Company entered into a license, collaboration and option agreement and a stock purchase agreement (collectively, the “Roche Agreements”) with F.

Hoffman-La Roche Ltd (“Roche”), providing Roche with exclusive commercial rights to SRP-9001 (AAVrh74.MHCK7.micro-dystrophin) (the “Lead Product”), the Company’s investigational gene therapy for DMD, outside the U.S.

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 directed to obtaining and maintaining regulatory approvals for SRP-9001 in the U.S.

Further, global development expenses for SRP-9001 will be equally shared between the two parties.

The closing of the transaction was subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary conditions.

The agreement became effective as of February 4, 2020, and closed on February 14, 2020.

When the Roche Agreements became effective, the Company received payments totaling approximately $ 1.2 billion, consisting of $ 750.0 million in an up-front payment and $ 400.0 million in an equity investment.

Additionally, the Company may receive up to approximately $ 1.7 billion in regulatory and sales milestones related to the Lead Product.

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.

(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”).

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.

In addition, Roche has options to in-license (1) certain exon-skipping products that target the dystrophin gene to induce exon skipping, including eteplirsen, golodirsen, casimersen and SRP-5051, (2) certain gene therapy products other than SRP-9001 that encode and directly express dystrophin or a derivative thereof and (3) certain gene-editing products that modify, repair, or activate an endogenous dysfunctional dystrophin gene (collectively, the “Option Products”).

If and when Roche decides to exercise the options, it will be required to make an option exercise payment, on a per Option Product basis, in an amount ranging between $ 20.0 million and $ 125.0 million.

As of December 31, 2019, there was no accounting impact as a result of the execution of the Roche Agreements because the closing of the transaction did not occur until subsequent to year-end.

In May 2017, the Company entered into a sponsored research agreement (the “Research Agreement”) with Genethon for its micro-dystrophin gene therapy program for the treatment of DMD.

The Research Agreement provided the Company with an option to in-license the corresponding technology.

On November 22, 2019, the Company exercised the option and entered into a license and collaboration with Genethon (the “Genethon Collaboration Agreement”).

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 (or $ 312.1 million net of issuance costs) 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.

Lastly, $ 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 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 December 31, 2020, no options have been exercised or expired.

The $348.7 million allocated to the Combined Performance Obligation was based on its estimated standalone selling price.

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 accompanying consolidated statements of operations and comprehensive loss.

For the year ended December 31, 2020, the Company recognized $ 84.2 million of collaboration revenue, the majority of which relates to the Combined Performance Obligation.

As of December 31, 2020, the Company has total deferred revenue of $ 752.7 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 December 31, 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 year ended December 31, 2020, costs reimbursable by Roche and reflected as a reduction to operating expenses were $ 66.5 million.

As of December 31, 2020, there was $ 34.2 million of collaboration receivable included in other current assets.

The Company entered into a sponsored research agreement in May 2017 and subsequently entered into a license and collaboration agreement with Genethon in November 2019 (the “Genethon Collaboration Agreement”) for Genethon’s micro-dystrophin gene therapy program for the treatment of DMD.

The Genethon Collaboration Agreement grants the Company with exclusive rights in the majority of the world (primarily excluding the EU) to Genethon’s micro-dystrophin gene therapy products (“Genethon Products”) and other micro-dystrophin gene therapy products (“Other Licensed Products”).

Under the Genethon Collaboration Agreement, a joint steering committee will be established to plan, monitor and coordinate development activities for Genethon Products and Other Licensed Products.

The Company and Genethon will be responsible for 75 % and 25 %, respectively, of development costs related to both the Genethon Products and the Other Licensed Products.

For the year ended December 31, 2019, the Company recorded $ 9.0 million of research and development expense related to reimbursable development costs incurred for Genethon Products to date.

Upon exercise of the option, the Company made an up-front payment of $ 28.0 million and may be liable for up to $ 157.5 million and $ 78.8 million in development, regulatory and sales milestones for the Genethon Products and Other Licensed Products, respectively.

The Company may be liable for up to $ 157.5 million and $ 78.8 million in development, regulatory and sales milestones for the Genethon Products and Other Licensed Products, respectively.

Furthermore, upon commercialization, the Company will be required to make tiered royalty payments based on net sales of the Genethon Products and the Other Licensed Products.

The up-front payment represents rights to potential future benefits associated with ongoing research and development activities that have no alternative future use.

Accordingly, this amount has been recorded as research and development expense in the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2019.

Under the Genethon Collaboration Agreement, a joint steering committee was established to plan, monitor and coordinate development activities for Genethon Products and Other Licensed Products.

The Company and Genethon are responsible for 75 % and 25 %, respectively, of development costs related to both the Genethon Products and the Other Licensed Products.

Upon signing the Genethon Collaboration Agreement, the Company made an up-front payment of $ 28.0 million, which was recorded as research and development expense in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2019.

Additionally, for the years ended December 31, 2020 and December 31, 2019, the Company recorded $ 10.1 million and $ 9.0 million, respectively, of research and development expense related to reimbursable development costs incurred by Genethon for Genethon Products.

As of December 31, 2020, no development or regulatory milestones were deemed probable of being achieved and, accordingly, no additional expense has been recognized.

StrideBio, Inc.

On November 14, 2019 (the “StrideBio Effective Date”), the Company entered into a collaboration and license agreement (the “StrideBio Collaboration Agreement”) and a stock purchase agreement (collectively, the “StrideBio Agreements”) with StrideBio, Inc.

(“StrideBio”).

Under the terms of the StrideBio Collaboration Agreement, StrideBio granted the Company exclusive worldwide licenses to develop, collaborate and commercialize StrideBio’s adeno-associated viral capsids for gene therapy with respect to multiple initial development targets (“Initial Targets”), and, at the option of the Company, additional development targets (“Additional Targets”).

In November 2019, the Company entered into a collaboration and license agreement and a stock purchase agreement (collectively, the “StrideBio Agreements”) with StrideBio, Inc.

(“StrideBio”), which granted the Company exclusive worldwide licenses to develop, collaborate and commercialize StrideBio’s adeno-associated viral capsids for gene therapy with respect to multiple initial development targets (“Initial Targets”), and, at the option of the Company, additional development targets (“Additional Targets”).

The Company also may be required to participate in StrideBio’s next preferred equity round of financing, subject to certain conditions.

Both the Initial Targets and the Additional Targets are comprised of targets to which the Company will have the exclusive right to perform development activities (“Sarepta Development Targets”) and targets that the two parties will jointly develop through completion of Phase 1/2 clinical trials (“Joint Development Targets”).

The Company also has the right to select additional Sarepta Development Targets and Joint Development Targets.

For each Sarepta Development Target, StrideBio is responsible for initial research activities and each party bears its own costs while the Company is responsible for all costs following transfer of responsibilities to the Company for additional development.

For each Joint Development Target, the parties will be responsible to develop a joint development plan for which the parties will share equally all costs through Phase 1/2 of clinical trials after which the Company will be solely responsible for the continued development, regulatory approval and commercialization of the target, including all related costs.

The Company and StrideBio will also form a joint steering committee to oversee the collaboration activities.

As a result of execution of the StrideBio Agreements, the Company recognized an up-front expense of $ 46.9 million, consisting of a cash payment of $ 17.5 million and 301,980 shares of the Company’s common stock delivered to StrideBio equal to $ 29.4 million.

For Sarepta Development Targets and Joint Development Targets, respectively, the Company may be liable for up to $ 450.0 million and $ 835.0 million in development, regulatory and sales milestone payments per target.

Furthermore, the Company may be obligated to pay StrideBio up to $ 42.5 million in additional fees when and if Additional Targets are selected.

Additionally, upon commercialization, the Company may be required to make tiered royalty payments based on net sales of each target.

The total up-front payment of $ 46.9 million, representing the fair value of the common shares delivered and cash, represents rights to potential future benefits associated with ongoing research and development activities that have no alternative future use.

Accordingly, this amount has been recorded as research and development expense in the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2019.

Upon signing the StrideBio Agreements, the Company made an up-front payment of $ 46.9 million, consisting of a cash payment of $ 17.5 million and 301,980 shares of the Company’s common stock delivered to StrideBio with a fair value of $ 29.4 million.

The up-front payment was recorded as research and development expense in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2019.

As of December 31, 2020, no development or regulatory milestones were deemed probable of being achieved and, accordingly, no additional expense has been recognized.

Additionally, upon commercialization, the Company may be required to make tiered royalty payments based on net sales of each target.

Myonexus Therapeutics

In May 2018, the Company entered into a Warrant to Purchase Common Stock Agreement (“Warrant Agreement”) with Myonexus Therapeutics, Inc.

(“Myonexus”), a clinical-stage gene therapy biotechnology company that was developing gene therapies for Limb-Girdle muscular dystrophies (“LGMD”).

(“Myonexus”), a clinical-stage gene therapy biotechnology company that was developing gene therapies for LGMD.

Pursuant to the terms of the Warrant Agreement, the Company made an up-front payment of $ 60.0 million to purchase an exclusive option to acquire Myonexus for $ 200.0 million plus sales-related and regulatory-related contingent payments.

During the year ended December 31, 2018, the Company recorded $ 85.0 million to research and development expense in connection with the Warrant Agreement comprised of the $ 60.0 million up-front payment, two development milestone payments totaling $ 20.0 million, and a third development milestone for $ 5.0 million was deemed probable of being achieved as of December 31, 2018.

On February 27, 2019, the Company announced that it exercised the exclusive option to acquire Myonexus.

The up-front payment, in addition to $ 25.0 million relating to development milestone payments, were recorded to research and development expense during the year ended December 31, 2018.

In February 2019, the Company announced that it exercised the exclusive option to acquire Myonexus.

The final exercise price as negotiated between the Company and Myonexus was $ 165.0 million.

In addition, the Company incurred transaction fees and other fees associated with the exercise of approximately $ 8.8 million.

The Company may also be required to make up to $ 200.0 million in additional payments to selling shareholders of Myonexus based on the achievement of certain sales- and regulatory-related milestones.

The acquisition closed on April 4, 2019 .

As a result of the acquisition, the Company added five LGMD gene therapy programs, including MYO-101, MYO-102 and MYO-201 that are currently in Phase 1/2 clinical trials, to its research and development portfolio.

The acquisition closed in April 2019.

The acquisition of Myonexus has been accounted for as an asset acquisition as substantially all of the fair value of the gross assets acquired is concentrated in a group of similar identifiable assets (the five LGMD gene therapy programs).

Additionally, the Company assessed whether any of the contingent payments met the definition of a derivative under ASC 815 and, therefore, should be accounted for as contingent consideration.

The Company identified that one regulatory-related milestone (not solely based on drug approval by the FDA) met the definition of a derivative.

As a result, the Company recorded a contingent consideration liability of $ 4.5 million at the acquisition date.

Any changes in the fair value of the contingent consideration liability after the acquisition date is included in the Company’s statement of operations.

This amount was estimated through a probability-weighted expected return method 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 fair value measurement.

The Company did not assume any other liabilities as a result of the acquisition.

The following table summarizes the total consideration for the asset acquisition and the value of assets acquired and liability assumed:

Consideration

(in thousands)

Purchase price

Transactions costs and other fees

Contingent consideration

Total consideration

Assets Acquired

(in thousands)

Cash and cash equivalents

In-process research and development

Total assets acquired

Liability Assumed

(in thousands)

Contingent consideration

Total liability assumed

The acquired in-process research and development asset relates to the LGMD asset group.

Due to the stage of development of this asset group, significant risk remains, and it is not yet probable that there is future economic benefit from this asset.

Absent successful clinical results and regulatory approval, there is no alternative future use associated with the LGMD asset group.

Accordingly, the value of this asset of $ 173.2 million was immediately expensed to research and development expense during the three months ended June 30, 2019.

The portion of the $ 200.0 million in contingent payments related to the sales milestone will be accrued when and if the sales milestone becomes probable of being achieved, and the related payment will be capitalized and amortized over the life of the patent.

As of December 31, 2019, the sales milestone was not probable of being achieved.

The total consideration associated with the asset acquisition was $ 178.3 million, consisting of the $165.0 million payment to the selling shareholders of Myonexus, $ 8.8 million in transaction fees associated with the exercise of the exclusive option, and $4.5 million relating to the fair value of contingent consideration (discussed further below).

Of this amount, $ 173.2 million was recorded as acquired in-process research and development expense related to the LGMD asset group in the Company’s consolidated statements of operations and comprehensive loss.

Additionally, the Company determined one regulatory-related milestone (not solely based on drug approval by the FDA) met the definition of a derivative and recorded a contingent consideration liability of $ 4.5 million on the transaction date.

The fair value of the contingent consideration liability increased to $ 49.5 million as of December 31, 2020, with the change recorded as other expense in the Company’s consolidated statements of operations and comprehensive loss.

P lease refer to Note 5, Fair Value Measurements for further information on the change in fair value of the contingent consideration liability.

Lysogene S.A.

In October 2018, the Company entered into a license and collaboration agreement to develop and commercialize LYS-SAF302, a gene therapy to treat MPS IIIA as well as an equity investment agreement with Lysogene S.A.

In October 2018, the Company entered into a license and collaboration agreement to develop and commercialize LYS-SAF302, a gene therapy to treat Mucopolysaccharidosis type IIIA (“MPS IIIA”) as well as an equity investment agreement with Lysogene S.A.

(“Lysogene”).

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Furthermore, the Company may be required to make tiered royalty payments based on net sales of the LYS-SAF302 product subsequent to its commercialization.

Under the equity investment agreement, the Company purchased 950,606 shares of common stock issued by Lysogene, representing 8 % of the outstanding equity of Lysogene at the time of the transaction.

As a result of execution of the agreements, for the year ended December 31, 2018, the Company recorded research and development expense of $ 44.8 million, consisting of $ 26.1 million related to the payment of up-front fees and $ 18.7 million related to the achievement of a development milestone.

In addition, $ 1.9 million of the total up-front fees paid was allocated to the equity investment in Lysogene and recorded as an other non-current asset.

Changes in the fair value of this equity investment are recorded to other (loss) income in the Company’s consolidated statements of operations and other comprehensive loss.

As of December 31, 2019, no additional development or regulatory milestones were deemed probable of being achieved and, accordingly, no additional expense has been recognized.

Further, t he changes in the fair value of the equity investment for the years ended December 31, 2019 and 2018 were not material.

Beginning January 1, 2020, the Company began to reimburse Lysogene for expenses incurred in connection with development activities of the MPS IIIA product candidate.

As of December 31, 2020, the Company owns 1,140,728 shares of common stock issued by Lysogene, representing approximately 7 % of the outstanding equity of Lysogene.

The Company recorded $ 3.0 million related to research and development reimbursement and $ 44.8 million related to up-front and milestone payments as research and development expense for the years ended December 31, 2020 and 2018, respectively, in the Company’s consolidated statements of operations and comprehensive loss, with no expense recognized in the year ended December 31, 2019.

As of December 31, 2020, the Company recorded $ 3.7 million of equity investment in Lysogene as an other non-current asset in the Company’s consolidated balance sheets.

Changes in the fair value of this equity investment are recorded to other expense, net in the Company’s consolidated statements of operations and other comprehensive loss.

The changes in the fair value of the equity investment for the years ended December 31, 2020, 2019 and 2018 were not material.

As of December 31, 2020, no development, regulatory or sales milestones were deemed probable of being achieved and, accordingly, no additional expenses have been recognized.

Lacerta Therapeutics

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As of December 31, 2020, no development or regulatory milestones were deemed probable of being achieved and, accordingly, no additional expense has been recognized.

The $30.0 million allocated to the Series A preferred stock investment was initially measured at cost and is classified as an other non-current asset in the accompanying consolidated balance sheets.

Changes in the carrying value of the investment are reported as a component of earnings whenever there are observable price changes in orderly transactions for identical or similar investments of Lacerta in the future.

The $30.0 million allocated to the Series A preferred stock investment was initially measured at cost and is classified within other non-current assets in the accompanying consolidated balance sheets.

Changes in the carrying value of the investment are reported as a component of earnings whenever there are triggering events that warrant impairment or observable price changes in orderly transactions for identical or similar investments of Lacerta in the future.

For the years ended December 31, 2020, 2019 and 2018, the Company did no t record any changes in carrying value of the investment as Lacerta did not issue identical or similar shares during the corresponding periods.

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Pursuant to the Nationwide License Agreement, the Company licensed exclusive worldwide rights to develop, manufacture and commercialize micro-dystrophin gene therapy product candidates.

Under the agreement, the Company made an up-front payment of $ 1.0 million to Nationwide, which was recorded as research and development expense in the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2018.

Additionally, the Company may be required to make up to $ 29.0 million in development, regulatory and sales milestone payments per micro-dystrophin product and low-single-digit royalty payments based on net sales of the micro-dystrophin products upon commercialization.

As of December 31, 2019, no development or regulatory milestones were deemed probable of being achieved and, accordingly, no additional expense has been recognized.

The Company may be required to make up to $ 29.0 million in development, regulatory and sales milestone payments per micro-dystrophin product, tiered sublicense fees and low-single-digit royalty payments based on net sales of the micro-dystrophin products upon commercialization.

For the year ended December 31, 2020, the Company recognized $ 9.5 million of research and development expense, $ 9.3 million of which related to the one-time estimated sublicense fee as a result of the Roche transaction.

As of December 31, 2020, no development or regulatory milestones were deemed probable of being achieved and, accordingly, no additional in-licensed rights or expenses have been recognized.

BioMarin Pharmaceutical, Inc.

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The royalty terms under the license agreement will expire in March 2024 in the U.S., December 2024 in the EU and no later than December 2024 in other countries.

Of the $35.0 million paid to BioMarin, $ 28.4 million was expensed as incurred and $ 6.6 million was recorded as an intangible asset, representing the fair value of the U.S.

Of the $35.0 million paid to BioMarin, $ 28.4 million was expensed as incurred during the year ended December 31, 2017 and $ 6.6 million was recorded as an intangible asset, representing the fair value of the U.S.

license to BioMarin’s intellectual property.

The intangible asset is being amortized on a straight-line basis over the remaining life of the patent and has a carrying value of $ 3.7 million as of December 31, 2020 .

The FDA approval of VYONDYS 53 in December 2019 resulted in a settlement charge to BioMarin of $ 10.0 million and has been expensed as incurred.

No regulatory or sales milestones were achieved for the years ended December 31, 2018 or 2017.

The FDA approval of VYONDYS 53 in December 2019 resulted in a settlement charge to BioMarin of $ 10.0 million and was expensed as incurred.

No additional regulatory or sales milestones were achieved for the years ended December 31, 2020, 2019 or 2018.

For the years ended December 31, 2020 , 2019, and 2018, the Company recognized royalty expense of $ 23.2 million, $ 19.4 million and $ 15.1 million, respectively.

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Additionally, the Company is required to pay a low-single-digit percentage royalty on net sales of products covered by issued patents licensed under the agreements with UWA.

Corresponding with the FDA approval of EXONDYS 51 in 2016, the Company recorded a $ 1.0 million milestone payment as an in-licensed right intangible asset in its consolidated balance sheet.

Similarly, corresponding to the milestone payments associated with the FDA approval of VYONDYS 53 in December 2019, the Company recorded a $ 0.5 million milestone payment as an in-licensed right intangible asset in its consolidated balance sheet.

Corresponding with the FDA approval of EXONDYS 51 in 2016 and VYONDYS 53 in December 2019, the Company recorded a $ 1.0 million milestone payment and a $ 0.5 million milestone payment as in-licensed right intangible assets in its consolidated balance sheets, respectively.

Both intangible assets are being amortized on a straight-line basis over the remaining life of the relevant patents and have a combined carrying value of $ 0.9 million as of December 31, 2020 .

For the year ended December 31, 2019, the Company recorded $ 3.5 million in royalty expense, which is included in cost of sales, related to agreements with UWA with no such an expense incurred in 2018 or 2017.

For the years ended December 31, 2020 and 2019, the Company recorded $ 5.7 million and $ 3.5 million in royalty expense, respectively, which is included in cost of sales, related to agreements with UWA with no such expense incurred in 2018.

As of December 31, 2020 , no other development, regulatory or sales milestones were deemed probable of being achieved and, accordingly, no additional in-licensed rights or expenses have been recognized.

Research and Option Agreements

During the year ended December 31, 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 $ 17.7 million, which was recorded as research and development expense in the accompanying consolidated statements of operations and comprehensive loss.

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 $ 237.0 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 tiered royalty payments based on the sales of the developed products upon commercialization.

As of December 31, 2020, the Company has not exercised any options nor have any research milestone payments become probable of occurring and, accordingly, no additional expenses have been recognized.

Milestone Obligations

Including the agreements discussed above, 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 December 31, 2020, the Company may be obligated to make up to $ 3.9 billion of future development, regulatory, commercial, and up-front royalty payments associated with its collaboration and license agreements.

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GAIN FROM SALE OF PRIORITY REVIEW VOUCHER

In March 2017, the Company completed a sale of its Rare Pediatric Disease Priority Review Voucher (“PRV”) to Gilead Sciences, Inc.

for $ 125.0 million, 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.

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 termination of the applicable waiting period under the Hart -Scott-Rodino Antitrust Improvements Act of 1976, as amended, in March 2020, the Company completed its sale of the PRV 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.

FAIR VALUE MEASUREMENTS

The tables below present information about the Company’s financial assets that are measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques it utilizes to determine such fair value:

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 the valuation techniques it utilizes to determine such fair value:

Fair Value Measurement as of December 31, 2020

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Money market funds

Commercial paper

Government and government agency

Corporate bonds

Strategic equity investments

Certificates of deposit

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, corporate bonds, certificates of deposit, and the Company’s strategic investment in Lysogene, a publicly traded company in France, as more fully described in Note 3, License and Collaboration Agreements .

Contingent consideration

Total liabilities

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, certificates of deposit, and the Company’s strategic investment in Lysogene, a publicly traded company in France, as more fully described in Note 3, License and Collaboration Agreements .

Certain of the government and government agency bonds and corporate bonds are publicly traded fixed income securities and are presented as cash equivalents on the consolidated balance sheets.

The Company’s assets with fair value categorized as Level 2 within the fair value hierarchy consist of commercial paper and government and government agency bonds.

These assets have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, through income-based approaches utilizing market observable data.

The Company’s assets with fair value categorized as Level 3 within the fair value hierarchy consists of a strategic investment in Series A preferred stock of Lacerta as more fully described in Note 3, License and Collaboration Agreements .

The fair value of the asset was initially based on a cost approach corroborated by the Black-Scholes option pricing model.

The fair value of the Lacerta investment was initially based on a cost approach corroborated by the Black-Scholes option pricing model.

The most significant assumptions in the option pricing model include historical volatility of similar public companies, estimated term through Lacerta’s potential exit and a risk-free rate based on certain U.S.

Treasury rates.

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 year ended December 31, 2019.

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 selling shareholders as well as to an academic institution under a separate license agreement that meet the definition on a derivative.

The investment in the private company is recorded at fair value at the time of purchase as measured by the investment cost.

At the end of each reporting period, the fair value of investments in equity securities will be adjusted if the issuer were to issue similar or identical equity securities or when there is a triggering event for impairment.

There were no changes in the fair value of the strategic investments during the year ended December 31, 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 selling shareholders as well as to certain academic institutions under separate license agreements that meet the definition of a derivative.

For more information related to Myonexus, please read Note 3, License and Collaboration Agreements .

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.

The contingent consideration liability was estimated using 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.

Significant changes which increase or decrease the probabilities of achieving the milestone or shorten or lengthen the time required to achieve the milestone would result in a corresponding increase or decrease in the fair value of the liability.

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 year ended December 31, 2019.

As of December 31, 2019, the contingent consideration was recorded as a non-current liability on the Company’s consolidated balance sheets.

The carrying amounts reported in the consolidated balance sheets for cash and cash equiva lents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments.

There were no changes transfers between Levels 1, 2 and 3 during the year ended December 31, 2020.

The following table represents a roll-forward of the fair value of Level 3 financial liabilities:

For the Year Ended

December 31, 2020

(in thousands)

Fair value at the beginning of the period

Additions of contingent consideration

Changes in estimated fair value

Fair value at the end of the period

An increase of $ 0.6 million was recorded during the year ended December 31, 2020, to account for new contingent consideration liabilities associated with new license agreements with certain academic institutions that meet the definition of a derivative.

An increase of $ 45.0 million was recorded during the year ended December 31, 2020, to account for the change in fair value of existing contingent consideration liabilities.

This change, which is recorded as a loss on contingent consideration in the Company’s consolidated statements of operations and comprehensive loss, was a result of updates made to certain inputs and assumptions impacting the probability-weighted expected cash flows, principally the probability of success of the underlying programs, the estimate of the amount of payments to be ultimately made, and the estimate of the year that the payments are expected to be made.

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments.

For fair value information related to the Company’s debt facilities, please read Note 13, Indebtedness .

CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

The following table summarizes the Company’s financial assets with maturities of equal to or less than three months from the date of purchase included in cash equivalents in the consolidated balance sheets for each of the periods indicated:

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 consolidated balance sheets for each of the periods indicated:

As of December 31,

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Government and government agency bonds

Commercial paper

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.

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Cash and money market funds

Commercial paper

Government and government agency bonds

Corporate bonds

Total cash, cash equivalents and investments

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(in thousands)

Product sales, net of discounts and allowances

Product sales receivable, net of discounts and allowances

Government contract receivables

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Manufacturing-related deposits and prepaids

Collaboration receivable

Prepaid clinical and pre-clinical expenses

Prepaid maintenance services

Leasehold improvement receivable

Prepaid insurance

Prepaid income tax

Prepaid research expenses

Prepaid income tax

Prepaid insurance

Leasehold improvement receivable

Total other current assets

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Prepaid clinical expenses

Alternative minimum tax credit

Total other non-current assets

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Leasehold improvements

Software and computer equipment

Lab equipment

Building and improvements

Software and computer equipment

Furniture and fixtures

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For the years ended December 31, 2020, 2019 and 2018, depreciation expense totaled $ 25.2 million, $ 22.8 million and $ 10.2 million, respectively.

INTANGIBLE ASSETS

INTANGIBLE ASSETS, NET

The following table summarizes the components of the Company’s intangible assets for each of the periods indicated:

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For more information about the in-licensed rights, please read Note 3, License and Collaboration Agreements .

For the years ended December 31, 2019, 2018 and 2017, the Company recorded $ 0.8 million, $ 0.9 million and $ 1.1 million, respectively, of amortization related to the in-license rights.

For the years ended

December 31, 2020 , 2019 and 2018 , the Company recorded $ 0.7 million, $ 0.8 million and $ 0.9 million, respectively, of amortization related to the in-license d rights.

Patent amortization expense was $ 0.6 million, $ 0.4 million and $ 0.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Total amortization expense was $ 1.7 million, $ 2.1 million and $ 1.7 million for the years ended December 31, 2019, 2018 and 2017, respectively.

The Company also expensed the remaining net book value of previously capitalized patents that were later abandoned of $ 0.1 million, $ 0.2 million and $ 0.1 million for the years ended December 31, 2020, 2019 and 2018, respectively, which were included in research and development expenses on the consolidated statements of operations and comprehensive loss.

Additionally, in 2018, the Company reviewed its patent portfolio and identified technology that the Company will no longer pursue.

As a result, the Company impaired these patent assets and recorded $ 3.8 million in impairment loss for the year ended December 31, 2018, which was included in research and development expense on the consolidated statement of operations and comprehensive loss.

There was no such loss recorded in the years ended December 31, 2019 and 2017.

The following table summarizes the estimated future amortization for intangible assets:

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(in thousands)

Product revenue related reserves

Accrued employee compensation costs

Product revenue related reserves

Accrued contract manufacturing costs

Accrued milestone expense

Accrued clinical and pre-clinical costs

Accrued professional fees

Accrued collaboration cost-sharing

Accrued milestone expense

Accrued royalties

Accrued property and equipment

Accrued collaboration cost-sharing

Accrued interest expense

Total accrued expenses

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The 2024 Notes were issued at face value and bear interest at the rate of 1.50 % per annum, payable semi-annually in cash on each May 15 and November 15, commencing on May 15, 2018.

The 2024 Notes contain customary covenants and events of default, occurrence of which will permits the certain holders to accelerate all outstanding obligations, including principal and interest.

The 2024 Notes contain customary covenants and events of default, occurrence of which permits the certain holders to accelerate all outstanding obligations, including principal and interest.

Upon conversion, the Company may pay cash, shares of its common stock or a combination of cash and stock, as determined by the Company in its discretion.

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The Company paid $ 50.9 million for these capped calls transactions, which was recorded as additional paid-in capital.

Term Loan s and Revolving Line of Credit

December 2019 Term Loan

On December 13, 2019, the Company entered into a loan agreement (the “Loan Agreement”) which provides a term loan (“December 2019 Term Loan”) of $ 500.0 million with Biopharma Credit PLC and Biopharma Credit Investments V (Master) LP (collectively, the “Lenders”).

The 2019 Term Loan has two tranches:

A and B, each of which has a loan amount of $ 250.0 million.

On December 20, 2019, Sarepta drew down tranche A of the 2019 Term Loan and has the option of draw down tranche B of the loan no later than December 31, 2020, subject to certain conditions.

The December 2019 Term Loan matures on December 20, 2023 , when the principal amount of the loan will become due.

Borrowings under the Loan Agreement bore interest at a rate per annum equal to 8.5 %, which shall be payable quarterly in arrears.

The Company is also required to pay the Lenders (1) a fee of 1.75 % of the amounts drawn under both tranche A and tranche B due on closing (if and when drawn down), (2) a fee of 2.0 % of principal amount on the December 2019 Term Loan maturity date or prepayment amount on each prepayment date and (3) certain out-of-pocket expenses incurred by the Lenders.

On December 13, 2019, the Company entered into a loan agreement (the “Credit Agreement”) which provides a term loan (“December 2019 Term Loan”) of $ 500.0 million with Biopharma Credit PLC and Biopharma Credit Investments V (Master) LP (collectively, the “Lenders”).

The December 2019 Term Loan has two tranches:

A and B, each of which had an initial loan amount of $ 250.0 million, prior to the Amendment.

On December 20, 2019, the Company drew down tranche A of the December 2019 Term Loan and had the option to draw down tranche B of the loan no later than December 31, 2020, subject to certain conditions.

On September 24, 2020, the Company entered into a first amendment to Credit Agreement (the “Amendment”).

The Amendment increased the aggregate principal amount of tranche B of the December 2019 Term Loan from $250.0 million to $ 300.0 million and revised certain fees.

On November 2, 2020, the Company drew down tranche B of the December 2019 Term Loan.

Tranche A and B of the December 2019 Term Loan matures on December 20, 2023 and December 31, 2024 , respectively, when the principal amount of the loan will become due.

Borrowings under the Credit Agreement bear interest at a rate per annum equal to 8.5 %, which shall be payable quarterly in arrears.

The Company is also required to pay the Lenders (1) a fee of 1.75 % of the amounts drawn under tranche A of the December 2019 Term Loan due on the date tranche A is drawn, which was paid in December 2019, (2) a fee of 2.95 % of the amounts drawn under tranche B of the December 2019 Term Loan due on the date tranche B is drawn, which was paid in November 2020, (3) a fee of 2.00 % of principal amount on the December 2019 Term Loan maturity dates or prepayment amount on each prepayment date and (4) certain out-of-pocket expenses incurred by the Lenders.

The Company may voluntarily prepay, in whole or in part, the outstanding balance under the December 2019 Term Loan at any time after the tranche A closing date.

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(1) an amount equal to the sum of all interest that would have been accrued and payable from the prepayment date through December 20, 2021 (“Makewhole Amount”), and (2) an amount equal to 1.0 % to 2.0 % of the prepayment amount depending on the date of the prepayment (“Prepayment Premium”).

The Loan Agreement contains customary affirmative and negative covenants as well as events of default, the occurrence of which would permit the Lenders to accelerate the payment of all outstanding obligations, including the payment of the Makewhole Amount and Prepayment Premium.

As of December 31, 2019, the Company recorded a debt discount of $ 9.4 million and debt issuance costs of $ 0.7 million, both of which are being treated as deduction to the carrying value of the December 2019 Term Loan and amortized as interest expense over the term of the loan based on an effective interest method.

The debt discount of $9.4 million is inclusive of (1) the initial fee of 1.75 % payable to the Lenders and (2) the 2.0 % fee payable to the Lenders at maturity or prepayment of the December 2019 Term Loan.

This amount is recorded within other long-term liabilities in the Company’s consolidated balance sheets.

After certain debt discounts and debt issuance costs, the Company received net proceeds of $ 244.9 million.

July 2017 Term Loan and Revolving Line of Credit

In July 2017, the Company entered into an amended and restated credit agreement (the “Amended and Restated Credit and Security Agreement”) with MidCap Financial Trust (“MidCap”) which provided a term loan of $ 60.0 million, bearing interest at a rate of 6.25 %, plus the one-month London Interbank Offered Rate (“LIBOR”).

In addition, in July 2017, the Company entered into a revolving credit and security agreement (the “Revolving Credit Agreement”) with MidCap which provided an aggregate revolving loan commitment of $ 40.0 million, bearing interest at a rate of 3.95 %, plus the one-month LIBOR.

In September 2018, the Company terminated both the Amended and Restated Credit and Security Agreement and the Revolving Credit Agreement with MidCap and paid off all amounts due thereunder, including any accrued and unpaid interest.

As a result, the Company recorded a debt extinguishment loss of $ 2.3 million primarily related to the write-off of unamortized debt issuance costs and prepayment fees.

As of December 31, 2019, the Company recorded approximately $ 681.9 million as long-term debt on the consolidated balance sheets.

The Credit Agreement contains customary affirmative and negative covenants as well as events of default, the occurrence of which would permit the Lenders to accelerate the payment of all outstanding obligations, including the payment of the Makewhole Amount and Prepayment Premium.

Upon draw-down of tranche A, the Company received net proceeds of $ 244.9 million for tranche A, net of a debt discount of $ 9.4 million relating to fees payable to the Lenders, $ 5.0 million of which is expected to be paid on December 20, 2023, and debt issuance costs of $ 0.7 million, both of which are being treated as a reduction to the carrying value of tranche A of the December 2019 Term Loan and amortized as interest expense over the term of the loan based on an effective interest method.

Upon draw-down of tranche B, the company received net proceeds of $ 291.1 million, net of a debt discount of $ 14.9 million relating to fees payable to the Lenders, $ 6.0 million of which is expected to be paid on December 31, 2024, and debt issuance costs of

less than $ 0.1 million, both of which are being treated as a reduction to the carrying value of tranche B of the December 2019 Term Loan and amortized as interest expense over the term of the loan based on an effective interest method.

As of December 31, 2020, the Company recorded approximately $ 992.5 million as long-term debt on the its consolidated balance sheets.

For the years ended December 31, 2020, 2019 and 2018, the Company recorded $ 59.9 million, $ 30.7 million and $ 33.7 million of interest expense, respectively.

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The fair value of the 2024 Notes is based on open market trades and is classified as level 1 in the fair value hierarchy.

The fair value of the December 2019 Term Loan, approximating its principal amount due to the close proximity of the reporting date and the tranche A close date, is classified as level 2 in the fair value hierarchy as it is based on market observable inputs.

The fair value of the December 2019 Term Loan, approximating its face value, is classified as level 2 in the fair value hierarchy as it is based on market observable inputs.

The following table summarizes the total gross payments due under the Company’s debt arrangements:

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Total payments

In February 2020, the Company issued approximately 2.5 million shares of common stock with a fair value of $ 312.1 million, net of direct transaction fees of $ 4.3 million as part of the Roche transaction (see Note 3, License and Collaboration Agreements ).

In November 2019, the Company issued approximated 0.3 million shares of common stock with a fair value of $ 29.4 million as part of the up-front consideration to StrideBio (see Note 3, License and Collaboration Agreements ).

In March 2019, the Company sold approximately 2.6 million shares of common stock through an underwritten public offering.

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The Company received net proceeds of approximately $ 365.4 million from the offering, net of commission and offering expenses of approximately $ 0.3 million.

In November 2018, the Company sold approximately 4.1 million shares of common stock through an underwritten public offering, including 0.3 million shares sold to the underwriters.

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The Company received net proceeds of approximately $ 513.4 million from the offering, net of commission and offering expenses of approximately $ 24.6 million.

In July 2017, the Company sold approximately 8.8 million shares of common stock through an underwritten public offering, including 1.2 million shares sold to the underwriters.

The offering price was $ 42.50 per share.

The Company received net proceeds of approximately $ 354.0 million from the offering, net of commission and offering expenses of approximately $ 20.0 million.

STOCK-BASED COMPENSATION

In June 2011, the Company’s stockholders approved the 2011 Equity Incentive Plan (“2011 Plan”).

The 2011 Plan, which as amended authorized 16.0 million shares of common stock to be issued, allowed for the grant of stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance shares and performance units.

During 2018, the 2011 Plan was merged into the 2018 Plan (defined below).

As a result, there were no shares of common stock remaining available for future grant under the 2011 Plan.

In June 2013, the Company’s stockholders approved the 2013 Employee Stock Purchase Plan (“ESPP”) with approximately 0.3 million shares of common stock available to be issued.

In June 2016 and 2019, the Company’s stockholders approved additional approximately 0.3 million and 0.5 million shares, respectively, of common stock available to be issued to be added to the 2013 ESPP.

In June 2013, the Company’s stockholders approved the 2013 Employee Stock Purchase Plan (the “2013 ESPP”) which authorized 0.3 million shares of common stock available to be issued.

In June 2016 and 2019, the Company’s stockholders approved an additional 0.3 million and 0.5 million shares, respectively, of common stock available for issuance under the 2013 ESPP.

As of December 31, 2020, 0.5 million shares of common stock remain available for future grant under the 2013 ESPP.

In September 2014, the Company initiated the 2014 Employment Commencement Incentive Plan (“2014 Plan”) with approximately 0.6 million shares of common stock available to be issued.

In October 2015, June 2017 and July 2018, the 2014 Plan was increased by 1.0 million, 3.8 million and 1.2 million shares of common stock available to be issued, respectively.

As of December 31, 2019, 0.6 million shares of common stock remain available for future grant under the 2014 Plan.

In June 2018, the Company’s stockholders approved the 2018 Equity Incentive Plan (“2018 Plan”).

In September 2014, the Company initiated the 2014 Employment Commencement Incentive Plan (the “2014 Plan”).

The 2014 Plan, which authorized 0.6 million shares of common stock to be issued and allows for the grant of stock options, SARs, RSAs, RSUs, performance shares and performance units.

As of December 31, 2020, an additional 7.0 million shares have been added to and 1.4 million shares of common stock remain available for future grant under the 2014 Plan.

In June 2018, the Company’s stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”).

The 2018 Plan, which authorized 2.9 million shares of common stock to be issued, allows for the grant of stock options, SARs, RSAs, RSUs, performance shares and performance units.

The 2011 Plan was merged into the 2018 Plan and, as a result, all remaining shares in the 2011 Plan were transferred into the 2018 Plan.

As of December 31, 2019, 3.4 million shares of common stock remain available for future grant under the 2018 Plan.

In June 2020, an additional 3.8 million shares of common stock were approved by the Company’s stockholders and added to the 2018 Plan.

Together with the roll-over shares from the Company’s 2011 Equity Incentive Plan, 5.8 million shares of common stock remain available for future grant under the 2018 Plan as of December 31, 2020.

Stock Options

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Expected term (3)

4.2 - 4.8 years

Expected volatility (4)

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Grants outstanding at beginning of

Expired and forfeited

Cancelled and forfeited

Grants outstanding at end of the period

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end of the period

Includes 3,300,000 options with service and market conditions granted to the Company’s CEO.

These options have a five-year cliff vesting schedule.

The fair value of $ 13.48 for these options was determined by a lattice model with Monte Carlo simulations.

The weighted-average grant date fair value per share of stock options granted during the years ended December 31, 2020, 2019 and 2018 was $ 61.38 , $ 70.93 and $ 44.66 , respectively.

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Aggregate intrinsic value of stock options

For the years ended December 31, 2019, 2018 and 2017, the Company has recognized approximately $ 0.1 million, $ 0.2 million and $ 0.9 million in stock-based compensation expense related to the options with performance-based criteria, respectively.

As of December 31, 2020, stock options with performance-based criteria were fully vested.

Included in the grants outstanding at December 31, 2020 were 3,300,000 options with service and market conditions granted to the Company’s CEO, which have a five-year cliff vesting schedule and a grant date fair value of $ 13.48 determined by a lattice model with Monte Carlo simulations.

These options have an exercise price of $ 34.65 .

For the years ended December 31, 2020, 2019 and 2018, the Company has recognized approximately less than $ 0.1 million, $ 0.1 million and $ 0.2 million in stock-based compensation expense related to these stock options, respectively.

Restricted Stock Awards

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Grants outstanding at end of the period

In September 2016, the Company granted certain executives RSAs with a performance conditions relating to certain sales targets.

If the sales targets are achieved within the required time frame, the number of RSAs may be increased from 71,925 to 89,906 shares.

In December 2017, the Company modified the expiration date of these RSAs from June 30, 2018 to January 1, 2019 .

As a result of this modification, the fair value per RSA was changed from $ 48.94 to $ 54.29 .

Through December 31, 2017, the Company had no t recorded any stock-based compensation expense associated with these awards as the achievement of the performance conditions was not deemed probable.

As of December 31, 2018, the first sales target related to these RSAs was achieved and, accordingly, the Company recognized approximately $ 3.3 million of stock-based compensation expense during the year ended December 31, 2018.

The second target was not achieved and the shares related to this target were subsequently cancelled and no expense was recognized.

Restricted Stock Units

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As of December 31, 2019, there were no RSUs with performance conditions remaining to be vested.

For the years ended December 31, 2019, 2018 and 2017, the Company recognized approximately $ 0.5 million, $ 0.2 million and $ 2.9 million of stock-based compensation expense, respectively.

Stock Appreciation Rights

The Company issues SARs on the same terms as options granted to employees.

The grant date fair value of the SARs is determined using the same valuation assumptions as for stock options described above.

Stock-based compensation expense is recognized on a straight-line basis over the vesting period of the SARs.

The following table summarizes the Company’s SAR activity for each of the periods indicated:

For the Year Ended December 31,

Grants outstanding at beginning of the

Grants outstanding at end of the period

Grants exercisable at end of the period

Grants vested and expected to vest at

end of the period

For the years ended December 31, 2019 and 2018, the Company recognized approximately $ 0.5 million and $ 0.2 million of stock-based compensation expense, respectively.

2013 Employee Stock Purchase Plan

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The purchase price is equal to 85 % of the lower of the closing price of the Company’s common stock on the first business day and the last business day of the relevant purchase period.

The 24 -month offering period will end between February 29, 2020 and August 31, 2021 .

The 24 -month offering period will end between August 31, 2021 and August 31, 2022 .

The following table summarizes the Company’s ESPP activity for each of the periods indicated:

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For the years ended December 31, 2020, 2019 and 2018, total stock-based compensation expense was $ 108.1 million, $ 78.6 million and $ 50.1 million, respectively.

Included in the amounts for the year ended December 31, 2017 is $ 2.1 million of stock-based compensation expense incurred in connection with the resignation of the Company’s former CEO.

The following table summarizes stock-based compensation expense by function included within the consolidated statements of operations and comprehensive loss:

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The expense is expected to be recognized over a weighted-average period of approximately 2 years.

Of this amount, $ 109.5 million relates to options with service conditions only, $ 22.1 million relates to awards with service and market conditions, less than $ 0.1 million relates to awards with performance conditions, and the remaining $ 49.5 million related to restricted stock awards or restricted stock units with service conditions only.

Of this amount, $ 107.4 million relates to options with service conditions only, $ 13.2 million relates to awards with service and market conditions, and the remaining $ 69.2 million related to restricted stock awards or restricted stock units with service conditions only.

The Company sponsors a 401(k) Plan (“the Plan”) in the U.S.

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Expense related to the Plan totaled $ 5.3 million, $ 3.4 million and $ 2.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

OTHER (LOSS) INCOME

The following table summarizes other income and loss for the periods indicated:

OTHER INCOME (LOSS)

The following table summarizes other income (loss) for the periods indicated:

For the Year Ended December 31,

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Amortization of investment discount

Other expense

Gain from sale of Priority Review Voucher

Total other (loss) income

Loss on contingent consideration*

Other expense

Total other income (loss)

* The loss on contingent consideration is related to the fair value adjustment of the regulatory-related contingent payments that are accounted for as derivatives.

Please see Note 5.

Fair Value Measurements for further details.

The following table summarizes the loss before the provision for income taxes by jurisdiction for the periods indicated:

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(in thousands)

The following table summarizes provision for income taxes in the accompanying consolidated financial stat ements for the periods indicated :

The following table summarizes provision for income taxes in the accompanying consolidated financial statements for the periods indicated:

For the Year Ended December 31,

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return to provision

Impact of tax reform, net of valuation

Basis difference in subsidiary

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Of the $253.7 million in accumulated costs, $ 85.0 million relates to up-front and milestone payments as a result of the execution of the Warrant Agreement in May 2018 as well as certain development milestones being achieved or becoming probable of being achieved and $ 168.7 million relates to the exercise of the exclusive option to acquire Myonexus in February 2019.

income tax purposes, these costs are considered to be an outside investment in the subsidiary and are not currently deductible for tax purposes.

income tax purposes, these costs are considered to be an investment in the subsidiary and are not currently deductible for tax purposes.

The permanent difference related to this acquisition is separately stated in the rate reconciliation above.

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The net change in the valuation allowance for deferred tax assets was an increase of $ 117.0 million and $ 119.5 million for the years ended December 31, 2020 and 2019, respectively.

This increase for the year ended December 31, 2019 was primarily due to the generation of federal and state net operating losses and income tax credits.

This increase for the year ended December 31, 2020 was primarily due to the generation of federal and state net operating losses, income tax credits and an increase in capitalized inventory costs.

The Company generated foreign deferred tax assets mainly consisting of net operating loss carryforwards, stock-based compensation and unrealized gain/losses.

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As such, the Company has not recorded a valuation allowance against these foreign jurisdictions.

Brazil, the Netherlands, Czech Republic, and Spain have generated deferred tax assets, which consist of net operating loss carryforwards and stock-based compensation expense.

Brazil, the Netherlands, Czech Republic and one of the entities in the United Kingdom have generated deferred tax assets, which consist of net operating loss carryforwards and stock-based compensation expense.

The Company has concluded that it is more likely than not that we will not recognize the future benefits of the deferred tax assets, and accordingly, a full valuation allowance has been recorded against these foreign deferred tax assets.

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The federal and state net operating loss carry forwards of $ 581.3 million and $ 819.9 million will expire at various dates between 2021 and 2040 .

The federal and state net operating loss carry forwards of $ 586.3 million and $ 51.3 million, respectively, can be carried forward indefinitely.

Utilization of these net operating losses could be limited under Section 382 of the Internal Revenue Code and similar state laws based on ownership changes and the value of the Company’s stock.

The federal and state net operating loss carryforwards of $ 717.0 million and $ 52.4 million, respectively, can be carried forward indefinitely.

Utilization of these net operating losses could be limited under Section 382 of the Internal Revenue Code and similar state laws based on historical or future ownership changes and the value of the Company’s stock.

Additionally, the Company has $ 111.9 million and $ 57.7 million of federal and state research and development credits, respectively, available to offset future taxable income.

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The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

It had no accrual for interest or penalties on its balance sheet at December 31, 2019 or 2018.

It had no accrual for interest or penalties on its consolidated balance sheets at December 31, 2020 or 2019.

No interest and/or penalties were recognized in 2019 or 2018.

The adoption of ASC 842 resulted in the recognition of operating lease liabilities and ROU assets of $ 60.1 million and $ 42.5 million, respectively, on the Company’s balance sheet relating to its leases for its corporate headquarters and its office and lab space on the January 1, 2019 transition date.

Further, the Company reclassified upon adoption $ 18.0 million of deferred rent which reduced the ROU assets recognized on the balance sheet, in accordance with the transition guidance.

As of December 31, 2019, operating lease assets were $ 37.9 million and operating lease liabilities were $ 55.6 million.

Amounts related to financing leases were immaterial.

The Company’s intent is to only make distributions from non-U.S.

subsidiaries in the future when they can be made at no net tax cost.

Otherwise, the Company considers all of its foreign earnings to be permanently reinvested outside of the U.S.

and has no plans to repatriate these foreign earnings to the U.S.

The Company has no material unremitted earnings from its non-U.S.

subsidiaries.

The Tax Cuts and Jobs Act created a new provision that certain income earned by foreign subsidiaries, known as global intangible low-tax income, must be included in the gross income of their U.S.

The Company has adopted a policy to account for this provision as a period cost.

The Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted in the United States on March 27, 2020.

While the CARES Act provides extensive tax changes in response to the COVID-19 pandemic, the provisions are not expected to have a significant impact on the Company’s financial results.

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.

The Company has also identified leases embedded in certain of its manufacturing and supply agreements as the Company determined that it controls the use of the facilities and related equipment therein.

For more information related to manufacturing and supply agreements with Thermo Fisher Scientific, Inc.

(“Thermo”) and Catalent, Inc.

(“Catalent”), please refer to Note 21, Commitments .

The lease on all four dedicated clean room suites at Catalent and four of the eight dedicated clean room suites at Thermo commenced during 2020, 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.

Lease expense recognized prior to regulatory approval of the related product will be classified to research and development expense.

Upon regulatory approval, lease expense will be classified to cost of inventory with the recognition in cost of sales as the sales of product occur.

The leases on the remaining four clean room suites at Thermo have not commenced as of December 31, 2020 because these clean room suites are not yet available for use by the Company.

Accordingly, cumulative payments totaling $ 52.7 million made to Thermo as of December 31, 2020 have been recorded as other assets in the accompanying 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 first half of 2021.

As of December 31, 2020, ROU assets for operating leases were $ 91.8 million and operating lease liabilities were $ 101.3 million.

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the year ended December 31, 2020:

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Total operating lease liabilities

Included in the condensed consolidated balance sheet:

Included in the consolidated balance sheet:

Current portion of lease liabilities within other current liabilities

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Total operating lease liabilities

For comparable purposes, aggregate future minimum non-cancellable commitments under leases as of December 31, 2018, are as follows:

December 31, 2018

(in thousands)

Total minimum lease payments

Excluded from the table above are obligations under manufacturing agreements with Brammer Bio MA, LLC (“Brammer”) and Paragon Bioservices, Inc.

The Company has determined that both agreements contain an embedded lease.

However, both leases have not yet commenced as of December 31, 2019, and as such, right of use assets and lease liabilities have not yet been recognized on the Company’s consolidated balance sheets.

Refer to Note 21, Commitments and Contingencies for additional details relating to these two agreements.

NET LOSS PER SHARE

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The Company has entered into long-term contractual arrangements from time to time for the provision of goods and services.

Brammer Bio MA, LLC

The Company entered into a Development, Commercial Manufacturing and Supply Agreement (the “Brammer Manufacturing Agreement”) and, subsequently, entered into the first amendment (the “Amendment”) to the Brammer Manufacturing Agreement with Brammer in June 2018 and May 2019, respectively (collectively, “Brammer Supply Agreements”).

Pursuant to the terms of the Brammer Supply Agreements, Brammer agreed to provide the Company with access to clinical and commercial manufacturing capacity for its gene therapy programs.

Under the Brammer Manufacturing Agreement, the Company will purchase product in batches from Brammer, subject to minimum and maximum annual purchase requirements.

Further, the Company:

(i) was required to make a $ 20.0 million advance payment to Brammer upon execution of the agreement in June 2018, (ii) was required to make two non-refundable payments of $ 5.0 million each to Brammer in the third and fourth quarter of 2018 to be used in the specification, selection, and procurement of the related process equipment to be utilized under the agreement, and (iii) was required to make a $ 10.0 million quarterly capacity access fee payment to Brammer throughout the term of the agreement.

As a result of the Amendment:

(i) the Company now has access to substantially all of the related facility’s capacity, subject to certain minimum and maximum volume limitations, (ii) the Company was required to make a $ 6.0 million advance payment to Brammer upon execution of the Amendment, and (iii) the quarterly capacity access fee payments due to Brammer throughout the term of the agreement increased from $ 10.0 million to $ 13.3 million, starting January 1, 2020.

However, through December 31, 2019, a reduced quarterly capacity access fee was in effect as Brammer worked towards achieving full capacity at its facility.

In addition, the application of the advance payments will reduce the quarterly capacity access fees paid through 2021.

The term of the Brammer Supply Agreements will continue for a period of six years following the first regulatory approval of a product manufactured under the agreements.

The term will automatically renew for successive two years unless the Company notifies Brammer of its intention not to renew (no less than twenty-four months prior to the expiration of the term).

The Company also has the ability to terminate the agreement prior to expiration but would be required to continue remitting capacity access fees to Brammer for up to eight additional quarters.

Upon execution of the Amendment, the Company determined that the Brammer Supply Agreements contain an embedded lease because the Company now has the right to direct the use of the facility and related equipment therein.

Further, the Company determined that it did not control the facility or related equipment during construction and, thus, the lease did not fall in the scope of “build-to-suit” accounting.

The lease has not commenced as of December 31, 2019 because of the clean room suites at the Brammer facility are not yet available for use by the Company.

Accordingly, total cumulative payments made to Brammer of $ 75.5 million have been recorded as an other non-current asset in the accompanying consolidated balance sheets and will be considered in the initial measurement of the cost of the right-of-use asset at the lease commencement date.

This amount, along with any additional quarterly access fees payable prior to the lease commencement date, will be amortized on a straight-line basis as rent expense over the term of the embedded lease, beginning on the lease commencement date, currently anticipated to occur during the first half of 2020.

Rent expense recognized prior to regulatory approval of the related product will be classified to research and development expense.

Upon regulatory approval, rent expense will be classified to cost of inventory with the recognition in cost of sales as the sales of product occur.

Paragon Bioservices, Inc.

The Company entered into a manufacturing collaboration agreement (the “Paragon Collaboration Agreement”) and, subsequently, entered into a manufacturing and supply agreement (the “Paragon Supply Agreement”) with Paragon in October 2018 and February 2019, respectively (collectively, the “Paragon Agreements”).

Pursuant to the terms of the Paragon Agreements, Paragon agreed to provide the Company with two dedicated clean room suites and an option to reserve two additional clean room suites for its gene therapy programs.

In September 2019, the Company exercised the option to gain access to the additional clean room suites.

The Paragon Agreements will expire on December 31, 2024 .

The Company has the ability to terminate the Paragon Agreements prior to expiration, subject to potential additional financial consideration.

Under the Paragon Agreements, the Company will purchase product in batches from Paragon subject to minimum annual purchase requirements during two periods:

the pre-launch period and the post-launch period.

During the pre-launch period, the Company is obligated to purchase a minimum amount of $ 4.0 million of services per quarter per clean room.

During the post-launch period, on an annual basis, the Company is obligated to purchase a minimum number of batches per clean room.

Further, the Company is required to pay Paragon:

(i) use fees of $ 1.0 million per year per clean room suite after the clean rooms are fully qualified and validated to manufacture the Company’s materials, and (ii) clean room reservation fees totaling $ 48.0 million.

Additional use fees and reservation fees are required if the Company has equipment needs beyond the basic equipment package included in the initial clean room suites.

In addition, Paragon will provide the Company with a credit of up to 100 % of the clean room use fee if certain clean room capacity utilization thresholds are met.

The Company has concluded that the Paragon Agreements contain an embedded lease as the Company has the right to direct the use of the facility and related equipment therein.

The Company also determined that it did not control the facility or related equipment during construction and, thus, the lease did not fall in the scope of “build-to-suit” accounting.

The lease has not commenced as of December 31, 2019 because the clean room suites at the Paragon facility are not yet available for use by the Company.

Accordingly, cumulative payments totaling $ 40.1 million made to Paragon have been recorded as an other non-current asset in the accompanying consolidated balance sheets and will be considered in the initial measurement of the cost of the right-of-use asset at the lease commencement date.

This amount, along with any additional payments made prior to the lease commencement date, will be amortized on a straight-line basis as rent expense over the term of the embedded lease, beginning on the lease commencement date, currently anticipated to occur in the first quarter of 2020.

Use fees associated with the clean room suites are considered contingent rental payments and will be charged to rent expense when (and if) incurred.

Rent expense recognized prior to regulatory approval of the related product will be classified to research and development expense.

Upon regulatory approval, rent expense will be classified to cost of inventory with the recognition in cost of sales as the sales of product occur.

Thermo Fisher Scientific, Inc.

The Company entered into a development, commercial manufacturing and supply agreement in June 2018 and, subsequently, entered into the first and second amendments in May 2019 and July 2020, respectively, with Thermo, formerly Brammer Bio MA, LLC (collectively, the “Thermo Supply Agreements”).

Pursuant to the terms of the Thermo Supply Agreements, the Company has access to substantially all of the related facility’s capacity for the Company’s gene therapy programs, subject to certain minimum and maximum volume limitations.

The term of the Thermo Supply Agreements will continue for a period of six years following the first regulatory approval of a product manufactured under the agreements.

The term will automatically renew for successive two years unless the Company notifies Thermo of its intention not to renew (no less than twenty-four months prior to the expiration of the term).

The Company also has the ability to terminate the agreement prior to expiration, subject to the payment of additional financial consideration.

The Company determined that the Thermo Supply Agreements contain a lease because the Company has the right to direct the use of the facility and related equipment therein .

Refer to Note 19, Leases , for further information.

Catalent, Inc.

The Company entered into a manufacturing collaboration agreement and, subsequently, entered into a manufacturing and supply agreement with Catalent, formerly Paragon Biosciences, Inc.

in October 2018 and February 2019, respectively (collectively, the “Catalent Agreements”).

Pursuant to the terms of the Catalent Agreements, Catalent agreed to provide the Company with two dedicated clean room suites and an option to reserve two additional clean room suites for its gene therapy programs, subject to certain minimum and maximum volume limitations.

In September 2019, the Company exercised the option to gain access to the two additional clean room suites.

The Catalent Agreements will expire on December 31, 2024 .

The Company has the ability to terminate the Catalent Agreements prior to expiration, subject to the payment of additional financial consideration.

The Company determined that the Catalent Agreements contain a lease because the Company has the right to direct the use of the facility and related equipment therein.

Refer to Note 19, Leases , for further information.

Aldevron, LLC

In December 2018, the Company entered into a Clinical and Commercial Supply Agreement (the “CCSA”) with Aldevron LLC (“Aldevron”) for the supply of plasmid DNA to fulfill its needs for gene therapy clinical trials and commercial supply.

Pursuant to the terms of the CCSA, Aldevron agreed to reserve a certain number of manufacturing slots (“Reserved Slots”) on a quarterly basis.

The initial term of the CCSA expired on December 31, 2019 .

The Company exercised the option to extend the CCSA to December 31, 2020 (the “2020 Option”) and has another option to extend the term of the CCSA for an additional year to December 31, 2021 (the “2021 Renewal Right”).

The Company may be required to make an additional $ 20.0 million in prepayments associated with the CCSA should the Company exercise the 2021 Renewal Right.

The prepayments will be credited back to Sarepta, until exhausted, for each batch of product delivered by Aldevron, in an amount equal to 50 % of the batch invoice amount.

The Company has determined that the CCSA does not contain an embedded lease because it does not convey the right to control the use of Aldevron’s facility or related equipment therein.

As of December 31, 2019, the Company recorded $ 22.8 million in other current assets in the accompanying balance sheets related to the prepayments made to Aldevron under the CCSA.

The Company entered into a clinical and commercial supply agreement in December 2018, as subsequently amended in June 2020, with Aldevron LLC (“Aldevron”) for the supply of plasmid DNA to fulfill its needs for gene therapy clinical trials and commercial supply (collectively, the “Aldevron Agreements”).

Pursuant to the terms of the Aldevron Agreements, Aldevron agreed to reserve a certain amount of manufacturing capacity on a quarterly basis.

In return, the Company is required to make advance payments to Aldevron related to the manufacturing capacity.

The term of the Aldevron Agreements will expire on December 31, 2026 .

The Company has the option to extend the term of the Aldevron Agreements by one year if the Company delivers a written notice of its intention to extend to Aldevron no later than June 1, 2025.

Both parties have the right to early terminate without additional penalty.

The Company has determined that the Aldevron Agreements do not contain an embedded lease because it does not convey the right to control the use of Aldevron’s facility or related equipment therein.

As of December 31, 2020 , the Company recorded $ 16.3 million in other current assets in the accompanying consolidated balance sheets related to the prepayments made to Aldevron.

The prepayments will be credited back to the Company, until exhausted, for each batch of product delivered by Aldevron, in an amount equal to 50 % of the batch invoice amount.

The gross cost of batches purchased from Aldevron since inception of the agreement have been classified as research and development expense.

In the event the Company does not expect services under the CCSA to be rendered to fully exhaust any prepayments made to Aldevron, the applicable balance will be charged to expense at the time this determination is made.

The following table presents non-cancelable contractual obligations arising from long-term contractual arrangements:

In the event the Company does not expect services under the Aldevron Agreements to be rendered to fully exhaust any prepayments made to Aldevron, the applicable balance will be charged to expense at the time this determination is made.

The following table presents non-cancelable contractual obligations arising from long-term contractual arrangements, including obligations related to leases embedded in certain supply agreements :

December 31, 2020

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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 alleges that the Defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and 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 consists 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.

Defendants’ motion to transfer the case to the United States District Court for the District of Massachusetts is pending.

On February 14, 2020, the lead plaintiff filed a Notice of Voluntary Dismissal of his claims against all Defendants and the clerk referred the Notice to the court for review and approval.

The court has taken no further action.

The Company is unable to provide an estimate of possible loss or range of possible loss.

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 asserts 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.

The Company is unable to provide an estimate of possible loss or range of possible loss.

For example, on September 15, 2020, REGENXBIO INC.

(“RegenX”) and the Trustees of the University of Pennsylvania filed a lawsuit against the Company and Sarepta Therapeutics Three, LLC (together, “Sarepta”), in the U.S.

District Court for the District of Delaware.

The plaintiffs assert patent infringement of U.S.

10,526,617 (“the ‘617 Patent”) under 35 U.S.C.§§ 271(a)-(c) based on Sarepta’s alleged direct or indirect manufacture and use of cultured host cell technology to make adeno-associated virus (“AAV”) gene therapy products, including SRP-9001.

Specifically, the Complaint essentially includes the allegation that Sarepta’s use, and the use by its contract manufacturers on its behalf, of a host cell containing a recombinant acid molecule that encodes a capsid protein having at least 95% amino acid identity to AAVrh10 infringes upon the ‘617 Patent asserted by RegenX.

Plaintiffs seek injunctive relief, a judgment of infringement, an unspecified amount of damages that is no less than a reasonable royalty, a judgment of willful infringement, attorneys’ fees and costs, and such other relief as the court deems just and proper.

On November 4, 2020, Sarepta moved to dismiss the case pursuant to Federal Rule of Civil Procedure 12(b)(6) based on the Safe Harbor provision of non-infringement contained in 35 U.S.C.

On December 16, 2020, Sarepta and RegenX both filed requests for oral argument.

The Court has not scheduled a date for the hearing.

We are unable to provide an estimate of possible loss or range of possible loss.

SUBSEQUENT EVENT

On February 14, 2020, the Company entered into an agreement to sell the rare pediatric disease PRV it received from the FDA in connection with the approval of VYONDYS 53 for consideration of $ 111.0 million.

Our third commercial product, AMONDYS 45 (casimersen) Injection (“AMONDYS 45”), was granted accelerated approval by the FDA on February 25, 2021.

AMONDYS 45 is indicated for the treatment of DMD in patients who have a confirmed mutation of the DMD gene that is amenable to exon 45 skipping.

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

On February 25, 2021, the Company entered into an agreement to sell the rare pediatric disease PRV it received from the FDA in connection with the approval of AMONDYS 53 for consideration of $ 102.0 million.

The closing of the transaction is subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary conditions.

When the transaction closes, the net proceeds will be recorded as a gain from sale of the PRV as it does not have a carrying value at the time of the sale.

The Company has evaluated subsequent events from the date of the consolidated balance sheet through the date the consolidated financial statements were issued.

The Company has evaluated subsequent events from the date of the consolidated balance sheets through the date the consolidated financial statements were issued.

FINANCIAL INFORMATION BY QUARTER (UNAUDITED)

1 unchanged sentence

(in thousands)

Products, net

Collaboration

Total revenues

3 unchanged sentences

Selling, general and administrative

Acquired in-process research and development

Settlement and license charges

Amortization of in-licensed rights

1 unchanged sentence

Operating loss

Other (loss) income:

Gain from sale on Priority Review Voucher

Loss on contingent consideration

Other expense, net

Total other (loss) income

Loss before income tax expense

5 unchanged sentences

(in thousands)

Products, net

Total revenues

3 unchanged sentences

Selling, general and administrative

Acquired in-process research and development

Settlement and license charges

Amortization of in-licensed rights

1 unchanged sentence

Operating loss

Interest expense and other, net

Other expense, net

Total other loss

Loss before income (benefit) tax expense

Income tax (benefit) expense

Loss before income tax expense

Income tax expense

Net loss per share - basic and diluted

2 unchanged sentences

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-K

Item 9A. Controls and Procedures