Sarepta Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures. Disclosure Controls and Procedures We carried out an evaluation as of the end of the period covered by this Annual Report on Form 10-K, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures pursuant to paragraph (b) of Rule 13a-15 and 15d-15 under the Exchange Act. Based on that review, the principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and (2) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. We considered these limitations during the development of our disclosure controls and procedures, and will continually reevaluate them to ensure they provide reasonable assurance that such controls and procedures are effective. -83- Internal Control over Financial Reporting Management’s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting for our Company, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that: • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in its 2013 Internal Control Integrated Framework. Based on this assessment, management has concluded that, as of December 31, 2020, our internal control over financial reporting was effective based on those criteria. The effectiveness of our internal control over financial reporting as of December 31, 2020, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears in this Annual Report on Form 10-K. Changes in Internal Control over Financial Reporting There have not been material changes in our internal control over financial reporting as defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act for the quarter ended December 31, 2020 that our certifying officers concluded materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. I tem 9B. Other Information. None. -84- PART III Item 10. Directors, Executive Officers and Corporate Governance. The information regarding our directors and executive officers required by this item will be included in either an amendment to this Annual Report on Form 10-K or in our definitive proxy statement for our 2021 annual meeting of stockholders to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference. Item 11. Executive Compensation. The information required by this item will be included in either an amendment to this Annual Report on Form 10-K or in our definitive proxy statement for our 2021 annual meeting of stockholders to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . The information required by this item will be included in either an amendment to this Annual Report on Form 10-K or in our definitive proxy statement for our 2021 annual meeting of stockholders to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item will be included in either an amendment to this Annual Report on Form 10-K or in our definitive proxy statement for our 2021 annual meeting of stockholders to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. The information required by this item will be included in either an amendment to this Annual Report on Form 10-K or in our definitive proxy statement for our 2021 annual meeting of stockholders to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference. -85- PART IV Item 15. Exhibits, Financial Statement Schedules. (a) The following documents are filed as part of this Annual Report on Form 10-K: (1) Financial Statements The following consolidated financial statements of the Company and the Report of KPMG LLP, Independent Registered Public Accounting Firm, are included in Part IV of this Annual Report on Form 10-K on the pages indicated: Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-5 Consolidated Statements of Operations and Comprehensive Loss F-6 Consolidated Statements of Stockholders’ Equity F-7 Consolidated Statements of Cash Flows F-8 Notes to Consolidated Financial Statements F-9 (2) Financial Statement Schedules All schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or the notes thereto. (3) Exhibits The exhibits required by Item 601 of Regulation S-K are listed in paragraph (b) below. (b) Exhibits. The following exhibits are filed herewith or are incorporated by reference to exhibits filed with the SEC: Exhibit Number Description Incorporated by Reference to Filings Indicated Form File No. Exhibit Filing Date Provided Herewith 2.1 Agreement and Plan of Merger dated June 6, 2013 between Sarepta Therapeutics, Inc., a Delaware corporation, and Sarepta Therapeutics, Inc., an Oregon corporation. 8-K12B 001-14895 2.1 6/6/13 2.2* Warrant to Purchase Common Stock of Myonexus Therapeutics, Inc., issued by Myonexus Therapeutics, Inc. to Sarepta Therapeutics, Inc., dated as of May 3, 2018. 10-Q 001-14895 2.1 8/8/18 3.1 Amended and Restated Certificate of Incorporation. 8-K12B 001-14895 3.1 6/6/13 3.2 Amendment to the Amended and Restated Certificate of Incorporation. 8-K 001-14895 3.1 6/30/15 3.3 Amended and Restated Bylaws. 8-K 001-14895 3.1 9/25/14 3.4 Amendment No. 1 to the Amended and Restated Bylaws. 8-K 001-14895 3.1 1/13/20 3.5 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sarepta Therapeutics, Inc. 8-K 001-14895 3.1 6/8/2020 4.1 Form of Specimen Certificate for Common Stock. 10-Q 001-14895 4.1 8/8/13 4.2 Indenture, dated as of November 14, 2017, by and between Sarepta Therapeutics, Inc. and U. S. Bank National Association (including the form of the 1.50% Convertible Senior Note due 2024). 8-K 001-14895 4.1 11/14/17 4.3 Form of Note (included in Exhibit 4.2) 8-K 001-14895 4.1 11/14/17 4.4 Description of Registered Securities 10-K 001-14895 4.4 2/26/20 -86- Exhibit Number Description Incorporated by Reference to Filings Indicated Form File No. Exhibit Filing Date Provided Herewith 10.1† AVI BioPharma, Inc. 2002 Equity Incentive Plan. Schedule 14A 001-14895 Appendix A 4/11/02 10.2† Sarepta Therapeutics, Inc. Amended and Restated 2011 Equity Incentive Plan. 8-K 001-14895 10.1 7/1/16 10.3† Form of Stock Option Award Agreement under the Amended and Restated 2011 Equity Incentive Plan. 10-K 001-14895 10.13 2/28/17 10.4† Form of Restricted Stock Agreement under the Amended and Restated 2011 Equity Incentive Plan. 10-K 001-14895 10.14 2/28/17 10.5† Form of Restricted Stock Unit Award Agreement under 2011 Equity Incentive Plan. 10-K 001-14895 10.17 2/28/17 10.6† Form of Stock Appreciate Right Award Agreement under the 2011 Equity Incentive Plan. 10-K 001-14895 10.18 2/28/17 10.7† Sarepta Therapeutics, Inc. Amended and Restated 2013 Employee Stock Purchase Plan. 8-K 001-14895 10.2 7/1/16 10.8† Offer Letter dated October 23, 2013 by and between Sarepta Therapeutics, Inc. and Sandesh Mahatme. 10-K 001-14895 10.24 3/3/14 10.9† Offer Letter dated October 23, 2012 by and between Sarepta Therapeutics, Inc. and David Tyronne Howton. 10-K 001-14895 10.25 3/3/14 10.10† Sarepta Therapeutics, Inc. 2014 Employment Commencement Incentive Plan, as amended. S-8 001-14895 4.4 2/25/16 10.11 Form of Stock Option Award Agreement under 2014 Employment Commencement Incentive Plan 10-K 001-14895 10.28 3/3/14 10.12* Amended and Restated Exclusive License Agreement by and among The University of Western Australia, Sarepta Therapeutics, Inc., and Sarepta International CV dated April 10, 2013. 10-Q 001-14895 10.1 5/9/13 10.13* First Amendment to License Agreement by and among The University of Western Australia, Sarepta Therapeutics, Inc., and Sarepta International CV dated June 19, 2016. 10-Q 001-14895 10.1 8/9/16 10.14 Lease Agreement dated June 25, 2013 by and between Sarepta Therapeutics, Inc. and ARE-MA Region No. 38, LLC. 8-K 001-14895 10.1 7/1/13 10.15† Amendment No. 1 to the Sarepta Therapeutics, Inc. Amended and Restated 2011 Equity Incentive Plan 8-K 001-14895 10.1 6/30/15 10.16 Asset Purchase Agreement dated February 20, 2017 by and between Sarepta Therapeutics Inc. and Gilead Sciences, Inc. 10-Q 001-14895 10.1 5/4/17 10.17† Employment Agreement, dated as of June 26, 2017, between Sarepta Therapeutics, Inc. and Douglas S. Ingram 8-K 001-14895 10.1 6/28/17 10.18† Change in Control and Severance Agreement by and between Douglas S. Ingram and Sarepta Therapeutics, Inc., effective June 26, 2017 8-K 001-14895 10.2 6/28/17 10.19† Amendment No. 1 to the Sarepta Therapeutics, Inc. 2014 Employment Commencement Incentive Plan 8-K 001-14895 10.3 6/28/17 10.20† Restricted Stock Agreement under the 2014 Employment Commencement Incentive Plan 8-K 001-14895 10.4 6/28/17 10.21† Performance Stock Option Award Agreement under the 2014 Employment Commencement Incentive Plan 8-K 001-14895 10.5 6/28/17 -87- Exhibit Number Description Incorporated by Reference to Filings Indicated Form File No. Exhibit Filing Date Provided Herewith 10.22* Settlement Agreement between Sarepta Therapeutics, Inc., Sarepta International C.V. and The University of Western Australia on the one hand, and BioMarin Leiden Holding BV, BioMarin Nederlands BV and BioMarin Technologies BV on the other hand dated July 17, 2017 10-Q 001-14895 10.7 8/3/17 10.23* License Agreement between Sarepta Therapeutics, Inc. and Sarepta International C.V. on the one hand and BioMarin Leiden Holding BV, BioMarin Nederlands BV and BioMarin Technologies BV on the other hand dated July 17, 2017 10-Q 001-14895 10.8 8/3/17 10.24 Base Call Option Transaction Confirmation, dated as of November 8, 2017, between Sarepta Therapeutics, Inc. and JPMorgan Chase Bank, National Association, London Branch. 8-K 001-14895 10.1 11/14/17 10.25 Base Call Option Transaction Confirmation, dated as of November 8, 2017, between Sarepta Therapeutics, Inc. and Goldman Sachs & Co. LLC. 8-K 001-14895 10.2 11/14/17 10.26 Additional Call Option Transaction Confirmation, dated as of November 9, 2017, between Sarepta Therapeutics, Inc. and JPMorgan Chase Bank, National Association, London Branch 8-K 001-14895 10.3 11/14/17 10.27 Additional Call Option Transaction Confirmation, dated as of November 9, 2017, between Sarepta Therapeutics, Inc. and Goldman Sachs & Co. LLC 8-K 001-14895 10.4 11/14/17 10.28 Seventh Amendment to a Lease Agreement between the Company and ARE-MA Region No. 38, LLC dated April 27, 2018 10-Q 001-14895 10.4 5/3/18 10.29† Sarepta Therapeutics, Inc. 2018 Equity Incentive Plan 10-Q 001-14895 10.1 8/8/18 10.30† Employment Agreement between Sarepta Therapeutics, Inc. and Gilmore O’Neill, M.D., effective as of June 7, 2018 10-Q 001-14895 10.2 8/8/18 10.31† Change in Control and Severance Agreement between Sarepta Therapeutics, Inc. and Gilmore O’Neill, M.D., effective as of June 7, 2018 10-Q 001-14895 10.3 8/8/18 10.32† Letter Agreement between Douglas S. Ingram and Sarepta Therapeutics, Inc. dated June 26, 2018 10-Q 001-14895 10.4 8/8/18 10.33† Form of Restricted Stock Unit Award Agreement under Sarepta Therapeutics, Inc. 2014 Employment Commencement Incentive Plan 10-Q 001-14895 10.5 8/8/18 10.34† Amendment No. 2 to the Sarepta Therapeutics, Inc. 2014 Employment Commencement Incentive Plan 10-Q 001-14895 10.6 8/8/18 10.35† Form of Stock Option Award Agreement under Sarepta Therapeutics, Inc. 2018 Equity Incentive Plan 10-Q 001-14895 10.1 10/31/18 10.36† Form of Restricted Stock Award Agreement under Sarepta Therapeutics, Inc. 2018 Equity Incentive Plan 10-Q 001-14895 10.2 10/31/18 10.37† Form of Restricted Stock Unit Award Agreement under Sarepta Therapeutics, Inc. 2018 Equity Incentive Plan 10-Q 001-14895 10.3 10/31/18 10.38† Form of Stock Appreciation Right Award Agreement under Sarepta Therapeutics, Inc. 2018 Equity Incentive Plan 10-Q 001-14895 10.4 10/31/18 10.39† Amendment to Restricted Stock Award Agreement between Douglas S. Ingram and Sarepta Therapeutics, Inc. dated December 17, 2018 10-K 001-14895 10.75 2/28/19 -88- Exhibit Number Description Incorporated by Reference to Filings Indicated Form File No. Exhibit Filing Date Provided Herewith 10.40^ Amendment No. 1 to License Agreement between Sarepta Therapeutics, Inc. and ST International Holdings Two, Inc. on the one hand and BioMarin Leiden Holding BV, BioMarin Nederlands BV and BioMarin Technologies BV on the other hand 10-Q 001-14895 10.1 8/7/19 10.41† Sub-Plan for Japan under the Sarepta Therapeutics, Inc. 2018 Equity Incentive Plan 10-Q 001-14895 10.2 8/7/19 10.42† Sub-Plan for Japan under the Sarepta Therapeutics, Inc. 2014 Employment Commencement Incentive Plan 10-Q 001-14895 10.3 8/7/19 10.43† Amendment No. 1 to the Sarepta Therapeutics, Inc. Amended and Restated 2013 Employment Stock Purchase Plan (as Amended and Restated on June 27, 2016) 10-Q 001-14895 10.4 8/7/19 10.44 Letter Agreement between Sarepta Therapeutics, Inc. and Myonexus Therapeutics, Inc. dated February 26, 2019 10-Q 001-14895 10.1 5/8/19 10.45† Form of Executive Vice President Severance Letter Agreement 10-Q 001-14895 10.2 5/8/19 10.46† Form of Executive Vice President Change in Control and Severance Agreement 10-Q 001-14895 10.3 5/8/19 10.47^ License, Collaboration, and Option Agreement between Sarepta Therapeutics Three, LLC and F. Hoffman-La Roche Ltd dated December 21, 2019 10-K 001-14895 10.51 2/26/20 10.48 Stock Purchase Agreement between Sarepta Therapeutics, Inc. and Roche Finance Ltd dated December 21, 2019 10-K 001-14895 10.52 2/26/20 10.49 Loan Agreement among Sarepta Therapeutics, Inc., BioPharma Credit PLC and BioPharma Credit Investments V (Master) LP dated December 13, 2019 10-K 001-14895 10.53 2/26/20 10.50 Guaranty and Security Agreement between Sarepta Therapeutics, Inc. and BioPharma Credit PLC dated December 20, 2019 10-K 001-14895 10.54 2/26/20 10.51† Director Compensation Policy 10-K 001-14895 10.55 2/26/20 10.52† Offer Letter dated November 11, 2019 by and between Sarepta Therapeutics, Inc. and William F. Ciambrone 10-K 001-14895 10.56 2/26/20 10.53† Amendment to Offer Letter by and between Sarepta Therapeutics, Inc. and William F. Ciambrone 10-K 001-14895 10.57 2/26/20 10.54† Amendment No. 2 to the Sarepta Therapeutics, Inc. 2014 Employment Commencement Incentive Plan 8-K 001-14895 10.1 2/21/20 10.55† Amendment No. 1 to the Sarepta Therapeutics, Inc. 2018 Equity Incentive Plan 8-K 001-14895 10.1 6/8/2020 10.56† Separation Agreement and General Release between Sandesh Mahatme and Sarepta Therapeutics, Inc. 10-Q 001-14895 10.2 8/5/2020 10.57 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 10-Q 001-14895 10.1 11/5/2020 10.58† Separation and Consulting Agreement and General Release between David T. Howton Jr. and Sarepta Therapeutics, Inc. X 10.59† Promotion Letter dated December 14, 2020 by and between Sarepta Therapeutics, Inc. and Louise Rodino-Klapac X 10.60† Offer Letter dated April 19, 2018 by and between Sarepta Therapeutics, Inc. and Louise Rodino-Klapac X -89- Exhibit Number Description Incorporated by Reference to Filings Indicated Form File No. Exhibit Filing Date Provided Herewith 10.6 1 † Promotion Letter dated December 14, 2020 by and between Sarepta Therapeutics, Inc. and Ian M. Estepan X 10.62† Offer Letter dated by December 18, 2014 and between Sarepta Therapeutics, Inc. and Ian M. Estepan X 10.63† Offer Letter dated March 17, 2017 by and between Sarepta Therapeutics, Inc. and Joseph Bratica X 21.1 Subsidiaries of the Registrant. X 23.1 Consent of Independent Registered Public Accounting Firm. X 24.1 Power of Attorney (contained on signature page). X 31.1 Certification of the Company’s President and Chief Executive Officer, Douglas S. Ingram, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of the Company’s Executive Vice President, Chief Financial Officer, Ian Estepan, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1** Certification of the Company’s President and Chief Executive Officer, Douglas S. Ingram, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2** Certification of the Company’s Executive Vice President, Chief Financial Officer, Ian Estepan, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 101 The following financial statements from the Annual Report on Form 10-K of Sarepta Therapeutics, Inc. for the year ended December 31, 2020, formatted in Inline XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations and Comprehensive Loss; (iii) Consolidated Statements of Stockholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags. X 104 The Cover page from the Annual Report on Form 10-K of Sarepta Therapeutics, Inc for the year ended December 31, 2020, formatted in Inline XBRL. X † Indicates management contract or compensatory plan, contract or arrangement. ^ Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. * Confidential treatment has been granted for portions of this exhibit. ** Furnished herewith. This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934. Item 16. Form 10-K Summary. Not applicable. -90- SIGNATURES 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. Dated: March 1, 2021 SAREPTA THERAPEUTICS, INC. By: /s/ Douglas S. Ingram Douglas S. Ingram President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Douglas S. 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. 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 March 1, 2021: Signature Title /s/ Douglas S. Ingram President, Chief Executive Officer and Director (Principal Executive Officer) Douglas S. Ingram /s/ Ian M. Estepan Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) Ian M. Estepan /s/ M. Kathleen Behrens Chairwoman of the Board M. Kathleen Behrens, Ph.D. /s/ Richard Barry Director Richard Barry /s/ Mary Ann Gray Director Mary Ann Gray, Ph.D. /s/ John C. Martin Director John C. Martin, Ph.D. /s/ Claude Nicaise Director Claude Nicaise, MD /s/ Hans Wigzell Director Hans Wigzell, M.D., Ph.D. -91- SAREPTA THERAPEUTICS, INC. CONSOLIDATED FINANCIAL STATEMENTS Page Number Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-5 Consolidated Statements of Operations and Comprehensive Loss F-6 Consolidated Statements of Stockholders’ Equity F-7 Consolidated Statements of Cash Flows F-8 Notes to Consolidated Financial Statements F-9 F-1 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Sarepta Therapeutics, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Sarepta Therapeutics, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) . Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. F-2 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 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. 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. The estimate of expected future demand for raw materials inventory is difficult to assess and results in the application of greater auditor judgment. 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 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. We evaluated clinical progress associated with the Company’s gene therapy technologies by inspecting internal meeting minutes and interviewing research and development personnel of the Company and assessed the potential impact of those technologies on expected future demand for raw materials inventory. 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. F-3 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 /s/ KPMG LLP We have served as the Company’s auditor since 2002. Boston, Massachusetts March 1, 2021 F-4 Sarepta Therapeutics, Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts) As of December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 1,502,648 $ 835,080 Short-term investments 435,923 289,668 Accounts receivable 101,340 90,879 Inventory 231,961 171,379 Other current assets 213,324 81,907 Total current assets 2,485,196 1,468,913 Property and equipment, net 190,430 129,620 Intangible assets, net 13,628 12,497 Right of use assets 91,761 37,933 Other non-current assets 203,703 173,859 Total assets $ 2,984,718 $ 1,822,822 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 111,090 $ 68,094 Accrued expenses 193,553 185,527 Deferred revenue, current portion 89,244 3,303 Other current liabilities 22,139 7,843 Total current liabilities 416,026 264,767 Long-term debt 992,493 681,900 Lease liabilities, net of current portion 80,367 47,720 Deferred revenue, net of current portion 663,488 — Contingent consideration 50,800 5,200 Other non-current liabilities 19,785 5,048 Total liabilities 2,222,959 1,004,635 Commitments and contingencies (Note 21) Stockholders’ equity: Preferred stock, $ .0001 par value, 3,333,333 shares authorized; none issued and outstanding — — Common stock, $ .0001 par value, 198,000,000 shares authorized; 79,374,247 and 75,184,863 issued and outstanding at December 31, 2020 and 2019, respectively 8 8 Additional paid-in capital 3,609,877 3,112,130 Accumulated other comprehensive income, net of tax 3 50 Accumulated deficit ( 2,848,129 ) ( 2,294,001 ) Total stockholders’ equity 761,759 818,187 Total liabilities and stockholders’ equity $ 2,984,718 $ 1,822,822 See accompanying notes to consolidated financial statements. F-5 Sarepta Therapeutics, Inc. Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share data) For the Year Ended December 31, 2020 2019 2018 Revenues: Products, net $ 455,865 $ 380,833 $ 301,034 Collaboration 84,234 — — Total revenues 540,099 380,833 301,034 Cost and expenses: Cost of sales (excluding amortization of in-licensed rights) 63,382 56,586 34,193 Research and development 722,343 560,909 401,843 Selling, general and administrative 317,875 284,812 207,761 Acquired in-process research and development — 173,240 — Settlement and license charges — 10,000 — Amortization of in-licensed rights 662 849 865 Total cost and expenses 1,104,262 1,086,396 644,662 Operating loss ( 564,163 ) ( 705,563 ) ( 343,628 ) Other income (loss): Gain from sale of Priority Review Voucher 108,069 — — Loss on contingent consideration ( 45,000 ) — — Other expense, net ( 51,971 ) ( 8,317 ) ( 18,982 ) Total other income (loss) 11,098 ( 8,317 ) ( 18,982 ) Loss before income tax expense (benefit) ( 553,065 ) ( 713,880 ) ( 362,610 ) Income tax expense (benefit) 1,063 1,195 ( 692 ) Net loss ( 554,128 ) ( 715,075 ) ( 361,918 ) Other comprehensive loss: Unrealized (losses) gains on investments ( 47 ) 149 280 Total other comprehensive (loss) income ( 47 ) 149 280 Comprehensive loss $ ( 554,175 ) $ ( 714,926 ) $ ( 361,638 ) Net loss per share — basic and diluted $ ( 7.11 ) $ ( 9.71 ) $ ( 5.46 ) Weighted average number of shares of common stock used in computing basic and diluted net loss per share 77,956 73,615 66,250 See accompanying notes to consolidated financial statements. F-6 Sarepta Therapeutics, Inc. Consolidated Statements of Stockholders’ Equity (in thousands) Accumulated Additional Other Total Common Stock Paid-In Comprehensive Accumulated Stockholders' Shares Amount Capital (Loss) Gain Deficit Equity BALANCE AT DECEMBER 31, 2017 64,792 $ 6 $ 2,006,598 $ ( 379 ) $ ( 1,217,008 ) $ 789,217 Exercise of options for common stock 2,119 — 47,916 — — 47,916 Grant of restricted stock awards and vest of restricted stock units, net of cancellations 58 — — — — — Shares withheld for taxes ( 79 ) — ( 9,061 ) — — ( 9,061 ) Issuance of common stock for cash, net of offering costs 4,107 1 513,408 — — 513,409 Issuance of common stock under employee stock purchase plan 75 — 2,306 — — 2,306 Stock-based compensation — — 50,127 — — 50,127 Unrealized gain from available-for-sale securities — — — 280 — 280 Net loss — — — — ( 361,918 ) ( 361,918 ) BALANCE AT DECEMBER 31, 2018 71,072 7 2,611,294 ( 99 ) ( 1,578,926 ) 1,032,276 Exercise of options and stock appreciation rights for common stock 1,125 — 31,522 — — 31,522 Grant of restricted stock awards and vest of restricted stock units, net of cancellations 68 — — — — — Shares withheld for taxes ( 78 ) — ( 9,135 ) — — ( 9,135 ) Issuance of common stock for cash, net of offering costs 2,604 1 365,353 — — 365,354 Issuance of common stock for collaboration agreement 302 — 29,415 — — 29,415 Issuance of common stock under employee stock purchase plan 92 — 5,079 — — 5,079 Stock-based compensation — — 78,602 — — 78,602 Unrealized gain from available-for-sale securities — — — 149 — 149 Net loss — — — — ( 715,075 ) ( 715,075 ) BALANCE AT DECEMBER 31, 2019 75,185 8 3,112,130 50 ( 2,294,001 ) 818,187 Exercise of options for common stock 1,443 — 76,492 — — 76,492 Vest of restricted stock units/awards, net of forfeitures 159 — — — — — Shares withheld for taxes ( 37 ) — ( 6,333 ) — — ( 6,333 ) Issuance of common stock to Roche, net of issuance costs 2,522 — 312,053 — — 312,053 Issuance of common stock under employee stock purchase plan 102 — 7,465 — — 7,465 Stock-based compensation — — 108,070 — — 108,070 Unrealized (loss) from available-for-sale securities — — — ( 47 ) — ( 47 ) Net loss — — — — ( 554,128 ) ( 554,128 ) BALANCE AT DECEMBER 31, 2020 79,374 $ 8 $ 3,609,877 $ 3 $ ( 2,848,129 ) $ 761,759 See accompanying notes to consolidated financial statements. F-7 Sarepta Therapeutics, Inc. Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2020 2019 2018 Cash flows from operating activities: Net loss $ ( 554,128 ) $ ( 715,075 ) $ ( 361,918 ) Adjustments to reconcile net loss to cash flows in operating activities: Loss on contingent consideration 45,000 — — Gain from sale of Priority Review Voucher ( 108,069 ) — — Acquired in-process research and development — 173,240 — Non-cash up-front payment to StrideBio — 29,415 — Depreciation and amortization 26,911 24,500 12,245 Reduction in the carry amounts of the right of use assets 12,828 6,047 — Amortization of investment discount ( 2,186 ) ( 8,445 ) ( 7,672 ) Loss from debt extinguishment — — 2,322 Non-cash interest expense 25,454 21,444 20,190 Stock-based compensation 108,070 78,602 50,127 Other ( 470 ) 690 3,938 Changes in operating assets and liabilities, net: Net increase in accounts receivable ( 10,461 ) ( 41,835 ) ( 19,576 ) Net increase in inventory ( 60,582 ) ( 45,934 ) ( 41,840 ) Net increase in other assets ( 166,328 ) ( 102,091 ) ( 136,638 ) Net increase in deferred revenue 749,429 — — Net increase in accounts payable, accrued expenses, lease liabilities and other liabilities 41,998 122,979 90,162 Net cash provided by (used in) operating activities 107,466 ( 456,463 ) ( 388,660 ) Cash flows from investing activities: Purchase of property and equipment ( 82,202 ) ( 59,631 ) ( 61,157 ) Proceeds from sale of Priority Review Voucher 108,069 — — Purchase of available-for-sale securities ( 1,333,568 ) ( 1,193,632 ) ( 1,171,603 ) Maturity and sales of available-for-sale securities 1,189,480 1,715,626 865,813 Acquisition of Myonexus Therapeutics, Inc., net of cash acquired — ( 172,556 ) — Other ( 3,500 ) ( 3,082 ) ( 3,541 ) Net cash (used in) provided by investing activities ( 121,721 ) 286,725 ( 370,488 ) Cash flows from financing activities: Proceeds from issuance of common stock to Roche, net of offering costs 312,053 — — Proceeds from exercise of stock options and purchase of stock under the Employee Stock Purchase Program 83,957 36,601 50,222 Taxes paid related to net share settlement of equity awards ( 4,798 ) ( 4,337 ) — Proceeds from sales of common stock, net of offering costs — 365,354 513,409 Proceeds from term loans 291,150 245,625 — Repayment of July 2017 Term Loan — — ( 30,000 ) Proceeds from revolving line of credit — — 235,872 Repayment of revolving line of credit — — ( 235,954 ) Payment for debt extinguishment — — ( 2,134 ) Repayment of mortgage loans and notes payable — — ( 1,265 ) Debt issuance costs ( 39 ) ( 689 ) — Net cash provided by financing activities 682,323 642,554 530,150 Increase (decrease) in cash and cash equivalents 668,068 472,816 ( 228,998 ) Cash, cash equivalents and restricted cash: Beginning of year 843,645 370,829 599,827 End of year $ 1,511,713 $ 843,645 $ 370,829 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 1,502,648 $ 835,080 $ 370,829 Restricted cash in other assets 9,065 8,565 — Total cash, cash equivalents and restricted cash $ 1,511,713 $ 843,645 $ 370,829 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 34,418 $ 8,550 $ 11,308 Cash paid during the period for income taxes $ 2,510 $ 933 $ 1,548 Supplemental schedule of non-cash activities: Lease liabilities arising from obtaining right of use assets $ 59,327 $ — $ — Intangible assets and property and equipment included in accrued expenses $ 5,151 $ 1,309 $ 5,795 Shares withheld for tax included in accrued expenses $ 6,333 $ 4,798 $ — Accrued debt issuance costs $ 11,000 $ 5,000 $ — Reclassification of long term investments to short term investments $ — $ — $ 9,980 See accompanying notes to consolidated financial statements. F-8 Sarepta Therapeutics, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND NATURE OF BUSINESS Sarepta Therapeutics, Inc. (together with its wholly-owned subsidiaries, “Sarepta” or the “Company”) is a commercial-stage biopharmaceutical company focused on helping patients through the discovery and development of unique RNA-targeted therapeutics, gene therapy and other genetic therapeutic modalities for the treatment of rare diseases. Applying its proprietary, highly-differentiated and innovative technologies, and through collaborations with its strategic partners, the Company is developing potential therapeutic candidates for a broad range of diseases and disorders, including Duchenne muscular dystrophy (“DMD”), Limb-girdle muscular dystrophies (“LGMDs”) 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 (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. As of December 31, 2020, the Company had approximately $ 1,947.8 million of cash, cash equivalents and investments, consisting of $ 1,502.6 million of cash and cash equivalents, $ 435.9 million of short-term investments, and $ 9.3 million of restricted cash and investments. The Company believes that its balance of cash, cash equivalents and investments as of December 31, 2020 is sufficient to fund its current operational plan for at least the next twelve months, though it may pursue additional cash resources through public or private debt and equity financings, seek additional government contracts and establish collaborations with or license its technology to other companies. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS Basis of Presentation The accompanying consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”), reflect the accounts of Sarepta Therapeutics, Inc. and its wholly-owned subsidiaries. All intercompany transactions between and among its consolidated subsidiaries have been eliminated. Management has determined that the Company operates in one segment: discovering, developing, manufacturing and delivering therapies to patients with rare diseases. 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. The Company’s research and development organization is responsible for the research and discovery of new product candidates and supports development and registration efforts for potential future products. The Company’s supply chain organization manages the development of the manufacturing processes, clinical trial supply and commercial product supply. The Company’s commercial organization is responsible for commercialization of EXONDYS 51 and VYONDYS 53 in the U.S. and internationally. The Company is supported by other back-office general and administration functions. 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 The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. F-9 Fair Value Measurements The Company has certain financial assets and liabilities that are recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements: • Level 1—quoted prices for identical instruments in active markets; • Level 2—quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and • Level 3—valuations derived from valuation techniques in which one or more significant value drivers are unobservable. The 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, 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. Cash Equivalents Only investments that are highly liquid and readily convertible to cash and have original maturities of three months or less are considered cash equivalents. Investments 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 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 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 The Company’s accounts receivable primarily arise from product sales. They are generally stated at the invoiced amount and do not bear interest. Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from Medicaid rebates, governmental chargebacks including Public Health Services (“PHS”) chargebacks, prompt pay discounts, co-pay assistance and distribution fees. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if no payments are required of the Company) for PHS chargebacks, prompt pay discounts and certain distribution fees, or a current liability (if a payment is required of us), for Medicaid rebates, co-pay assistance and certain distribution fees. The accounts receivable from product sales represents receivables due from the Company’s specialty distributor and specialty pharmacies in the U.S. as well as certain distributors in the EU, Brazil, Israel and the Middle East. 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, 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. F-10 Concentration of Credit Risk 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. Three individual customers accounted for 45 %, 41 % and 9 % of accounts receivable from product sales for the year ended December 31, 2020 and 45 %, 37 % and 11 % for the year ended December 31, 2019. As of December 31, 2020 , the Company believes that such customers are of high credit quality. 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 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 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. Delivery occurs when the inventory passes quality inspection and ownership transfers to the Company. Nonrefundable advance payments for research and development activities, including production of purchased drug product, are deferred and capitalized until the goods are delivered. If the Company does not expect the goods to be delivered or services to be rendered, the advanced payment capitalized will be charged to expense. 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 their intended use. The cost of normal, recurring or periodic repairs and maintenance activities related to property and equipment are expensed as incurred. The cost for planned major maintenance activities, including the related acquisition or construction of assets, is capitalized if the repair will result in future economic benefits. Interest costs incurred during the construction period of major capital projects are capitalized until the asset is ready for its intended use, at which point the interest costs are amortized as depreciation expense over the life of the underlying asset. The Company generally depreciates the cost of its property and equipment using the straight-line method over the estimated useful lives of the respective assets, which are summarized as follows: Asset Category Useful lives Lab equipment 5 years Office equipment 5 years Manufacturing equipment 5 years Software and computer equipment 3 - 5 years Furniture and fixtures 7 years Leasehold improvements Lesser of the useful life or the term of the respective lease Land improvements 25 years Land Not depreciated Building and improvements 30 years Construction in progress Not depreciated until put into service F-11 Intangible assets The Company’s intangible assets consist of in-licensed rights, patent costs, and software licenses, which are stated in the Company’s consolidated balance sheets net of accumulated amortization and impairments, if applicable. The in-licensed rights relate to agreements with BioMarin Pharmaceutical, Inc. (“BioMarin”) and the University of Western Australia (“UWA”). The in-licensed rights are being amortized on a straight-line basis over the remaining life of the related patents because the life of the related patents reflects the expected time period that the Company will benefit from the in-licensed rights. Patent costs consist primarily of external legal costs, filing fees incurred to file patent applications and renewal fees on proprietary technology developed or licensed by the Company. Patent costs associated with applying for a patent, being issued a patent and annual renewal fees are capitalized. Costs to defend a patent and costs to invalidate a competitor’s patent or patent application are expensed as incurred. Patent costs are amortized on a straight-line basis over the shorter of the estimated economic lives or the initial term of the patents, which is generally 20 years. Impairment of Long-Lived Assets 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. If the asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Such reviews assess the fair value of the assets based upon estimates of future cash flows that the assets are expected to generate. Convertible Debt The Company separately accounts for the liability and equity components of convertible debt instruments that can be settled in cash by allocating the proceeds from issuance between the liability component and the embedded conversion option. The value of the equity component is calculated by first measuring the fair value of the liability component, using the interest rate of a similar liability that does not have a conversion feature, as of the issuance date. The difference between the proceeds from the convertible debt issuance and the amount measured as the liability component is recorded as the equity component with a corresponding discount recorded on the debt. The Company recognizes the amortization of the resulting discount as interest expense using the effective interest method. Simultaneously, the Company bought capped call options from certain counterparties to minimize the impact of potential dilution upon conversion. The premium for the capped call options was recorded as additional paid-in capital. For additional information related to the convertible debt transactions, please read Note 13, Indebtedness to the consolidated financial statements. Revenue Recognition 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 606”), the Company performs the following five steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers or provides to the customer. At contract inception, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied. The only performance obligation in the Company’s contracts with customers is to timely deliver drug products to the customer’s designated location. Product revenues The Company distributes its products principally through its customers. The customers subsequently resell the product to patients and health care providers. The Company provides no right of return to the customers except in cases of shipping error or product defect. Product revenues are recognized when the customers take control of the product, which typically occurs upon delivery to the customers. For the years ended December 31, 2020, 2019 and 2018 , the majority of the revenues recognized were generated by the specialty distributor and specialty pharmacies in the U.S. F-12 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 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. Additional details relating to variable consideration follows: • Medicaid rebates relate to the Company’s estimated obligations to states under established reimbursement arrangements. Medicaid rebate reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a liability which is included in accrued expenses. • Governmental chargebacks, including PHS chargebacks, relate to the Company’s estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices that the Company charges to wholesalers. The wholesaler charges the Company for the difference between what the wholesaler pays for the products and the ultimate selling price to the qualified healthcare providers. Chargeback reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider from the wholesaler, and the Company generally issues credits for such amounts within a few weeks of receiving notification of resale from the wholesaler. • Prompt payment discounts relate to the Company’s estimated obligations for credits to be granted to specialty pharmacies for remitting payment on their purchases within established incentive periods. Reserves for prompt payment discounts are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. • Co-pay assistance relates to financial assistance provided to qualified patients, whereby the Company may assist them with prescription drug co-payments required by the patient’s insurance provider. Reserves for co-pay assistance are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a liability which is included in accrued expenses. • Distribution fees relate to fees paid to customers in the distribution channel that provide the Company with inventory management, data and distribution services and are generally accounted for as a reduction of revenue. To the extent that the services received are distinct from the Company’s sale of products to the customers, these payments are accounted for as selling, general and administrative expenses. 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. (“Roche”). For more information, please read Note 3, Collaboration and License Agreements . At the inception of a collaboration arrangement, the Company first assesses whether the contractual arrangement is within the scope of ASC 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. F-13 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 Research and development expenses consist of costs associated with research activities as well as those with the Company’s product development efforts, conducting pre-clinical trials, clinical trials and manufacturing activities. Research and development expenses are expensed as incurred. Up-front fees and milestones paid to third parties in connection with technologies which have not reached technological feasibility and do not have an alternative future use are expensed when incurred. Direct research and development expenses associated with the Company’s programs include clinical trial site costs, clinical manufacturing costs, costs incurred for consultants and other external services, such as data management and statistical analysis support and materials and supplies used in support of clinical programs. Indirect costs of the Company’s clinical programs include salaries, stock-based compensation and an allocation of its facility and technology costs. When third-party service providers’ billing terms do not coincide with the Company’s period-end, the Company is required to make estimates of its obligations to those third parties, including clinical trial and pharmaceutical development costs, contractual services costs and costs for supply of its drug candidates, incurred in a given accounting period and record accruals at the end of the period. The Company bases its estimates on its knowledge of the research and development programs, services performed for the period, past history for related activities and the expected duration of the third-party service contract, where applicable. Stock-Based Compensation The Company’s stock-based compensation programs include stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), stock appreciation rights (“SARs”) and an employee stock purchase program (“ESPP”). The Company accounts for stock-based compensation using the fair value method. The fair values of stock options and SARs are estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The fair values of RSAs and RSUs are based on the fair market value of the Company’s common stock on the date of the grant. The fair value of stock awards, with consideration given to estimated forfeitures, is recognized as stock-based compensation expense on a straight-line basis over the vesting period of the grants. For stock awards with performance-vesting conditions, the Company does not recognize compensation expense until it is probable that the performance-vesting condition will be achieved. Under the Company’s ESPP, participating employees purchase common stock through payroll deductions. 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 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. In addition to stock options with service and performance conditions, the Company also granted its CEO options with service and market conditions. A market condition relates to the achievement of a specified price of the Company’s common stock, a specified amount of intrinsic value indexed to the Company’s common stock or a specified price of the Company’s common stock in terms of other similar equity shares. The grant date fair value for the options with service and market conditions is determined by a lattice model with Monte Carlo simulations and is recognized as stock-based compensation expense on a straight-line basis over the service period. F-14 Income Taxes The Company follows the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. It is the intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations and not to repatriate the earnings to the U.S. Accordingly, the Company does not provide for deferred taxes on the excess of the financial reporting over the tax basis in its investments in foreign subsidiaries as they are considered permanent in duration. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered and settled. A valuation allowance is recorded to reduce the net deferred tax asset to zero when it is more likely than not that the net deferred tax asset will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination. Leases Effective January 1, 2019, the Company adopted ASC Topic 842, Leases (“ASC 842”), using the modified retrospective approach and utilizing the effective date as its date of initial application, for which prior periods are presented in accordance with the previous guidance in ASC Topic 840, Leases (“ASC 840”). As a result of adopting ASC 842, the Company recorded lease right-of-use (“ROU”) assets of $ 42.5 million and lease liabilities of $ 60.1 million as of January 1, 2019, primarily related to real estate leases, based on the present value of future lease payments on the date of adoption. The difference between the ROU assets and lease liabilities was due to previously recorded net deferred rent liabilities that were reclassified into the ROU assets. There was no impact to retained earnings upon adoption of ASC 842. Amounts related to finance leases were immaterial as of adoption. 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 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. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew. The Company monitors its plans to renew its leases no less than on a quarterly basis. In addition, the Company’s lease agreements generally do not contain any residual value guarantees or restrictive covenants. 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. 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. The interest rate implicit in lease contracts is typically not readily determinable. 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. 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 ASC Topic 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, meets the definition of a derivative. The embedded derivative is F-15 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 The Company records liabilities for legal and other contingencies when information available to the Company indicates that it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Legal costs in connection with legal and other contingencies are expensed as costs are incurred. Recent Accounting Pronouncements Not yet adopted In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, “ Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, which is intended to simplify the accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard will be effective beginning January 1, 2021. The Company is currently evaluating the potential impact this ASU may have on its financial position and results of operations upon adoption. 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. 2018-13, “Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. This ASU removed the following disclosure requirements: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; and (3) the valuation processes for Level 3 fair value measurements. Additionally, this update added the following disclosure requirements: (1) the changes in unrealized gains and losses for the period included in other comprehensive income and loss for recurring Level 3 fair value measurements held at the end of the reporting period; (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 F-16 unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 was effective beginning January 1, 2020. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, “ Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract”. This ASU requires a customer in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance contained in ASC Subtopic 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. ASU No. 2018-15 was effective beginning January 1, 2020. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements . In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” . This ASU requires that credit losses for financial instruments measured at amortized cost be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard requires allowances to be recorded instead of reducing the amortized cost of the investment. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. ASU 2016-13 was effective beginning January 1, 2020. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements. In November 2018, the FASB issued ASU 2018-18, “ Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 ”. This ASU: (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. 3. LICENSE AND COLLABORATION AGREEMENTS Roche Holding A.G. On December 21, 2019, the Company entered into a license, collaboration and option agreement with Roche and a stock purchase agreement with an affiliate of Roche (collectively, the “Roche Agreement”), providing Roche with exclusive commercial rights to SRP-9001, the Company’s investigational gene therapy for DMD, outside the U.S. The Company retains all rights to SRP-9001 in the U.S. and will perform all development activities within the joint global development plan necessary to obtain and maintain regulatory approvals for SRP-9001 in the U.S. and the EU. Further: (i) research and development expenses incurred under the joint global development plan will be equally shared between the Company and Roche, (ii) Roche is solely responsible for all costs incurred in connection with any development activities (other than those within the joint global development plan) that are necessary to obtain or maintain regulatory approvals outside the U.S, and (iii) the Company will continue to be responsible for the manufacturing of clinical and commercial supplies of SRP-9001. The Company has also granted Roche options to acquire ex-U.S. rights to certain future DMD-specific programs (the “Options”) in exchange for separate option exercise payments, milestone and royalty considerations, and cost sharing provisions. The agreement became effective on February 4, 2020 (“Effective Date”). The Company received an aggregate of approximately $ 1.2 billion in cash consideration from Roche, consisting of an up-front payment and an equity investment in the Company. Additionally, the Company may receive up to $ 1.7 billion in development, regulatory and sales milestones related to SRP-9001. Upon commercialization, the Company is also eligible to receive tiered royalty payments based on net sales. The Roche Agreement is governed by a joint steering committee (“JSC”) formed by representatives from Roche and the Company. The JSC, among other activities, manages the overall strategic alignment between the parties, approves any material update to the joint global development plan and budget and oversees the operations of the subcommittees. The Company determined that the Roche Agreement represents a collaboration arrangement subject to the scope of ASC 808. To determine if the collaboration arrangement was also within the scope of ASC 606, using the unit of account guidance in ASC 606, the Company identified the distinct goods or services in the Roche Agreement and evaluated whether they were transferred to a customer. However, since the Company’s ordinary activities do not include contracting with third parties to provide them with research and development services, it was determined that the Roche Agreement was not within the scope of ASC 606. Thus, for recognition and measurement purposes, the Company must apply other GAAP, including by analogy, or if there is no appropriate analogy, apply a reasonable, rational and consistently applied accounting policy election. F-17 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. Genethon 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”). 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. 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. F-18 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. 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”). 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. 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 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. 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. 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 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). 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. F-19 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”). Under the license and collaboration agreement, in addition to the payment of up-front fees, the Company may be liable for a total of $ 102.8 million in development, regulatory and sales milestones. Furthermore, the Company may be required to make tiered royalty payments based on net sales of the LYS-SAF302 product subsequent to its commercialization. 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 In August 2018, the Company entered into a license, development and option agreement (the “Lacerta License Agreement”) and a Series A Preferred Stock Purchase Agreement (the “Stock Purchase Agreement”) with Lacerta Therapeutics, Inc. (“Lacerta”). Pursuant to the Lacerta License Agreement, the Company licensed exclusive worldwide rights to develop, manufacture and commercialize a pre-clinical Pompe product candidate (the “Pompe License”). Lacerta also granted the Company exclusive options to enter into exclusive license agreements to develop, manufacture and commercialize other gene therapy product candidates for Sanfilipo syndrome and L-Amino Acid Decarboxylase Deficiency for additional consideration of $ 42.0 million (collectively, the “Options”) when (and if) the Options are exercised. Additionally, the Company may be liable for up to approximately $ 44.0 million in development, regulatory and sales milestones associated with the Pompe License and may be required to make tiered royalty payments based on net sales of the Pompe product subsequent to its commercialization. Under the Stock Purchase Agreement, the Company purchased approximately 4.5 million shares of Series A preferred stock issued by Lacerta. Under the agreements, the Company made an up-front payment of $ 38.0 million to Lacerta, $ 30.0 million and $ 8.0 million of which were allocated to the Series A preferred stock investment and the Pompe License, respectively. The amount allocated to the Pompe License represents rights to potential future benefits associated with ongoing research and development activities that have no alternative future use. Accordingly, this amount was recorded as research and development expense in the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2018. 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 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. Nationwide Children’s Hospital In December 2016, the Company entered into an exclusive option agreement with Nationwide Children’s Hospital (“Nationwide”) from which the Company obtained an exclusive right to acquire a worldwide license of the micro-dystrophin gene therapy technology for DMD and Becker muscular dystrophy. In October 2018, the Company exercised the option and entered into a license agreement with Nationwide (“Nationwide License Agreement”). Pursuant to the Nationwide License Agreement, the Company licensed exclusive worldwide rights to develop, manufacture and commercialize micro-dystrophin gene therapy product candidates. 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. F-20 BioMarin Pharmaceutical, Inc. In July 2017, the Company and the University of Western Australia (“UWA”) entered into a settlement agreement with BioMarin Pharmaceutical, Inc. (“BioMarin”). On the same day, the Company entered into a license agreement, which was subsequently amended in April 2019, with BioMarin and Academisch Ziekenhuis Leiden (“AZL”) (collectively with the Company, UWA and BioMarin, the “Settlement Parties”). Under these agreements and amendment, BioMarin agreed to provide the Company with an exclusive license to certain intellectual property with an option to convert the exclusive license into a co-exclusive license and the Settlement Parties agreed to stop most existing efforts to continue with ongoing litigation and opposition and other administrative proceedings concerning BioMarin’s intellectual property. As a result of execution of the agreements, the Company made total up-front payments of $ 35.0 million. Additionally, the Company may be liable for up to approximately $ 65.0 million in regulatory and sales milestones for eteplirsen as well as casimersen and golodirsen. BioMarin is also eligible to receive tiered royalty payments, ranging from 4 % to 8 %, based on the net sales for the two products and product candidate. 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 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 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. As of December 31, 2020 , no other regulatory or sales milestones were deemed probable of being achieved and, accordingly, no additional in-licensed rights or expenses have been recognized. University of Western Australia In April 2013, the Company and UWA entered into an amendment to an existing exclusive license agreement relating to the treatment of DMD by inducing the skipping of certain exons. The agreement was further amended in June 2016. Under the amended agreement, the Company may be obligated to make payments to UWA totaling up to $ 26.0 million upon the achievement of certain development, regulatory and sales milestones. 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 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 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. F-21 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. For the years ended December 31, 2020, 2019 and 2018, the Company recognized approximately $ 47.3 million, $ 113.2 million and $ 142.4 million relating to certain up-front, milestone and settlement payments as research and development expense, respectively, under these agreements. The Company is also obligated to pay royalties on net sales of certain of its products related to these collaboration and license agreements. The royalty rates range from the low-single-digit to high teens percentages for both inside and outside the U.S. 4. GAIN FROM SALE OF PRIORITY REVIEW VOUCHER In February 2020, the Company entered into an agreement with Vifor (International) Ltd. to sell the rare pediatric disease Priority Review Voucher (“PRV”) it received from the FDA in connection with the approval of VYONDYS 53. Following the early 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. 5. FAIR VALUE MEASUREMENTS 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 Total Level 1 Level 2 Level 3 (in thousands) Assets Money market funds $ 629,440 $ 629,440 $ — $ — Government and government agency bonds 1,037,981 1,037,981 — — Strategic equity investments 38,799 3,699 — 35,100 Certificates of deposit 250 250 — — Total assets $ 1,706,470 $ 1,671,370 $ — $ 35,100 Liabilities Contingent consideration $ 50,800 $ — $ — $ 50,800 Total liabilities $ 50,800 $ — $ — $ 50,800 Fair Value Measurement as of December 31, 2019 Total Level 1 Level 2 Level 3 (in thousands) Assets Money market funds $ 203,410 $ 203,410 $ — $ — Government and government agency bonds 809,159 809,159 — — Strategic equity investments 31,937 1,937 — 30,000 Certificates of deposit 1,001 1,001 — — Total assets $ 1,045,507 $ 1,015,507 $ — $ 30,000 Liabilities Contingent consideration $ 5,200 $ — $ — $ 5,200 Total liabilities $ 5,200 $ — $ — $ 5,200 F-22 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 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 and a strategic investment in Series A preferred stock of another private company. 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. 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 . 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 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 $ 5,200 Additions of contingent consideration 600 Changes in estimated fair value 45,000 Fair value at the end of the period $ 50,800 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 . 6. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES The following table summarizes the Company’s financial assets with maturities of less than 90 days from the date of purchase included in cash equivalents in the consolidated balance sheets for each of the periods indicated: As of December 31, 2020 2019 (in thousands) Money market funds $ 629,440 $ 203,410 Government and government agency bonds 602,058 519,491 Total $ 1,231,498 $ 722,901 F-23 It is the Company’s policy to mitigate credit risk in its financial assets by maintaining a well-diversified portfolio that limits the amount of exposure as to maturity and investment type. The weighted average maturity of the Company’s available-for-sale securities as of December 31, 2020 and 2019 was approximately two months . The following tables summarize the Company’s cash, cash equivalents and investments for each of the periods indicated: As of December 31, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value (in thousands) Cash and money market funds $ 900,590 $ — $ — $ 900,590 Government and government agency bonds 1,037,959 22 — 1,037,981 Total cash, cash equivalents and investments $ 1,938,549 $ 22 $ — $ 1,938,571 As reported: Cash and cash equivalents $ 1,502,639 $ 9 $ — $ 1,502,648 Short-term investments 435,910 13 — 435,923 Total cash, cash equivalents and investments $ 1,938,549 $ 22 $ — $ 1,938,571 As of December 31, 2019 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value (in thousands) Cash and money market funds $ 315,589 $ — $ — $ 315,589 Government and government agency bonds 809,090 71 ( 2 ) 809,159 Total cash, cash equivalents and investments $ 1,124,679 $ 71 $ ( 2 ) $ 1,124,748 As reported: Cash and cash equivalents $ 835,044 $ 36 $ — $ 835,080 Short-term investments 289,635 35 ( 2 ) 289,668 Total cash, cash equivalents and investments $ 1,124,679 $ 71 $ ( 2 ) $ 1,124,748 7. ACCOUNTS RECEIVABLE AND RESERVES FOR PRODUCT SALES The following table summarizes the components of the Company’s accounts receivable for the periods indicated: As of December 31, 2020 2019 (in thousands) Product sales receivable, net of discounts and allowances $ 100,870 $ 90,409 Government contract receivables 470 470 Total accounts receivable, net $ 101,340 $ 90,879 The balance for government contract receivables for both periods presented is subject to government audit and will not be collected until the completion of the audit. F-24 The following table summarizes an analysis of the change in reserves for discounts and allowances for the periods indicated: Chargebacks Rebates Prompt Pay Other Accruals Total (in thousands) Balance, as of December 31, 2018 $ 1,378 $ 24,276 $ 538 $ 2,318 $ 28,510 Provision 9,698 44,749 4,897 9,643 68,987 Payments/credits ( 10,488 ) ( 24,287 ) ( 3,929 ) ( 7,290 ) ( 45,994 ) Balance, as of December 31, 2019 $ 588 $ 44,738 $ 1,506 $ 4,671 $ 51,503 Provision 9,700 52,180 6,384 10,175 78,439 Payments/credits ( 8,007 ) ( 55,147 ) ( 5,941 ) ( 9,877 ) ( 78,972 ) Balance, as of December 31, 2020 $ 2,281 $ 41,771 $ 1,949 $ 4,969 $ 50,970 The following table summarizes the total reserves above included in the Company’s consolidated balance sheets for the periods indicated: As of December 31, 2020 2019 (in thousands) Reduction to accounts receivable $ 8,352 $ 6,254 Component of accrued expenses 42,618 45,249 Total reserves $ 50,970 $ 51,503 8. INVENTORY The following table summarizes the components of the Company’s inventory for each of the periods indicated: As of December 31, 2020 2019 (in thousands) Raw materials $ 71,717 $ 82,030 Work in progress 139,704 88,031 Finished goods 20,540 1,318 Total inventory $ 231,961 $ 171,379 9. OTHER ASSETS The following table summarizes the Company’s other current assets for each of the periods indicated: As of December 31, 2020 2019 (in thousands) Manufacturing-related deposits and prepaids $ 134,430 $ 54,276 Collaboration receivable 34,184 — Prepaid clinical and pre-clinical expenses 16,224 8,263 Prepaid maintenance services 6,411 4,366 Prepaid research expenses 5,854 2,007 Prepaid income tax 4,939 2,114 Prepaid insurance 4,158 2,573 Leasehold improvement receivable 3,059 3,059 Other 4,065 5,249 Total other current assets $ 213,324 $ 81,907 The following table summarizes the Company’s other non-current assets for each of the periods indicated: F-25 As of December 31, 2020 2019 (in thousands) Manufacturing-related deposits and prepaids $ 148,525 $ 122,091 Strategic investments 38,799 31,937 Restricted cash and investments 9,315 9,566 Prepaid clinical expenses 3,395 4,665 Other 3,669 5,600 Total other non-current assets $ 203,703 $ 173,859 10. PROPERTY AND EQUIPMENT, NET Property and equipment are recorded at historical cost, net of accumulated depreciation. The following table summarizes components of property and equipment, net, for each of the periods indicated: As of December 31, 2020 2019 (in thousands) Leasehold improvements $ 55,019 $ 53,950 Lab equipment 49,571 30,053 Building and improvements 39,397 23,108 Software and computer equipment 33,948 30,683 Furniture and fixtures 7,010 7,090 Land 5,183 5,183 Land improvements 3,610 3,403 Office equipment 1,178 1,157 Construction in progress 71,541 25,988 Property and equipment, gross 266,457 180,615 Less: accumulated depreciation ( 76,027 ) ( 50,995 ) Property and equipment, net $ 190,430 $ 129,620 For the years ended December 31, 2020, 2019 and 2018, depreciation expense totaled $ 25.2 million, $ 22.8 million and $ 10.2 million, respectively. 11. INTANGIBLE ASSETS, NET The following table summarizes the components of the Company’s intangible assets for each of the periods indicated: As of December 31, 2020 2019 (in thousands) Patents $ 11,210 $ 8,902 In-licensed rights 8,073 8,073 Software licenses 1,554 1,029 Intangible assets, gross 20,837 18,004 Less: accumulated amortization ( 7,209 ) ( 5,507 ) Intangible assets, net $ 13,628 $ 12,497 The in-licensed rights relate to agreements with BioMarin and UWA. As a result of the FDA approval of EXONDYS 51 and VYONDYS 53, the Company recorded in-licensed rights of $ 1.0 million and $ 0.5 million, respectively. Following the execution of the settlement and license agreements with BioMarin in July 2017, the Company recorded a $ 6.6 million intangible asset related to EXONDYS 51 in the U.S. The in-licensed rights are being amortized on a straight-line basis over the remaining life of the related patent because the life of the related patent reflects the expected time period that the Company will benefit from the in-licensed right. For more information about the in-licensed rights, please read Note 3, License and Collaboration Agreements . For the years ended F-26 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. 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. The following table summarizes the estimated future amortization for intangible assets: As of December 31, 2020 (in thousands) 2021 $ 1,527 2022 1,277 2023 1,277 2024 1,270 2025 1,213 Thereafter 7,064 Total $ 13,628 12. ACCRUED EXPENSES The following table summarizes the Company’s accrued expenses for each of the periods indicated: As of December 31, 2020 2019 (in thousands) Accrued employee compensation costs $ 50,803 $ 43,240 Product revenue related reserves 42,618 45,249 Accrued contract manufacturing costs 36,543 27,622 Accrued clinical and pre-clinical costs 22,169 18,010 Accrued professional fees 10,221 10,707 Accrued milestone expense 9,380 18,390 Accrued royalties 7,793 6,301 Accrued property and equipment 4,993 1,181 Accrued collaboration cost-sharing 3,516 9,000 Accrued interest expense 1,045 1,045 Other 4,472 4,782 Total accrued expenses $ 193,553 $ 185,527 13. INDEBTEDNESS 2024 Convertible Notes On November 14, 2017, the Company issued $ 570.0 million senior notes due on November 15, 2024 (the “2024 Notes”). 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 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. The 2024 Notes may be convertible into 7,763,552 shares of the Company’s common stock under certain circumstances prior to maturity at a conversion rate of 13.621 shares per $1,000 principal amount of the 2024 Notes, which represents a conversion price of $ 73.42 per share, subject to adjustment under certain conditions. The Company allocated the proceeds received from issuance of the 2024 Notes between the liability component and the embedded conversion option, or equity component. The liability component was determined by measuring the fair value of similar notes that do not include the embedded conversion option. The Company allocated $ 161.1 million to the equity component, which was determined by deducting the fair value of the liability component from the par value of the 2024 Notes. The equity component, net of allocated offering costs of $ 4.2 million, was recorded as an increase additional paid-in capital. The equity component, plus $ 10.6 million of offering costs allocated to the liability component, represent the total debt discount on the 2024 Notes at issuance. The debt discount is amortized under the effective interest method and recorded as additional interest expense over the life of the 2024 Notes. The effective interest rate on the liability component of the 2024 Notes for the year ended December 31, 2020, 2019 and 2018 was 6.9 %. F-27 Upon the occurrence of a “fundamental change”, which includes (1) change in beneficial ownership of the Company where any person/group possesses more than 50 % of the voting power of the Company, (2) consolidation or merger of the Company, (3) shareholder approval of a liquidation plan or (4) the Company is delisted from NYSE or NASDAQ, the holders may require the Company to repurchase all or a portion of the 2024 Notes for cash at 100 % of the principal amount of the 2024 Notes being purchased, plus any accrued and unpaid interest. Additionally, upon the occurrence of a “make-whole fundamental change” prior to the maturity date, the Company shall adjust the conversion rate on a sliding scale basis detailed in the agreement To minimize the impact of potential dilution upon conversion of the 2024 Notes, the Company separately entered into capped call transactions with certain counterparties. The capped calls have a strike price of $ 73.42 and a cap price of $ 104.88 and are exercisable when and if the 2024 Notes are converted. If, upon conversion of the 2024 Notes, the price of the Company’s common stock is between the strike price and the cap price of the capped calls, the counterparties will deliver shares of the Company’s common stock and/or cash with an aggregate value equal to the difference between the price of the Company’s common stock at the conversion date and the strike price, multiplied by the number of shares of the Company’s common stock related to the capped calls being exercised. The Company paid $ 50.9 million for these capped calls transactions, which was recorded as additional paid-in capital. December 2019 Term Loan 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. Upon occurrence of a change in control, the Company is required to repay any amounts outstanding under the December 2019 Term Loan. In the event of a permitted prepayment, the Company would be obligated to make the following premium payments: (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 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 F-28 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. The following table summarizes the Company’s debt facilities for the periods indicated: As of December 31, 2020 2019 (in thousands) Principal amount of the 2024 Notes $ 569,993 $ 570,000 Unamortized discount - equity component ( 98,721 ) ( 120,182 ) Unamortized discount - debt issuance costs ( 6,510 ) ( 7,922 ) Net carrying value of 2024 Notes 464,762 441,896 Principal amount of the 2019 Term Loan 550,000 250,000 Unamortized discounts ( 22,269 ) ( 9,996 ) Net carrying value of 2019 Term Loan 527,731 240,004 Total carrying value of debt facilities $ 992,493 $ 681,900 Fair value of 2024 Notes $ 1,394,249 $ 1,141,288 Fair value of 2019 Term Loan 550,000 250,000 Total fair value of debt facilities $ 1,944,249 $ 1,391,288 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 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: As of December 31, 2020 (in thousands) 2021 $ — 2022 — 2023 250,000 2024 869,993 2025 — Thereafter — Total payments $ 1,119,993 14. EQUITY 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. The offering price was $ 140.41 per share. 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. The offering price was $ 131.00 per share. The Company received net proceeds of approximately $ 513.4 million from the offering, net of commission and offering expenses of approximately $ 24.6 million. F-29 15. STOCK-BASED COMPENSATION 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 (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. 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 In general, stock options have a ten-year term and vest over a four-year period, with one-fourth of the underlying shares vesting on the first anniversary of the grant and 1/48th of the underlying shares vesting monthly thereafter, such that the underlying shares will be fully vested on the fourth anniversary of the grant, subject to the terms of the applicable plan under which they were granted. The fair values of stock options granted during the periods presented are measured on the date of grant using the Black-Scholes-Merton option-pricing model, with the following assumptions: For the Year Ended December 31, 2020 2019 2018 Risk-free interest rate (1) 0.1 - 1.3% 1.4 - 2.5% 2.5 - 3.0% Expected dividend yield (2) — — — Expected term (3) 5.00 years 5.04 years 5.06 years Expected volatility (4) 57.3 - 68.2% 52.5 - 68.9% 52.4 - 60.8% (1) The risk-free interest rate is estimated using an average of Treasury bill interest rates over a historical period commensurate with the expected term of the option that correlates to the prevailing interest rates at the time of grant. (2) The expected dividend yield is zero as the Company has not paid any dividends to date and does not expect to pay dividends in the future. (3) The expected term is estimated using historical exercise behavior. ( 4 ) The expected volatility is the implied volatility in exchange-traded options of the Company’s common stock. The amounts estimated according to the Black-Scholes-Merton option-pricing model may not be indicative of the actual values realized upon the exercise of these options by the holders. F-30 The following tables summarize the Company’s stock option activity for each of the periods indicated: For the Year Ended December 31, 2020 2019 2018 Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Grants outstanding at beginning of the period 8,346,348 $ 61.01 8,391,171 $ 46.09 8,806,204 $ 29.74 Granted 1,402,409 122.25 1,429,652 132.97 2,152,439 90.15 Exercised ( 1,445,054 ) 53.21 ( 1,055,715 ) 30.73 ( 2,119,306 ) 22.89 Cancelled and forfeited ( 458,756 ) 108.60 ( 418,760 ) 84.15 ( 448,166 ) 46.11 Grants outstanding at end of the period 7,844,947 $ 70.61 8,346,348 $ 61.01 8,391,171 $ 46.09 Grants exercisable at end of the period 2,020,322 $ 70.16 2,368,621 $ 45.33 2,304,791 $ 27.69 Grants vested and expected to vest at end of the period 7,500,726 $ 68.24 7,987,427 $ 58.65 6,643,835 $ 45.43 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. Weighted Aggregate Average Intrinsic Remaining Value Contractual (in thousands) Life (Years) Options outstanding at December 31, 2020 $ 783,558 7.0 Options exercisable at December 31, 2020 $ 202,709 6.2 Options vested and expected to vest at December 31, 2020 $ 766,936 6.9 The following table summarizes the Company’s stock options vested and exercised for each of the periods indicated: For the Year Ended December 31, 2020 2019 2018 (in thousands) Aggregate grant date fair value of stock options vested $ 80,355 $ 50,878 $ 16,316 Aggregate intrinsic value of stock options exercised $ 144,750 $ 109,707 $ 158,936 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. F-31 Restricted Stock Awards The Company grants RSAs to members of its board of directors and certain employees. The following table summarizes the Company’s RSA activity for each of the periods indicated: For the Year Ended December 31, 2020 2019 2018 Weighted Weighted Weighted Average Average Average Grant Date Grant Date Grant Date Shares Fair Value Shares Fair Value Shares Fair Value Grants outstanding at beginning of the period 136,125 $ 42.98 252,321 $ 42.37 411,781 $ 37.23 Granted — — — — 27,590 98.57 Vested ( 83,750 ) 34.65 ( 100,840 ) 40.54 ( 187,050 ) 39.34 Forfeited ( 3,500 ) 142.71 ( 15,356 ) 48.94 — — Grants outstanding at end of the period 48,875 $ 50.11 136,125 $ 42.98 252,321 $ 42.37 Restricted Stock Units The Company also grants RSUs to members of its board of directors and employees. The following table summarizes the Company’s RSU activity for the periods indicated: For the Year Ended December 31 2020 2019 2018 Weighted Weighted Weighted Average Average Average Grant Date Grant Date Grant Date Shares Fair Value Shares Fair Value Shares Fair Value Grants outstanding at beginning of the period 605,874 $ 121.61 251,298 $ 81.21 66,552 $ 33.72 Granted 623,552 120.43 511,283 131.18 230,736 87.95 Vested ( 162,970 ) 120.28 ( 84,068 ) 75.12 ( 30,276 ) 33.23 Forfeited ( 119,377 ) 118.48 ( 72,639 ) 103.03 ( 15,714 ) 71.45 Grants outstanding at end of the period 947,079 $ 121.46 605,874 $ 121.61 251,298 $ 81.21 In March 2017, the Company granted certain executives 156,029 RSUs with performance conditions relating to certain sales target and regulatory milestones, which were achieved between June 2017 and March 2019. As of December 31, 2019, there were no RSUs with performance conditions remaining to be vested. 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 Under the Company’s 2013 ESPP, participating employees purchase common stock through payroll deductions. 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 August 31, 2021 and August 31, 2022 . The following table summarizes the Company’s ESPP activity for each of the periods indicated: For the Year Ended December 31, 2020 2019 2018 Number of shares purchased 102,031 92,086 75,094 Proceeds received (in millions) $ 7.5 $ 5.1 $ 2.3 F-32 Stock-based Compensation Expense 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. The following table summarizes stock-based compensation expense by function included within the consolidated statements of operations and comprehensive loss: For the Year Ended December 31, 2020 2019 2018 (in thousands) Research and development $ 41,671 $ 27,681 $ 14,214 Selling, general and administrative 66,399 50,921 35,913 Total stock-based compensation $ 108,070 $ 78,602 $ 50,127 The following table summarizes stock-based compensation expense by grant type included within the consolidated statements of operations and comprehensive loss: For the Year Ended December 31, 2020 2019 2018 (in thousands) Stock options $ 68,832 $ 53,427 $ 37,671 Restricted stock awards/units 33,457 20,103 10,632 Employee stock purchase plan 5,781 5,072 1,824 Total stock-based compensation $ 108,070 $ 78,602 $ 50,127 As of December 31, 2020, there was $ 189.8 million of total unrecognized stock-based compensation expense related to the Company’s stock-based compensation plans. The expense is expected to be recognized over a weighted-average period of approximately 2 years. 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. 16. 401 (K) PLAN The Company sponsors a 401(k) Plan (“the Plan”) in the U.S. and other retirement plans in the rest of the world, all of which are defined contribution plans. The Plan is available to all employees who are age 21 or older. Participants may make voluntary contributions and the Company makes matching contributions according to the Plan’s matching formula. Matching contributions fully vest after one year of service for all employees. The expense related to the Plan primarily consists of the Company’s matching contributions. 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. F-33 17. OTHER INCOME (LOSS) The following table summarizes other income (loss) for the periods indicated: For the Year Ended December 31, 2020 2019 2018 (in thousands) Interest expense $ ( 59,947 ) $ ( 30,669 ) $ ( 33,709 ) Interest income 2,970 7,238 6,810 Amortization of investment discount 4,489 15,350 8,573 Gain from sale of Priority Review Voucher 108,069 — — Loss on contingent consideration* ( 45,000 ) — — Other expense 517 ( 236 ) ( 656 ) Total other income (loss) $ 11,098 $ ( 8,317 ) $ ( 18,982 ) * 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. 18. INCOME TAXES The following table summarizes the loss before the provision for income taxes by jurisdiction for the periods indicated: For the Year Ended December 31, 2020 2019 2018 (in thousands) Domestic $ ( 204,956 ) $ ( 489,747 ) $ ( 309,294 ) Foreign ( 348,109 ) ( 224,133 ) ( 53,316 ) Total $ ( 553,065 ) $ ( 713,880 ) $ ( 362,610 ) The following table summarizes provision for income taxes in the accompanying consolidated financial statements for the periods indicated: For the Year Ended December 31, 2020 2019 2018 (in thousands) Current provision: Federal $ 4 $ — $ ( 110 ) State 624 521 ( 653 ) Foreign 680 1,050 311 Total current provision 1,308 1,571 ( 452 ) Deferred benefit: Federal — ( 15 ) — State — ( 5 ) — Foreign ( 245 ) ( 356 ) ( 240 ) Total deferred benefit ( 245 ) ( 376 ) ( 240 ) Total current provision $ 1,063 $ 1,195 $ ( 692 ) F-34 The following table summarizes the reconciliation between the Company’s effective tax rate and the income tax rate for each of the periods indicated: For the Year Ended December 31, 2020 2019 2018 Federal income tax rate 21.0 % 21.0 % 21.0 % State taxes 4.0 6.3 12.3 Research and development and other tax credits 6.6 3.3 3.1 Valuation allowance ( 21.3 ) ( 16.8 ) ( 45.5 ) Permanent differences 2.2 1.8 6.9 Sarepta International C.V. return to provision — — ( 0.1 ) Basis difference in subsidiary — ( 8.4 ) — Foreign rate differential ( 12.9 ) ( 7.4 ) ( 0.9 ) Other 0.2 — 3.4 Effective tax rate ( 0.2 ) % ( 0.2 ) % 0.2 % Permanent differences affecting the Company’s effective tax rate primarily include excess stock-based compensation tax deductions, net of non-deductible stock-based compensation and limitation on officer compensation deduction. In February 2019, the Company exercised its option to acquire Myonexus. Accumulated costs of $ 253.7 million, associated with the Myonexus acquisition, were expensed for U.S. GAAP purposes. 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. For U.S. 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. In December 2012, the Company licensed certain intellectual property of Sarepta Therapeutics, Inc. to its wholly owned Netherlands subsidiary, Sarepta International C.V. The parties also entered into a contract research agreement under which Sarepta Therapeutics, Inc. performs research services for Sarepta International C.V. In January 2016, Sarepta Therapeutics, Inc. entered into a manufacturing and distribution agreement as well as service agreement with Sarepta International C.V. In conjunction with its recent filings, it was determined that beginning in 2016, Sarepta International C.V. is effectively connected with the conduct of a trade or business by the entity in the U.S. and, accordingly, the 2016, 2017 and 2018 losses are subject to U.S. income taxes. In May 2018, Sarepta International C.V. merged into another wholly owned U.S. subsidiary of Sarepta Therapeutics, Inc. F-35 The following table summarizes the analysis of the deferred tax assets and liabilities for each of the periods indicated: As of December 31, 2020 2019 (in thousands) Deferred tax assets: Net operating loss carryforwards $ 333,703 $ 304,033 Difference in depreciation and amortization 31,259 40,095 Research and development tax credits 159,917 103,806 Stock-based compensation 31,212 24,114 Lease liabilities 13,120 15,796 Deferred revenue — 939 Capitalized inventory 35,959 18,255 Other 28,381 16,270 Total deferred tax assets 633,551 523,308 Deferred tax liabilities: Right of use asset ( 8,772 ) ( 10,782 ) Debt discount ( 18,044 ) ( 23,099 ) Total deferred tax liabilities ( 26,816 ) ( 33,881 ) Valuation allowance ( 605,848 ) ( 488,829 ) Net deferred tax assets $ 887 $ 598 The Company has evaluated the positive and negative evidence bearing upon the realizability of its U.S. net deferred tax assets, which are comprised principally of federal and state net operating loss carryforwards, research and development tax credit carryforwards, stock-based compensation expense, capitalized inventory, and intangibles. Under the applicable accounting standards, management has considered the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of net federal and state deferred tax assets. Accordingly, a full valuation allowance of the U.S. net deferred tax asset had been established at December 31, 2020 and 2019. 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, 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. Based upon the income projections in the majority of the foreign jurisdictions, the Company believes it will realize the benefit of its future deductible differences in these jurisdictions. As such, the Company has not recorded a valuation allowance against these foreign jurisdictions. 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. In 2019, the Company undertook an internal restructuring involving its subsidiary in Switzerland. The restructuring resulted in the utilization of all of its net operating loss carryforwards and the release of its previously established valuation allowance of $ 7.9 million. As of December 31, 2020, the Company had federal and state net operating loss carryforwards of $ 1,298.3 million and $ 872.3 million, respectively, available to reduce future taxable income. 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 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. These federal and state research and development credits begin to expire between 2021 and 2040 and between 2021 and 2035 , respectively. The Company also has foreign net operating loss carryforwards of $ 11.4 million, mainly derived from the net operating loss generated by its subsidiary in Brazil, which may be carried forward indefinitely. The Company, or one of its subsidiaries, files income tax returns in the U.S., and various state and foreign jurisdictions. The federal, state and foreign income tax returns are generally subject to tax examinations for the tax years ended December 31, 2017 through December 31, 2019. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period. F-36 The follow table summarizes the reconciliation of the beginning and ending amount of total unrecognized tax benefits for each of the periods indicated: For the Year Ended December 31, 2020 2019 2018 (in thousands) Balance at beginning of the period $ 41,753 $ 37,544 $ 5,134 Increase related to current year tax positions 6,722 4,275 2,164 Increase related to prior year tax positions — 109 30,246 Decrease related to prior year tax positions — ( 175 ) — Balance at end of the period $ 48,475 $ 41,753 $ 37,544 The balance of total unrecognized tax benefits at December 31, 2020, if recognized, would not affect the effective tax rate on income from continuing operations, due to a full valuation allowance against the Company’s U.S. deferred tax assets. The Company does not expect that the amount of unrecognized tax benefits to change significantly in the next twelve months. 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 consolidated balance sheets at December 31, 2020 or 2019. No interest and/or penalties were recognized in 2019 or 2018. 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. shareholder. 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. 19. LEASES The Company has real estate operating leases in Cambridge, Andover and Burlington, Massachusetts and Dublin and Columbus, Ohio that provide for scheduled annual rent increases throughout each lease’s term. 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. F-37 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: For the Year Ended December 31, 2020 (in thousands) Lease cost Operating lease cost $ 18,978 Variable lease cost 17,065 Total lease cost $ 36,043 Other information Operating lease payments $ 19,344 Operating lease liabilities arising from obtaining ROU assets 59,327 Weighted average remaining lease term 4.6 years Weighted average discount rate 7.6 % The following table summarizes maturities of lease liabilities and the reconciliation of lease liabilities as of December 31, 2020: As of December 31, 2020 (in thousands) 2021 $ 27,846 2022 25,513 2023 25,615 2024 25,430 2025 10,910 Thereafter 4,131 Total minimum lease payments 119,445 Less: imputed interest ( 18,148 ) Total operating lease liabilities $ 101,297 Included in the consolidated balance sheet: Current portion of lease liabilities within other current liabilities $ 20,930 Lease liabilities 80,367 Total operating lease liabilities $ 101,297 F-38 20. NET LOSS PER SHARE Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding. Given that the Company recorded a net loss for each of the periods presented, there is no difference between basic and diluted net loss per share since the effect of common stock equivalents would be anti-dilutive and are, therefore, excluded from the diluted net loss per share calculation. For the Year Ended December 31, 2020 2019 2018 (in thousands, except per share amounts) Net loss $ ( 554,128 ) $ ( 715,075 ) $ ( 361,918 ) Weighted-average common shares outstanding - basic 77,956 73,615 66,250 Effect of dilutive securities* — — — Weighted-average common shares outstanding - diluted 77,956 73,615 66,250 Net loss per share — basic and diluted $ ( 7.11 ) $ ( 9.71 ) $ ( 5.46 ) * For the years ended December 31, 2020, 2019 and 2018, stock options, RSAs, RSUs, SARs and ESPP to purchase approximately 9.0 million, 9.1 million and 9.1 million shares of common stock, respectively, were excluded from the net loss per share calculation as their effect would have been anti-dilutive. The Company accounts for the effect of the 2024 Notes on diluted net earnings per share using the if-converted method as they may be settled in cash or shares at the Company’s option. While the closing price on December 31, 2020, exceeded the conversion price of $ 73.42 , the potential shares issuable under the 2024 Notes were excluded from the calculation of diluted loss per share as they were anti-dilutive using the if-converted method. In the period of conversion, the 2024 Notes will have no impact on diluted net loss if they are settled in cash and will have an impact on diluted earnings per share if the 2024 Notes are settled in shares upon conversion and when the Company is in an income position. 21. COMMITMENTS AND CONTINGENCIES Manufacturing Obligations The Company has entered into long-term contractual arrangements from time to time for the provision of goods and services. 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. F-39 Aldevron, LLC 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 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 : As of December 31, 2020 (in thousands) 2021 $ 632,257 2022 208,485 2023 107,612 2024 105,932 2025 101,932 Thereafter 138,217 Total manufacturing commitments $ 1,294,435 Additionally, should the Company obtain regulatory approval for any drug product candidate produced as a part of the Company’s manufacturing obligations above, additional minimum batch requirements with the respective manufacturing parties would be required. Other Funding Commitments The Company has several on-going clinical trials in various clinical trial stages. Its most significant clinical trial expenditures are to contract research organizations (“CROs”). The CRO contracts are generally cancellable at the Company’s option. As of December 31, 2020, the Company has approximately $ 280.9 million in cancellable future commitments based on existing CRO contracts. For the years ended December 31, 2020, 2019 and 2018, the Company recognized approximately $ 40.4 million, $ 31.6 million and $ 19.6 million, respectively, for expenditures incurred by CROs. Litigation In the normal course of business, the Company may from time to time be named as a party to various legal claims, actions and complaints, including matters involving securities, employment, intellectual property, effects from the use of therapeutics utilizing its technology, or others. For example, on 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. Patent No. 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. § 271(e)(1). 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. F-40 22. SUBSEQUENT EVENT 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 sheets through the date the consolidated financial statements were issued. 23. FINANCIAL INFORMATION BY QUARTER (UNAUDITED) 2020 for Quarter Ended December 31 September 30 June 30 March 31 (in thousands) Revenues: Products, net $ 122,644 $ 121,429 $ 111,344 $ 100,448 Collaboration 22,494 22,495 26,019 13,226 Total revenues 145,138 143,924 137,363 113,674 Cost and expenses: Cost of sales (excluding amortization of in-licensed rights) 22,404 15,015 13,341 12,622 Research and development 207,239 190,438 188,522 136,144 Selling, general and administrative 86,046 75,373 73,688 82,768 Amortization of in-licensed rights 165 166 165 166 Total cost and operating expenses 315,854 280,992 275,716 231,700 Operating loss ( 170,716 ) ( 137,068 ) ( 138,353 ) ( 118,026 ) Other (loss) income: Gain from sale on Priority Review Voucher — — — 108,069 Loss on contingent consideration — ( 45,000 ) — — Other expense, net ( 17,769 ) ( 14,335 ) ( 12,447 ) ( 7,420 ) Total other (loss) income ( 17,769 ) ( 59,335 ) ( 12,447 ) 100,649 Loss before income tax expense ( 188,485 ) ( 196,403 ) ( 150,800 ) ( 17,377 ) Income tax expense 832 96 20 115 Net loss $ ( 189,317 ) $ ( 196,499 ) $ ( 150,820 ) $ ( 17,492 ) Net loss per share - basic and diluted $ ( 2.40 ) $ ( 2.50 ) $ ( 1.93 ) $ ( 0.23 ) Weighted average number of shares of common stock used in computing basic and diluted net loss per share 78,905 78,501 77,968 76,432 F-41 2019 for Quarter Ended December 31 September 30 June 30 March 31 (in thousands) Revenues: Products, net $ 100,113 $ 99,041 $ 94,668 $ 87,011 Total revenues 100,113 99,041 94,668 87,011 Cost and expenses: Cost of sales (excluding amortization of in-licensed rights) 15,567 13,037 15,919 12,063 Research and development 223,141 133,949 113,266 90,553 Selling, general and administrative 81,424 75,429 67,393 60,566 Acquired in-process research and development — — 173,240 — Settlement and license charges 10,000 — — — Amortization of in-licensed rights 200 216 217 216 Total cost and operating expenses 330,332 222,631 370,035 163,398 Operating loss ( 230,219 ) ( 123,590 ) ( 275,367 ) ( 76,387 ) Other loss: Other expense, net ( 4,773 ) ( 2,510 ) ( 862 ) ( 172 ) Total other loss ( 4,773 ) ( 2,510 ) ( 862 ) ( 172 ) Loss before income tax expense ( 234,992 ) ( 126,100 ) ( 276,229 ) ( 76,559 ) Income tax expense 711 226 174 84 Net loss $ ( 235,703 ) $ ( 126,326 ) $ ( 276,403 ) $ ( 76,643 ) Net loss per share - basic and diluted $ ( 3.16 ) $ ( 1.70 ) $ ( 3.74 ) $ ( 1.07 ) Weighted average number of shares of common stock used in computing basic and diluted net loss per share 74,557 74,177 73,958 71,731 F-42