What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-05 compared with 2020-11-05 · 161 added, 339 removed, 321 unchanged (61% of the section changed)

3 unchanged sentences

(unaudited, in thousands, except share and per share amounts)

September 30, 2020

March 31, 2021

December 31, 2020

17 unchanged sentences

Long-term debt

Lease liabilities

Lease liabilities, net of current portion

Deferred revenue, net of current portion

7 unchanged sentences

Common stock, $ 0.0001 par value, 198,000,000 shares authorized;

and 75,184,863 issued and outstanding at September 30, 2020 and

and 79,374,247 issued and outstanding at March 31, 2021, and

December 31, 2020, respectively

9 unchanged sentences

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

Products, net

5 unchanged sentences

Selling, general and administrative

Acquired in-process research and development

Settlement and license charges

Amortization of in-licensed rights

2 unchanged sentences

Other (loss) income:

Gain from sale of Priority Review Voucher

Loss on contingent consideration

Other expense, net

Gain from sale of Priority Review Voucher

Total other (loss) income

Loss before income tax expense

Income tax expense

Loss before income tax (benefit) expense

Income tax (benefit) expense

Other comprehensive (loss) income:

13 unchanged sentences

Balance at December 31, 2020

Cumulative effect of accounting change to

adopt ASU 2020-06

Exercise of options for common stock

Vest of restricted stock units

Issuance of common stock to Roche, net of

issuance costs

Issuance of common stock under employee

1 unchanged sentence

Stock-based compensation

Unrealized gains from available-for-sale

securities, net of tax

Balance at March 31, 2020

Exercise of options for common stock

Vest of restricted stock units, net of

cancellations

Stock-based compensation

Unrealized losses from available-for-sale

securities, net of tax

Balance at June 30, 2020

Exercise of options for common stock

Vest of restricted stock units, net of

cancellations

Issuance of common stock under employee

stock purchase plan

Stock-based compensation

Unrealized losses from available-for-sale

securities, net of tax

Balance at September 30, 2020

Balance at March 31, 2021

Comprehensive

Stockholders'

(Loss) Income

Balance at December 31, 2019

Exercise of options for common stock

Grant of restricted stock awards and vest of

restricted stock units, net of cancellations

Shares withheld for taxes

Issuance of common stock for cash, net of

offering costs

Vest of restricted stock units

Issuance of common stock to Roche, net of

issuance costs

Issuance of common stock under employee

2 unchanged sentences

Unrealized gains from available-for-sale

securities, net of tax

Balance at March 31, 2020

Exercise of options for common stock

Grant of restricted stock awards and vest of

restricted stock units, net of cancellations

Issuance of common stock for cash, net of

offering costs

Stock-based compensation

Unrealized gains from available-for-sale

Balance at June 30, 2019

Exercise of options for common stock

Grant of restricted stock awards and vest of

restricted stock units, net of cancellations

Shares withheld for taxes

Issuance of common stock under employee

stock purchase plan

Stock-based compensation

Unrealized losses from available-for-sale

Balance at September 30, 2019

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(unaudited, in thousands)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash flows from operating activities:

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

Loss on contingent consideration

Gain from sale of Priority Review Voucher, net of commission

Acquired in-process research and development

Depreciation and amortization

3 unchanged sentences

Stock-based compensation

Gain from sale of Priority Review Voucher, net of commission

Changes in operating assets and liabilities, net:

1 unchanged sentence

Net increase in inventory

Net increase in other assets

Net increase in deferred revenue

Net increase in accounts payable, accrued expenses and other liabilities

Net cash provided by (used in) operating activities

Net decrease (increase) in other assets

Net (decrease) increase in deferred revenue

Net decrease in accounts payable, accrued expenses and other liabilities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Purchase of property and equipment

Proceeds from sale of Priority Review Voucher, net of commission

Purchase of available-for-sale securities

Maturity and sale of available-for-sale securities

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

Net cash provided by investing activities

Proceeds from sale of Priority Review Voucher, net of commission

Net cash provided by (used in) investing activities

Cash flows from financing activities:

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

Proceeds from sale of common stock, net of offering costs

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

1 unchanged sentence

Taxes paid related to net share settlement of equity awards

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

Net cash provided by financing activities

Increase in cash, cash equivalents and restricted cash

(Decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash:

8 unchanged sentences

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

Lease liabilities arising from obtaining right of use assets

Intangible assets and property and equipment included in accrued expenses

Lease liabilities arising from obtaining right of use assets

Lease liabilities terminated

Issuance costs related to the Roche Collaboration in accrued expenses

See accompanying notes to unaudited condensed consolidated financial statements.

4 unchanged sentences

(together with its wholly-owned subsidiaries, “Sarepta” or the “Company”) is a commercial-stage biopharmaceutical company focused on helping patients through the discovery and development of unique RNA-targeted therapeutics, gene therapy and other genetic therapeutic modalities for the treatment of rare diseases.

Applying its proprietary, highly-differentiated and innovative technologies, and through collaborations with its strategic partners, the Company is developing potential therapeutic candidates for a broad range of diseases and disorders, including Duchenne muscular dystrophy (“DMD”), Limb-girdle muscular dystrophies (“LGMDs”), Mucopolysaccharidosis type IIIA (“MPS IIIA”) and other neuromuscular and central nervous system disorders.

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

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

EXONDYS 51 and VYONDYS 53 are indicated for the treatment of DMD in patients who have a confirmed mutation of the DMD gene that is amenable to exon 51 and exon 53 skipping, respectively.

EXONDYS 51 and VYONDYS 53 use the Company’s phosphorodiamidate morpholino oligomer (“PMO”) chemistry and exon-skipping technology to skip exon 51 and exon 53, respectively, of the dystrophin gene.

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”) related disorders.

Its products in the U.S., EXONDYS 51 (eteplirsen) Injection (“EXONDYS 51”), VYONDYS 53 (golodirsen) Injection (“VYONDYS 53”) and AMONDYS 45 (casimersen) Injection (“AMONDYS 45”), were granted accelerated approval by the U.S.

Food and Drug Administration (the “FDA”) on September 19, 2016, December 12, 2019 and February 25, 2021, respectively.

EXONDYS 51, VYONDYS 53 and AMONDYS 45 are indicated for the treatment of DMD in patients who have a confirmed mutation of the DMD gene that is amenable to exon 51, exon 53 and exon 45 skipping, respectively.

EXONDYS 51, VYONDYS 53 and AMONDYS 45 use the Company’s phosphorodiamidate morpholino oligomer (“PMO”) chemistry and exon-skipping technology to skip exon 51, exon 53 and exon 45, respectively, of the dystrophin gene.

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

As of September 30, 2020, the Company had approximately $ 1,825.7 million of cash, cash equivalents and investments, consisting of $ 1,474.6 million of cash and cash equivalents, $ 341.5 million of short-term investments, and $ 9.6 million of long-term restricted cash and investments.

As of March 31, 2021, the Company had approximately $ 1,747.1 million of cash, cash equivalents and investments, consisting of $ 1,481.8 million of cash and cash equivalents, $ 256.0 million of short-term investments, and $ 9.3 million of long-term restricted cash and investments.

The Company believes that its balance of cash, cash equivalents and investments as of the date of the issuance of this report is sufficient to fund its current operational plan for at least the next twelve months, though it may pursue raising additional cash resources through public or private debt and equity financings, seek additional government contracts and establish collaborations with or license its technology to other companies.

7 unchanged sentences

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

Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but that is not required for interim reporting purposes, has been omitted.

Certain financial information that is normally included in annual financial statements prepared in accordance with the U.S.

GAAP, but that is not required for interim reporting purposes, has been omitted.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2020 which are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the U.S.

Securities and Exchange Commission on February 26, 2020.

The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year.

Securities and Exchange Commission on March 1, 2021.

The results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year.

Estimates and Uncertainties

4 unchanged sentences

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

As of September 30, 2020, the majority of the Company’s accounts receivable arose from product sales in the U.S.

As of March 31, 2021, the majority of the Company’s accounts receivable arose from product sales in the U.S.

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

Outside of the U.S., the majority of the Company’s customers have payment terms ranging between 45 and 150 days .

Three individual customers accounted for 47 %, 38 % and 10 % of net product revenues for the three months ended September 30, 2020 and 47 %, 39 % and 11 % of net product revenues for the nine months ended September 30, 2020.

Three individual customers accounted for 43 %, 40 % and 11 % of net product revenues for the three months ended September 30, 2019 and 42 %, 41 % and 13 % of net product revenues for the nine months ended September 30, 2019.

Three individual customers accounted for 42 %, 42 % and 10 % of accounts receivable from product sales as of September 30, 2020 and 45 %, 37 % and 11 % of accounts receivable from product sales as of December 31, 2019.

Three individual customers accounted for 49 %, 40 % and 7 % of net product revenues for the three months ended March 31, 2021 and 44 %, 40 % and 12 % of net product revenues for the three months ended March 31, 2020.

Three individual customers accounted for 49 %, 40 % and 7 % of accounts receivable from product sales as of March 31, 2021 and 45 %, 41 % and 9 % of accounts receivable from product sales as of December 31, 2020.

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

As of September 30, 2020, the Company believes that such customers are of high credit quality.

As of September 30, 2020, the Company’s cash was concentrated at three financial institutions in the U.S., which potentially exposes the Company to credit risks.

As of March 31, 2021, the Company believes that such customers are of high credit quality.

As of March 31, 2021, the Company’s cash was concentrated at three financial institutions in the U.S., which potentially exposes the Company to credit risks.

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

1 unchanged sentence

For details about the Company’s accounting policies, please read Note 2, Summary of Significant Accounting Policies and Recent Accounting Pronouncements of the Annual Report on Form 10-K for the year ended December 31, 2020.

Collaboration revenue

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

Hoffman-La Roche Ltd.

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

At the inception of a collaboration arrangement, the Company first assesses whether the contractual arrangement is within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to determine whether the arrangement involves a joint operating activity and involves two (or more) parties that are both active participants in the activity and exposed to significant risks and rewards dependent on the commercial success of such activity.

Then the Company determines whether the collaboration arrangement in its entirety represents a contract with a customer as defined by ASC 606, Revenue from Contracts with Customers (“ASC 606”).

If only a portion of the collaboration arrangement is potentially with a customer, the Company applies the distinct good or service unit-of-account guidance in ASC 606 to determine whether there is a unit of account that should be accounted for under ASC 606.

For the units of account in the collaboration arrangement that do not represent a vendor-customer relationship, the Company will (i) consider applying other GAAP, including by analogy, or (ii) if there is no appropriate analogy, consistently apply a reasonable and rational accounting policy election.

In general, by analogy to ASC 606, the Company identifies the performance obligations within the collaboration arrangement and identifies and allocates the transaction price the Company expects to receive on a relative standalone selling price basis to each performance obligation.

The residual approach is used to determine estimated standalone selling prices when the selling price is uncertain.

Variable consideration, consisting of development and regulatory milestones, will be included in the transaction price only if the Company expects to receive such consideration and if it is probable that the inclusion of the variable consideration will not result in a significant reversal in the cumulative amount of revenue recognized under the arrangement.

Sales-based royalty and milestone payments are excluded from the transaction price the Company expects to receive until the underlying sales occur because the license to the Company’s intellectual property is deemed to be the predominant item to which the royalties or milestones relate as it is the primary driver of value in its collaboration arrangement.

For the recognition of revenue associated with each performance obligation, if the Company determines ASC 606 is not appropriate to apply by analogy, the Company will apply a reasonable, rational, and consistently applied accounting policy election to faithfully depict the transfer of services to the collaboration partner over the estimated performance period.

Up-front payments from a collaboration partner are recognized as deferred revenue when received and recognized as revenue over the estimated performance period.

Reimbursement payments from a collaboration partner associated with research and development cost sharing provisions in a collaboration arrangement are recognized as the related expense is incurred and classified as an offset to research and development expense.

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

If an arrangement contains customer options, by analogy to ASC 606, the Company evaluates the customer options to determine whether they represent material rights, which may include options to acquire additional goods or services for free or at a discount.

If the customer options are determined to represent material rights, they are recognized as a separate performance obligation at inception of the arrangement.

The Company allocates a portion of the transaction price of the collaboration arrangement to material rights based on the relative standalone selling price.

Amounts allocated to material rights are not recognized as revenue until related options are exercised or expire.

Key assumptions to determine the standalone selling price of units of account in a collaboration arrangement include, but are not limited to, forecasted revenues, development timelines, incremental costs related to the arrangement, discount rates and probabilities of technical and regulatory success.

In accordance with ASC 842, Leases (“ASC 842”), components of a lease should be bifurcated between lease components and non-lease components.

The fixed and in-substance fixed contract consideration identified must then be allocated based on the relative standalone price to the lease and non-lease components.

However, ASC 842 provides entities with a practical expedient that allows 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 embedded leases in manufacturing and supply agreements with certain of its contract manufacturing organizations and has instead allocated contract consideration between the lease and non-lease components based on their relative standalone price.

Contingent Consideration

Certain of the Company’s license and collaboration agreements include future payments that are contingent upon the occurrence of a certain regulatory-related event or events.

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 accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

Discount rates in the Company’s valuation models represent a measure of the credit risk associated with settling the liability.

The period over which the Company discounts its contingent obligations is based on the current development stage of the product candidates, the Company’s specific development plan for that product candidate adjusted for the probability of completing the development step and when the contingent payments would be triggered.

In estimating the probability of success, the Company utilizes data regarding similar milestone events from several sources, including industry studies and its own experience.

These fair value measurements are based on significant inputs not observable in the market.

Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period.

There have not been any other material changes to the Company’s accounting policies through September 30, 2020.

There have not been any material changes to the Company’s accounting policies through March 31, 2021, other than those noted below relating to the adoption of 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 .”

Recent Accounting Pronouncements

Not yet adopted

Recently adopted

In August 2020, the Financial Accounting Standards Board (“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):

1 unchanged sentence

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 exception for contracts in an entity’s own equity.

This guidance will be effective beginning January 1, 2022 on a prospective basis.

As of September 30, 2020, the Company is continuing to evaluate the potential impact this ASU may have on its financial position and results of operations upon adoption.

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 senior notes due on November 15, 2024 (the “2024 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 the accounting change removed 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 effect of the accounting change as of January 1, 2021 increased the carrying amount of the convertible notes by $ 96.8 million, reduced accumulated deficit by $ 60.2 million and reduced additional paid-in capital by $ 157.0 million.

Interest expense of the 2024 Notes will be lower as a result of adoption of this guidance.

The if-converted method for such instruments will be used to compute diluted net earnings per share if and when profitability is achieved.

As a result of the adoption of this guidance, interest expense and net loss was reduced by $ 5.4 million for the three months ended March 31, 2021, which was $ 0.07 per share.

In December 2019, the FASB issued ASU 2019-12, “ Income Taxes (Topic 740):

1 unchanged sentence

This ASU removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application.

The new guidance will be effective beginning January 1, 2021.

As of September 30, 2020, the Company is continuing to evaluate the potential impact this ASU may have on its financial position and results of operations upon adoption.

Recently a dopted

In August 2018, the FASB issued ASU No.

2018-13, “Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”.

This ASU removed the following disclosure requirements:

(1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy;

(2) the policy for timing of transfers between levels;

and (3) the valuation processes for Level 3 fair value measurements.

Additionally, this update added the following disclosure requirements:

(1) the changes in unrealized gains and losses for the period included in other comprehensive income and loss for recurring Level 3 fair value measurements held at the end of the reporting period;

and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

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.

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 new guidance was effective beginning January 1, 2021.

The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

The Company has no historical write-offs of its accounts receivable and its terms range from 60 to 91 days for sales within the U.S.

and 45 and 150 days for the majority of sales outside the U.S.

The Company monitors the creditworthiness of its customers and payments such that it can properly assess and respond to changes in the customers’ credit profile or any specific issues.

Upon adoption and as of September 30, 2020, the Company believes that such customers are of high credit quality and the expected credit losses are insignificant.

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

Clarifying the Interaction between Topic 808 and Topic 606” .

(i) clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when the collaborative arrangement participant is a customer, (ii) provides guidance specifying that a distinct good or service is the unit of account for evaluating whether a transaction is with a customer, and (iii) precludes a company from presenting transactions with a collaborative arrangement participant that are not in the scope of ASC 606 together with revenue from contracts with customers.

The new standard was effective beginning January 1, 2020.

The Company presents collaboration revenue separate from product revenues.

LICENSE AND COLLABORATION AGREEMENTS

Roche Holding A.G.

On December 21, 2019, the Company entered into a license, collaboration and option agreement 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.

(i) research and development expenses incurred under the joint global development plan will be equally shared between the Company and Roche, (ii) Roche is solely responsible for all costs incurred in connection with any development activities (other than those within the joint global development plan) that are necessary to obtain or maintain regulatory approvals outside the U.S, and (iii) the Company will continue to be responsible for the manufacturing of clinical and commercial supplies of SRP-9001.

The Company has also granted Roche options to acquire ex-U.S.

rights to certain future DMD-specific programs (the “Options”) in exchange for separate option exercise payments, milestone and royalty considerations, and cost sharing provisions.

The agreement became effective on February 4, 2020 (“Effective Date”).

Within 10 days of the Effective Date, the Company received an aggregate of approximately $ 1.2 billion in cash consideration from Roche, consisting of an up-front payment and an equity investment in the Company.

Additionally, the Company may receive up to $ 1.7 billion in development, regulatory and sales milestones related to SRP-9001.

Upon commercialization, the Company is also eligible to receive tiered royalty payments based on net sales.

The Roche Agreement is governed by a joint steering committee (“JSC”) formed by representatives from Roche and the Company.

The JSC, among other activities, manages the overall strategic alignment between the parties, approves any material update to the joint global development plan and budget and oversees the operations of the subcommittees.

The Company determined that the Roche Agreement represents a collaboration arrangement subject to the scope of ASC 808.

To determine if the collaboration arrangement was also within the scope of ASC 606, using the unit of account guidance in ASC 606, the Company identified the distinct goods or services in the Roche Agreement and evaluated whether they were transferred to a customer.

However, since the Company’s ordinary activities do not include contracting with third parties to provide them with research and development services, it was determined that the Roche Agreement was not within the scope of ASC 606.

Thus, for recognition and measurement purposes, the Company must apply other GAAP, including by analogy, or if there is no appropriate analogy, apply a reasonable, rational and consistently applied accounting policy election.

Accordingly, the Company has analogized to ASC 606 for the accounting for certain aspects of the Roche Agreement.

Of the $1.2 billion cash received from Roche, $ 316.3 million was allocated to the 2,522,227 shares of the Company’s common stock issued to Roche based on the closing price when the shares were issued.

Further, $ 485.0 million was allocated to the Options, as the Company determined that the option exercise payments (ranging from $ 20.0 million to $ 125.0 million per Option) are priced at a discount, resulting in material rights.

The residual amount of $ 348.7 million was allocated to a single, combined performance obligation (“Combined Performance Obligation”) comprised of:

(i) the license of IP relating to SRP-9001 transferred to Roche, (ii) the related research and development services provided under the joint global development plan, (iii) the services provided to manufacture clinical supplies of SRP-9001, and (iv) the Company’s participation in the JSC, because the Company determined that the license of IP and related activities were not capable of being distinct from one another.

The Company recorded $ 312.1 million of common shares issued to Roche, based on the closing price of the Company’s stock on the date such shares were issued, net of direct transaction fees incurred of $ 4.3 million.

This net amount is reflected as an increase to common stock and additional paid-in-capital in the accompanying unaudited condensed consolidated balance sheets.

The $ 485.0 million allocated to the material rights associated with the Options was based on their estimated standalone selling prices, determined using an income approach of projected incremental discounted cash flows from each Option.

The discounted cash flows incorporate the likelihood of success of the individual product candidates and the related commercial opportunity.

The value assigned to the individual material rights is reflected as deferred revenue and will not be recognized until an option is either:

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

If exercised, the value of the material right will be aggregated with the option exercise price and recognized over the applicable performance period.

If expired, the related transaction price will be recognized immediately.

Through September 30, 2020, no options have been exercised or expired.

The $348.7 million allocated to the Combined Performance Obligation was determined using the residual approach because the standalone selling price is uncertain.

The Company recognizes revenue related to the Combined Performance Obligation on a straight-line basis over the expected performance period of the joint global development plan, which is expected to extend through the fourth quarter of 2023.

The Company believes this method represents the best depiction of the transfer of services to Roche, as the estimated full-time equivalent employees dedicated to the services is not expected to materially vary over the expected service period.

Revenue relating to future development, regulatory and sales milestones will be recognized when the milestone is probable of achievement (which is typically when the milestone has occurred).

Any royalties payable by Roche in the future will be recognized in the period earned.

In addition, the Company determined that the supply of commercial product to Roche under the agreement is not priced at a discount and represents optional goods or services (i.e., a contingent promise).

Accordingly, any revenues associated with the supply of commercial product in the future will be recognized in the period earned.

The Company classifies all revenues recognized under the Roche Agreement as collaboration revenues within the unaudited condensed consolidated statements of operations and comprehensive loss.

For the three and nine months ended September 30, 2020, the Company recognized $ 22.5 million and $ 61.7 million of collaboration revenue, respectively, the majority of which relates to the Combined Performance Obligation.

As of September 30, 2020, the Company has total deferred revenue of $ 775.2 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 September 30, 2020.

The costs associated with co-development activities performed under the Roche Agreement are included in research and development expenses, with any reimbursement of costs by Roche reflected as a reduction of such expenses when the related expense is incurred.

For the three and nine months ended September 30, 2020, costs reimbursable by Roche and reflected as a reduction to operating expenses were $ 16.9 million and $ 42.2 million, respectively, and $ 16.9 million is included in accounts receivable as of September 30, 2020.

For the three months ended March 31, 2021 and 2020, the Company recognized $ 22.0 million and $ 13.2 million of collaboration revenue, respectively, associated with the license, collaboration and option agreement (the “Roche Agreement”) with Roche Holding A.G.

As of March 31, 2021, the Company has total deferred revenue of $ 730.7 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 to acquire ex-U.S.

rights to certain DMD-specific programs was $ 485.0 million as of March 31, 2021.

The costs associated with co-development activities performed under the Roche Agreement are included in operating expenses, with any reimbursement of costs by Roche reflected as a reduction of such expenses when the related expense is incurred.

For the three months ended March 31, 2021 and 2020, costs reimbursable by Roche and reflected as a reduction to operating expenses were $ 13.4 million and $ 16.4 million, respectively.

As of March 31, 2021, there was $ 15.1 million of collaboration receivable included in other current assets.

BioMarin Pharmaceutical, Inc.

The FDA approval of AMONDYS 45 (casimersen) in February 2021 resulted in a settlement charge to BioMarin Pharmaceutical, Inc.

(“BioMarin”) under the terms of the previous settlement agreement with BioMarin.

This amount, which was expensed as incurred, is separately presented in the statement of operations for the three months ended March 31, 2021.

Research and Option Agreements

During the three and nine months ended September 30, 2020, the Company entered into multiple research and option agreements with third parties in order to develop various technologies and biologics that may be used in the administration of the Company’s genetic therapeutics, with aggregate up-front payments made by the Company of $ 1.1 million and $ 13.1 million, respectively, which were recorded as research and development expense in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

The Company has 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.

The agreements generally provide for research services related to preclinical development programs, and options to license the technology for clinical development.

2 unchanged sentences

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 September 30, 2020, the Company has not exercised any options nor have any research milestone payments become probable of occurring.

As of March 31, 2021, the Company has not exercised any options nor have any research milestone payments become probable of occurring.

Milestone Obligations

The Company has license and collaboration agreements in place for which it could be obligated to pay, in addition to the payment of up-front fees upon execution of the agreements, certain milestone payments as a product candidate proceeds from the submission of an investigational new drug application through approval for commercial sale and beyond.

As of September 30, 2020, the Company may be obligated to make up to $ 3.7 billion in future development, regulatory, commercial and up-front royalty milestone payments associated with its license and collaboration agreements.

These obligations exclude potential future option and milestone payments for options that have yet to be exercised within agreements entered into by the Company as of September 30, 2020, which are discussed above.

For the three and nine months ended September 30, 2020, the Company recognized up-front, development milestone, and other expenses of $ 15.4 million and $ 36.7 million, respectively, as research and development expense in the accompanying unaudited condensed consolidated statement of operations and comprehensive loss.

For the three and nine months ended September 30, 2019, the Company recognized up-front, development milestone, and other expenses of $ 10.2 million and $ 25.7 million, respectively, as research and development expense in the accompanying unaudited condensed consolidated statement of operations and comprehensive loss.

As of March 31, 2021, the Company may be obligated to make up to $ 3.9 billion in future development, regulatory, commercial and up-front royalty milestone payments associated with its license and collaboration agreements.

These obligations exclude potential future option and milestone payments for options that have yet to be exercised within agreements entered into by the Company as of March 31, 2021, which are discussed above.

For the three months ended March 31, 2021 and 2020, the Company recognized up-front, development milestone, settlement and other expenses of $ 14.0 million and $ 8.5 million, respectively, as research and development expense in the accompanying unaudited condensed consolidated statement of operations and comprehensive loss.

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.

I n February 2021, the Company entered into an agreement to sell the rare pediatric disease Priority Review Voucher (“PRV”) it received from the FDA in connection with the approval of AMONDYS 45 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.

The transaction closed on April 13, 2021 and 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 during the quarter ended June 30, 2021 .

In February 2020, the Company entered into an agreement to sell the rare pediatric disease PRV it received from the FDA in connection with the approval of VYONDYS 53.

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 unchanged sentences

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

Fair Value Measurement as of September 30, 2020

Fair Value Measurement as of March 31, 2021

(in thousands)

15 unchanged sentences

and certificates of deposit.

Certain of the government and government agency bonds are publicly traded fixed income securities and are presented as cash equivalents on the unaudited condensed consolidated balance sheets as of September 30, 2020.

The Company’s asset with fair value categorized as Level 3 within the fair value hierarchy consists of a strategic investment in Series A preferred stock of Lacerta Therapeutics, Inc.

The Company’s assets with fair value categorized as Level 3 within the fair value hierarchy consist of a strategic investment in Series A preferred stock of Lacerta Therapeutics, Inc.

(“Lacerta”) and strategic investments in Series A and Series B preferred stock of two other private companies.

For more information related to Lacerta, please read Note 3, License and Collaboration Agreements of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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

This fair value measurement was based upon significant inputs not observable in the market and therefore represented a Level 3 measurement.

At the end of each reporting period, the fair value will be adjusted if Lacerta issues similar or identical equity securities or when there is a triggering event for impairment.

There were no changes in the fair value of the Lacerta strategic investment during the nine months ended September 30, 2020.

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 other two private companies are recorded at fair value at the time of purchase as measured by their respective investment cost.

At the end of each reporting period, the fair value of investments in equity securities will be adjusted if the issuers 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 three months ended March 31, 2021, other than the additional investment of $ 1.8 million in Series B preferred stock of a private company.

The Company’s contingent consideration liability with fair value categorized as Level 3 within the fair value hierarchy relate to the regulatory-related contingent payments to Myonexus Therapeutics, Inc.

(“Myonexus”) selling shareholders as well as to an academic institution under separate license agreements that meet the definition of a derivative.

(“Myonexus”) selling shareholders as well as to two 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 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 .

3 unchanged sentences

At the end of each reporting period, the fair value is adjusted to reflect the most current assumptions through earnings.

There were no transfers between levels 1, 2 and 3 during the three and nine months ended September 30, 2020.

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

For the Nine Months Ended

September 30, 2020

(in thousands)

Fair value as of December 31, 2019

Additions of contingent consideration

Changes in estimated fair value

Fair value as of September 30, 2020

An increase of $ 0.3 million was recorded during the three months ended September 30, 2020 to account for a new contingent consideration liability associated with a new license agreement with an academic institution that meets the definition of a derivative.

An increase of $ 45.0 million was recorded during the three months ended September 30, 2020 to account for the change in fair value of existing contingent consideration liabilities.

This change, which is recorded through earnings, 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.

As of September 30, 2020, the contingent consideration was recorded as a non-current liability on the Company’s unaudited condensed consolidated balance sheets.

There were no transfers between levels 1, 2 and 3 during the three months ended March 31, 2021.

For the three months ended March 31, 2021, there have been no changes to the fair value of the contingent consideration liability.

As of March 31, 2021, the contingent consideration was recorded as a non-current liability on the Company’s unaudited condensed consolidated balance sheets.

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

1 unchanged sentence

The following table summarizes the Company’s financial assets with maturities of less than 90 days from the date of purchase included in cash equivalents in the unaudited condensed consolidated balance sheets for each of the periods indicated:

September 30,

(in thousands)

2 unchanged sentences

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 September 30, 2020 and December 31, 2019 was approximately one and two months , respectively.

The following tables summarize the Company’s cash, cash equivalents and short-term investments for each of the periods indicated:

As of September 30, 2020

The weighted average maturity of the Company’s available-for-sale securities as of March 31, 2021 and December 31, 2020 was approximately one and two months , respectively.

The following tables summarize the Company’s cash, cash equivalents and short-term investments as of the periods indicated:

As of March 31, 2021

(in thousands)

13 unchanged sentences

Total cash, cash equivalents and investments

ACCOUNTS RECEIVABLE AND RESERVES FOR PRODUCT SALES

PRODUCT REVENUES, NET, ACCOUNTS RECEIVABLE AND RESERVES FOR PRODUCT SALES

The following table summarizes the Company’s product revenues, net by product for the periods indicated:

For the Three Months Ended

(in thousands)

Product revenues, net

The following table summarizes the components of the Company’s accounts receivable for the periods indicated:

September 30,

(in thousands)

Product sales receivable, net of discounts and allowances

Collaboration receivable

Government contract receivable

Government contract receivables

Total accounts receivable, net

5 unchanged sentences

Payments/credits

Balance, as of September 30, 2020

Balance, as of March 31, 2021

Other Accruals

2 unchanged sentences

Payments/credits

Balance, as of September 30, 2019

Balance, as of March 31, 2020

The following table summarizes the total reserves included in the Company’s unaudited condensed consolidated balance sheets for the periods indicated:

September 30,

(in thousands)

3 unchanged sentences

The following table summarizes the components of the Company’s inventory for the periods indicated:

September 30,

(in thousands)

4 unchanged sentences

The following table summarizes the Company’s other current assets for each of the periods indicated:

September 30,

(in thousands)

1 unchanged sentence

Prepaid clinical and pre-clinical expenses

Prepaid insurance

Collaboration receivable

Prepaid maintenance services

Prepaid research expenses

Prepaid income tax

Prepaid maintenance services

Leasehold improvement receivable

Prepaid insurance

Total other current assets

The following table summarizes the Company’s other non-current assets for each of the periods indicated:

September 30,

(in thousands)

6 unchanged sentences

The following table summarizes the Company’s accrued expenses for each of the periods indicated:

September 30,

(in thousands)

1 unchanged sentence

Accrued contract manufacturing costs

Accrued employee compensation costs

Accrued clinical and pre-clinical costs

Accrued employee compensation costs

Accrued professional fees

Accrued milestone expense

Accrued property and equipment

Accrued royalties

Accrued collaboration cost sharing

Accrued royalties

Accrued property and equipment

Accrued interest expense

Total accrued expenses

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.

The Company incurred $ 10.6 million of offering costs, which represents 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.

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.

For more information related to the 2024 Notes, please read Note 13, Indebtedness of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Upon adoption of ASU 2020-06, the 2024 Notes are accounted for as a single liability measured at its amortized cost.

The cumulative effect of the accounting change as of January 1, 2021 increased the carrying amount of the convertible notes by $ 96.8 million, reduced the accumulated deficit by $ 60.2 million and reduced additional paid-in capital by $ 157.0 million.

Interest expense of the 2024 convertible notes will be lower as a result of adoption of this guidance.

The effective interest rate on the liability component of the 2024 Notes for the three months ended March 31, 2021 was 1.9 %.

For the three months ended March 31, 2021 and 2020, the interest expense related to the 2024 Notes was $ 2.7 million and $ 7.7 million, respectively.

The fair value of the Company’s 2024 Notes as of March 31, 2021 was $ 735.0 million, based on open market trades and is classified as level 1 in the fair value hierarchy.

December 2019 Term Loan

There have been no material changes to the December 2019 Term Loan in the three months ended March 31, 2021.

For more information related to the term loan, please read Note 13, Indebtedness of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The following table summarizes the Company’s debt facilities for the periods indicated:

(in thousands)

Principal amount of the 2024 Notes

Unamortized discount - equity component

Unamortized discount - debt issuance costs

Net carrying value of 2024 Notes

Principal amount of the 2019 Term Loan

Unamortized discounts

Net carrying value of 2019 Term Loan

Total carrying value of debt facilities

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

March 31, 2021

(in thousands)

2021 (April-December)

Total payments

STOCK-BASED COMPENSATION

The following table summarizes the Company’s stock awards granted for each of the periods indicated:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Stock options

1 unchanged sentence

Stock-based Compensation Expense

For the three months ended September 30, 2020 and 2019, total stock-based compensation expense was $ 26.9 million and $ 20.6 million, respectively.

For the nine months ended September 30, 2020 and 2019, total stock-based compensation expense was $ 78.5 million and $ 56.5 million, respectively.

For the three months ended March 31, 2021 and 2020, total stock-based compensation expense was $ 28.5 million and $ 24.0 million, respectively.

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

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

(in thousands)

Research and development

3 unchanged sentences

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

(in thousands)

Stock options

5 unchanged sentences

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

(in thousands)

Interest expense

2 unchanged sentences

Gain from sale of Priority Review

Loss on contingent consideration*

Other expense, net

Other (expense) income, net

Total other (loss) income

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

Please see Note 5.

Fair Value Measurements for further details.

The Company has real estate operating leases in Cambridge, Andover and Burlington, Massachusetts and Dublin and Columbus, Ohio that provide for scheduled annual rent increases throughout each lease’s term.

There have been no significant changes to the real estate leases in the nine months ended September 30, 2020.

The Company has also identified embedded leases in its manufacturing and supply agreements with Catalent, Inc.

(“Catalent”) and Thermo Fisher Scientific, Inc.

For additional details relating to these two agreements, please read Note 21, Commitments and Contingencies of the Annual Report on Form 10-K for the year ended December 31, 2019.

The Company determined that both the Catalent and Thermo agreements contain an embedded lease because the Company controls the use of the facilities and related equipment therein.

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

The lease on two of the four dedicated clean room suites at Catalent and four of the eight dedicated clean room suites at Thermo commenced during the first and second quarter of fiscal 2020, respectively, which is when the dedicated clean room suites became available for use by the Company.

Accordingly, the fixed and in-substance fixed contract consideration associated with the dedicated clean room suites was allocated to the lease and non-lease components.

The lease component was determined based on the estimated standalone price of the leased clean rooms and the associated equipment based on available market and specific cost information.

The non-lease component was determined using the residual estimation approach as the standalone price of the gene therapy manufacturing and supply services provided by both Catalent and Thermo is highly variable.

Consequently, as of the nine months ended September 30, 2020, the Company had aggregate right of use (“ROU”) assets of $ 36.3 million and aggregate lease liabilities of $ 32.2 million relating to the dedicated clean room suites at both Catalent and Thermo.

The initial ROU assets and lease liabilities recorded were based on the present value of estimated future payments associated with the lease component of the Catalent and Thermo clean room suites at discount rates of 8.0 % and 7.5 %, respectively, representing the rate at which the Company could borrow on a collateralized basis the amount of the lease payments in a similar term.

The difference between the ROU assets and the lease liabilities results from certain prepayments made to Catalent and Thermo by the Company prior to the commencement of the leases.

The weighted average remaining lease term on the leases for the dedicated clean room suites range between 4.3 and 7.2 years.

The total lease liability payments are expected to be paid in equal installments through the five-year and eight-year terms of the Catalent and Thermo agreements, respectively.

The leases on the remaining two clean room suites at Catalent and four clean room suites at Thermo have not commenced as of September 30, 2020 because these clean room suites are not yet available for use by the Company.

Accordingly, cumulative payments totaling $ 24.0 million and $ 47.9 million made to Catalent and Thermo, respectively, relating to the remaining clean room suites which have not become available to the Company have been recorded as other assets in the accompanying unaudited condensed consolidated balance sheets, a portion of which will be considered in the initial measurement of the cost of the ROU asset at the lease commencement date, currently anticipated to occur in the fourth quarter of 2020 for Catalent and the first half of 2021 for Thermo.

For the three and nine months ended September 30, 2020, the Company recorded aggregate operating lease costs of $ 2.2 million and $ 5.0 million related to the Catalent and Thermo embedded leases, respectively.

For the three and nine months ended September 30, 2020, the Company recorded aggregate variable lease costs of $ 3.0 million and $ 7.5 million, respectively.

The operating lease costs and variable lease costs of the Thermo and Catalent embedded leases were included in research and development expense in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

NET LOSS PER SHARE

1 unchanged sentence

Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding.

For the three and nine months ended September 30, 2020 and 2019, there were no differences between basic and diluted net loss per share since the effect of common stock equivalents would be anti-dilutive due to the net loss position and, therefore, would be excluded from the diluted net loss per share calculation.

For the three months ended March 31, 2021 and 2020, there were no differences between basic and diluted net loss per share since the effect of common stock equivalents would be anti-dilutive due to the net loss position and, therefore, would be excluded from the diluted net loss per share calculation.

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

(in thousands, except per share amounts)

Weighted-average common shares outstanding - basic

2 unchanged sentences

Net loss per share - basic and diluted

For both the three and nine months ended September 30, 2020 and 2019, stock options, RSAs, RSUs, and ESPP to purchase 9.6 million shares of the Company’s common stock were excluded from the diluted net loss per share calculation as their effect would have been anti-dilutive.

The Company accounts for the effect of the 2024 Notes on diluted net earnings per share using the if-converted method as they may be settled in cash or shares at the Company’s option.

While the closing price on September 30, 2020 exceeded the conversion price of $ 73.42 , the potential shares issuable under the 2024 Notes were excluded from the calculation of diluted loss per share as they were anti-dilutive using the if-converted method.

In the period of conversion, the 2024 Notes will have no impact on diluted net earnings (loss) if they are settled in cash and will have an impact on diluted earnings per share if the Notes are settled in shares upon conversion and when the Company is in an income position.

For the three months ended March 31, 2021 and 2020, stock options, RSAs, RSUs, and ESPP to purchase 10.3 million and 10.5 million shares of the Company’s common stock, respectively, were excluded from the diluted net loss per share calculation as their effect would have been anti-dilutive.

The Company accounts for the effect of the 2024 Notes on diluted net earnings per share using the if-converted method as this obligation may be settled in cash or shares at the Company’s option.

The effect of potential share settlement is included in the diluted EPS calculation if the effect is more dilutive.

During the three months ended March 31, 2021, the inclusion of the potential share settlement of the 2024 was anti-dilutive.

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

The following table summarizes the aggregate non-cancelable contractual obligations arising from the Company’s manufacturing obligations:

September 30, 2020

March 31, 2021

(in thousands)

2020 (October - December)

2021 (April - December)

Total manufacturing commitments*

Total manufacturing commitments include both Catalent and Thermo Agreements.

Related to the embedded leases at Catalent and Thermo that have commenced during the nine months ended September 30, 2020, the Company recorded an ROU asset and a lease liability.

Please see Note 13.

Leases for further details.

Total manufacturing commitments include both the Catalent and Thermo manufacturing and supply agreements.

Related to the embedded leases at Catalent and Thermo , the Company has an ROU asset and a lease liability recorded on the unaudited condensed consolidated balance sheets as of March 31, 2021.

For more information, please read Note 19, Leases of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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.

The Company has leases embedded in two of its manufacturing and supply agreements as the Company determined that it controls the use of clean room suites and the related equipment therein.

During the three months ended March 31, 2021, the Company modified the terms of its manufacturing and supply agreement with Catalent, Inc.

The modification decreased the Company’s right of use of certain dedicated clean room suites and reduced the fixed and in-substance fixed payments due over the remaining term of the agreement.

The modification was accounted for as a partial lease termination, resulting in:

(i) the derecognition of right of use assets of $ 22.8 million, (ii) the derecognition of lease liabilities of $ 20.0 million, and (iii) the recognition of a loss of $ 2.8 million, which is included in research and development expense.

In the normal course of business, the Company may from time to time be named as a party to various legal claims, actions and complaints, including matters involving securities, employment, intellectual property, effects from the use of therapeutics utilizing its technology, or others.

For example, on August 30, 2019, Plaintiff Andrew Salinger filed a putative class action complaint against the Company and two of its current officers, Douglas S.

Ingram and Sandesh Mahatme (collectively, the “Defendants”), in the United States District Court for the Southern District of New York.

The complaint alleged that the Defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and SEC Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the Exchange Act, in connection with the Company’s disclosures related to golodirsen.

The proposed class consisted of all persons or entities who acquired Company securities between September 6, 2017 and August 19, 2019.

On December 17, 2019, the district court appointed Bernard Portnoy as lead plaintiff, and set a briefing schedule requiring the amended complaint to be filed on February 18, 2020 and requiring Defendants to answer or otherwise respond to the amended complaint on April 17, 2020.

On February 13, 2020, the lead plaintiff filed a Notice of Voluntary Dismissal of his claims against all Defendants.

On April 22, 2020, the Court endorsed the Notice of Voluntary Dismissal and closed the case.

On January 7, 2020, Plaintiff Al Lutzker filed a stockholder derivative complaint, purportedly on behalf of the Company, against two of the Company’s current officers, Douglas S.

Ingram and Sandesh Mahatme, and six current members of Company’s Board of Directors, M.

Kathleen Behrens, Richard J.

Barry, Michael W.

Bonney, Mary Ann Gray, Claude Nicaise, and Hans Wigzell (collectively, the “Defendants”), in the United States District Court for the District of Delaware.

The complaint asserted claims for breach of fiduciary duty, insider selling, unjust enrichment, waste of corporate assets, and violations of Section 14(a) of the Securities Exchange Act of 1934, and Rule 14a-9 promulgated thereunder, in connection with the Company’s disclosures related to golodirsen.

On April 7, 2020, the plaintiff filed a Notice of Voluntary Dismissal of his claims against all Defendants, and the court closed the case.

On September 15, 2020, REGENXBIO INC.

7 unchanged sentences

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

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

The Court has not scheduled a date for the hearing.

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

SUBSEQUENT EVENT

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

The 2019 Term Loan has two tranches:

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

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

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

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

The Amendment increases the aggregate principal amount of the tranche B loan from $250.0 million to $ 300.0 million.

In addition, the Amendment extends the maturity date for the tranche B loan to December 31, 2024 and increases the funding fee payable to each Lender to 2.95 %.

On November 2, 2020, the Company drew down the $ 300.0 million tranche B loan.

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

What changed 10-Q

Item 1. Financial Statements