Sarepta Therapeutics, Inc. 10-Q

Item 1. Financial Statements SAREPTA THERAPEUTICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except share and per share amounts) As of March 31, 2021 As of December 31, 2020 Assets Current assets: Cash and cash equivalents $ 1,481,836 $ 1,502,648 Short-term investments 255,997 435,923 Accounts receivable 118,203 101,340 Inventory 240,333 231,961 Other current assets 174,981 213,324 Total current assets 2,271,350 2,485,196 Property and equipment, net 203,107 190,430 Intangible assets, net 14,124 13,628 Right of use assets 65,068 91,761 Other non-current assets 211,584 203,703 Total assets $ 2,765,233 $ 2,984,718 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 76,651 $ 111,090 Accrued expenses 180,636 193,553 Deferred revenue, current portion 89,244 89,244 Other current liabilities 18,205 22,139 Total current liabilities 364,736 416,026 Long-term debt 1,091,110 992,493 Lease liabilities, net of current portion 60,675 80,367 Deferred revenue, net of current portion 641,483 663,488 Contingent consideration 50,800 50,800 Other non-current liabilities 20,984 19,785 Total liabilities 2,229,788 2,222,959 Commitments and contingencies (Note 15) Stockholders’ equity: Preferred stock, $ 0.0001 par value, 3,333,333 shares authorized; no ne issued and outstanding — — Common stock, $ 0.0001 par value, 198,000,000 shares authorized; 79,748,109 and 79,374,247 issued and outstanding at March 31, 2021, and December 31, 2020, respectively 8 8 Additional paid-in capital 3,490,658 3,609,877 Accumulated other comprehensive (loss) income, net of tax ( 3 ) 3 Accumulated deficit ( 2,955,218 ) ( 2,848,129 ) Total stockholders’ equity 535,445 761,759 Total liabilities and stockholders’ equity $ 2,765,233 $ 2,984,718 See accompanying notes to unaudited condensed consolidated financial statements. 3 SAREPTA THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited, in thousands, except per share amounts) For the Three Months Ended March 31, 2021 2020 Revenues: Products, net $ 124,926 $ 100,448 Collaboration 22,005 13,226 Total revenues 146,931 113,674 Cost and expenses: Cost of sales (excluding amortization of in-licensed rights) 22,346 12,622 Research and development 195,149 136,144 Selling, general and administrative 71,131 82,768 Settlement and license charges 10,000 — Amortization of in-licensed rights 170 166 Total cost and expenses 298,796 231,700 Operating loss ( 151,865 ) ( 118,026 ) Other (loss) income: Other expense, net ( 15,528 ) ( 7,420 ) Gain from sale of Priority Review Voucher — 108,069 Total other (loss) income ( 15,528 ) 100,649 Loss before income tax (benefit) expense ( 167,393 ) ( 17,377 ) Income tax (benefit) expense ( 143 ) 115 Net loss ( 167,250 ) ( 17,492 ) Other comprehensive (loss) income: Unrealized (losses) gains on investments, net of tax ( 6 ) 574 Total other comprehensive (loss) income ( 6 ) 574 Comprehensive loss $ ( 167,256 ) $ ( 16,918 ) Net loss per share - basic and diluted $ ( 2.10 ) $ ( 0.23 ) Weighted average number of shares of common stock used in computing basic and diluted net loss per share 79,454 76,432 See accompanying notes to unaudited condensed consolidated financial statements. 4 SAREPTA THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited, in thousands) Accumulated Additional Other Total Common Stock Paid-In Comprehensive Accumulated Stockholders' Shares Amount Capital Income (Loss) Deficit Equity Balance at December 31, 2020 79,374 $ 8 $ 3,609,877 $ 3 $ ( 2,848,129 ) $ 761,759 Cumulative effect of accounting change to adopt ASU 2020-06 — — ( 156,953 ) — 60,161 ( 96,792 ) Exercise of options for common stock 108 — 4,683 — — 4,683 Vest of restricted stock units 204 — — — — — Issuance of common stock under employee stock purchase plan 62 — 4,543 — — 4,543 Stock-based compensation — — 28,508 — — 28,508 Unrealized losses from available-for-sale securities, net of tax — — — ( 6 ) — ( 6 ) Net loss — — — — ( 167,250 ) ( 167,250 ) Balance at March 31, 2021 79,748 $ 8 $ 3,490,658 $ ( 3 ) $ ( 2,955,218 ) $ 535,445 Accumulated Additional Other Total Common Stock Paid-In Comprehensive Accumulated Stockholders' Shares Amount Capital Income Deficit Equity Balance at December 31, 2019 75,185 $ 8 $ 3,112,130 $ 50 $ ( 2,294,001 ) $ 818,187 Exercise of options for common stock 97 — 3,687 — — 3,687 Vest of restricted stock units 98 — — — — — Issuance of common stock to Roche, net of issuance costs 2,522 — 312,053 — — 312,053 Issuance of common stock under employee stock purchase plan 56 — 3,795 — — 3,795 Stock-based compensation — — 24,024 — — 24,024 Unrealized gains from available-for-sale securities, net of tax — — — 574 — 574 Net loss — — — — ( 17,492 ) ( 17,492 ) Balance at March 31, 2020 77,958 $ 8 $ 3,455,689 $ 624 $ ( 2,311,493 ) $ 1,144,828 See accompanying notes to unaudited condensed consolidated financial statements. 5 SAREPTA THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) For the Three Months Ended March 31, 2021 2020 Cash flows from operating activities: Net loss $ ( 167,250 ) $ ( 17,492 ) Adjustments to reconcile net loss to cash flows from operating activities: Depreciation and amortization 8,930 6,529 Reduction in the carrying amounts of the right of use assets 2,220 2,153 Amortization of investment discount ( 82 ) ( 1,284 ) Non-cash interest expense 1,816 6,342 Stock-based compensation 28,508 24,024 Gain from sale of Priority Review Voucher, net of commission — ( 108,069 ) Other 2,774 ( 1,381 ) Changes in operating assets and liabilities, net: Net increase in accounts receivable ( 16,863 ) ( 15,996 ) Net increase in inventory ( 8,372 ) ( 1,789 ) Net decrease (increase) in other assets 34,915 ( 27,966 ) Net (decrease) increase in deferred revenue ( 22,005 ) 820,437 Net decrease in accounts payable, accrued expenses and other liabilities ( 44,962 ) ( 57,718 ) Net cash (used in) provided by operating activities ( 180,371 ) 627,790 Cash flows from investing activities: Purchase of property and equipment ( 21,149 ) ( 9,120 ) Purchase of available-for-sale securities ( 29,989 ) ( 365,437 ) Maturity and sale of available-for-sale securities 210,000 250,000 Proceeds from sale of Priority Review Voucher, net of commission — 108,069 Other ( 2,196 ) ( 1,192 ) Net cash provided by (used in) investing activities 156,666 ( 17,680 ) Cash flows from financing activities: Proceeds from exercise of stock options and purchase of stock under the Employee Stock Purchase Program 9,226 7,482 Taxes paid related to net share settlement of equity awards ( 6,333 ) ( 4,798 ) Proceeds from issuance of common stock to Roche, net of offering costs — 316,338 Net cash provided by financing activities 2,893 319,022 (Decrease) increase in cash, cash equivalents and restricted cash ( 20,812 ) 929,132 Cash, cash equivalents and restricted cash: Beginning of period 1,511,713 843,645 End of period $ 1,490,901 $ 1,772,777 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 1,481,836 $ 1,764,212 Restricted cash in other assets 9,065 8,565 Total cash, cash equivalents and restricted cash $ 1,490,901 $ 1,772,777 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 11,688 $ 5,385 Supplemental schedule of non-cash investing activities and financing activities: Intangible assets and property and equipment included in accrued expenses $ 5,729 $ 6,154 Lease liabilities arising from obtaining right of use assets $ 901 $ 24,783 Lease liabilities terminated $ 19,967 $ — Issuance costs related to the Roche Collaboration in accrued expenses $ — $ 4,285 See accompanying notes to unaudited condensed consolidated financial statements. 6 SAREPTA THERAPEUTICS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION AND NATURE OF BUSINESS Sarepta Therapeutics, Inc. (together with its wholly-owned subsidiaries, “Sarepta” or the “Company”) is a commercial-stage biopharmaceutical company focused on helping patients through the discovery and development of unique RNA-targeted therapeutics, gene therapy and other genetic therapeutic modalities for the treatment of rare diseases. Applying its proprietary, highly-differentiated and innovative technologies, and through collaborations with its strategic partners, the Company is developing potential therapeutic candidates for a broad range of diseases and disorders, including Duchenne muscular dystrophy (“DMD”), Limb-girdle muscular dystrophies (“LGMDs”), 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 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS Basis of Presentation The accompanying unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), reflect the accounts of Sarepta 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. 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 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 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 The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of accounts receivable from customers, cash held at financial institutions and cash equivalents and investments. 7 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 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 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. Significant Accounting Policies For details about the Company’s accounting policies, please read Note 2, Summary of Significant Accounting Policies and Recent Accounting Pronouncements of the Annual Report on Form 10-K for the year ended December 31, 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 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): 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 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): Simplifying the Accounting for Income Taxes”, which is intended to simplify the accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. The new 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. 8 3. LICENSE AND COLLABORATION AGREEMENTS Roche Holding A.G. 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. (“Roche”). 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 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. 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 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 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. 4. GAIN FROM SALE OF PRIORITY REVIEW VOUCHER 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. 9 5. FAIR VALUE MEASUREMENTS The Company has certain financial assets and liabilities that are recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements. • Level 1 — quoted prices for identical instruments in active markets; • Level 2 — quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and • Level 3 — valuations derived from valuation techniques in which one or more significant value drivers are unobservable. The tables below present information about the Company’s financial assets and liabilities that are measured and carried at fair value and indicate the level within the fair value hierarchy of valuation techniques it utilizes to determine such fair value: Fair Value Measurement as of March 31, 2021 Total Level 1 Level 2 Level 3 (in thousands) Assets Money market funds $ 1,053,383 $ 1,053,383 $ — $ — Government and government agency bonds 359,029 359,029 — — Strategic equity investments 40,640 3,740 — 36,900 Certificates of deposit 250 250 — — Total assets $ 1,453,302 $ 1,416,402 $ — $ 36,900 Liabilities Contingent consideration $ 50,800 $ — $ — $ 50,800 Total liabilities $ 50,800 $ — $ — $ 50,800 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 The Company’s assets with fair value categorized as Level 1 within the fair value hierarchy include money market funds, government and government agency bonds, the Company’s strategic investment in Lysogene S.A. and certificates of deposit. Certain of the government and government agency bonds are publicly traded fixed income securities and are presented as cash equivalents on the unaudited condensed consolidated balance sheets as of March 31, 2021. 10 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 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 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 . 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 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. 6. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES The following table summarizes the Company’s financial assets with maturities of less than 90 days from the date of purchase included in cash equivalents in the unaudited condensed consolidated balance sheets for each of the periods indicated: As of March 31, 2021 As of December 31, 2020 (in thousands) Money market funds $ 1,053,383 $ 629,440 Government and government agency bonds 103,032 602,058 Total $ 1,156,415 $ 1,231,498 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 March 31, 2021 and December 31, 2020 was approximately one and two months , respectively. 11 The following tables summarize the Company’s cash, cash equivalents and short-term investments as of the periods indicated: As of March 31, 2021 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in thousands) Cash and money market funds $ 1,378,804 $ — $ — $ 1,378,804 Government and government agency bonds 359,013 16 — 359,029 Total cash, cash equivalents and investments $ 1,737,817 $ 16 $ — $ 1,737,833 As reported: Cash and cash equivalents $ 1,481,836 $ — $ — $ 1,481,836 Short-term investments 255,981 16 — 255,997 Total cash, cash equivalents and investments $ 1,737,817 $ 16 $ — $ 1,737,833 As of December 31, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair 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 7. 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 March 31, 2021 2020 (in thousands) EXONDYS 51 $ 107,185 $ 98,183 VYONDYS 53 17,548 2,265 AMONDYS 45 193 — Product revenues, net $ 124,926 $ 100,448 The following table summarizes the components of the Company’s accounts receivable for the periods indicated: As of March 31, 2021 As of December 31, 2020 (in thousands) Product sales receivable, net of discounts and allowances $ 117,733 $ 100,870 Government contract receivables 470 470 Total accounts receivable, net $ 118,203 $ 101,340 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. 12 The following tables summarize an analysis of the change in reserves for discounts and allowances for each of the periods indicated: Chargebacks Rebates Prompt Pay Other Accruals Total (in thousands) Balance, as of December 31, 2020 $ 2,281 $ 41,771 $ 1,949 $ 4,969 $ 50,970 Provision 2,085 14,907 1,844 3,191 22,027 Payments/credits ( 3,969 ) ( 9,108 ) ( 1,432 ) ( 2,619 ) ( 17,128 ) Balance, as of March 31, 2021 $ 397 $ 47,570 $ 2,361 $ 5,541 $ 55,869 Chargebacks Rebates Prompt Pay Other Accruals Total (in thousands) Balance, as of December 31, 2019 $ 588 $ 44,738 $ 1,506 $ 4,671 $ 51,503 Provision 2,435 12,083 1,373 2,103 17,994 Payments/credits ( 2,336 ) ( 10,979 ) ( 1,291 ) ( 4,023 ) ( 18,629 ) Balance, as of March 31, 2020 $ 687 $ 45,842 $ 1,588 $ 2,751 $ 50,868 The following table summarizes the total reserves included in the Company’s unaudited condensed consolidated balance sheets for the periods indicated: As of March 31, 2021 As of December 31, 2020 (in thousands) Reduction to accounts receivable $ 7,421 $ 8,352 Component of accrued expenses 48,448 42,618 Total reserves $ 55,869 $ 50,970 8. INVENTORY The following table summarizes the components of the Company’s inventory for the periods indicated: As of March 31, 2021 As of December 31, 2020 (in thousands) Raw materials $ 62,244 $ 71,717 Work in progress 149,811 139,704 Finished goods 28,278 20,540 Total inventory $ 240,333 $ 231,961 9. OTHER ASSETS The following table summarizes the Company’s other current assets for each of the periods indicated: As of March 31, 2021 As of December 31, 2020 (in thousands) Manufacturing-related deposits and prepaids $ 114,659 $ 134,430 Prepaid clinical and pre-clinical expenses 17,539 16,224 Collaboration receivable 15,105 34,184 Prepaid maintenance services 8,063 6,411 Prepaid research expenses 4,620 5,854 Prepaid income tax 3,930 4,939 Leasehold improvement receivable 3,059 3,059 Prepaid insurance 2,637 4,158 Other 5,369 4,065 Total other current assets $ 174,981 $ 213,324 13 The following table summarizes the Company’s other non-current assets for each of the periods indicated: As of March 31, 2021 As of December 31, 2020 (in thousands) Manufacturing-related deposits and prepaids $ 156,413 $ 148,525 Strategic investments 40,640 38,799 Restricted cash and investments 9,315 9,315 Prepaid clinical expenses 2,124 3,395 Other 3,092 3,669 Total other non-current assets $ 211,584 $ 203,703 10. ACCRUED EXPENSES The following table summarizes the Company’s accrued expenses for each of the periods indicated: As of March 31, 2021 As of December 31, 2020 (in thousands) Product revenue related reserves $ 48,448 $ 42,618 Accrued contract manufacturing costs 34,556 36,543 Accrued clinical and pre-clinical costs 24,580 22,169 Accrued employee compensation costs 23,520 50,803 Accrued professional fees 10,990 10,221 Accrued milestone expense 9,377 9,380 Accrued collaboration cost sharing 8,962 3,516 Accrued royalties 8,019 7,793 Accrued property and equipment 5,056 4,993 Accrued interest expense 3,182 1,045 Other 3,946 4,472 Total accrued expenses $ 180,636 $ 193,553 11. 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. 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. 14 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: As of March 31, 2021 As of December 31, 2020 (in thousands) Principal amount of the 2024 Notes $ 569,993 $ 569,993 Unamortized discount - equity component — ( 98,721 ) Unamortized discount - debt issuance costs ( 7,913 ) ( 6,510 ) Net carrying value of 2024 Notes 562,080 464,762 Principal amount of the 2019 Term Loan 550,000 550,000 Unamortized discounts ( 20,970 ) ( 22,269 ) Net carrying value of 2019 Term Loan 529,030 527,731 Total carrying value of debt facilities $ 1,091,110 $ 992,493 The following table summarizes the total gross payments due under the Company’s debt arrangements: As of March 31, 2021 (in thousands) 2021 (April-December) $ — 2022 — 2023 250,000 2024 869,993 2025 — Thereafter — Total payments $ 1,119,993 12. STOCK-BASED COMPENSATION The following table summarizes the Company’s stock awards granted for each of the periods indicated: For the Three Months Ended March 31, 2021 2020 Grants Weighted Average Grant Date Fair Value Grants Weighted Average Grant Date Fair Value Stock options 1,359,637 $ 49.35 1,085,330 $ 56.80 Restricted stock units 689,367 $ 87.14 498,910 $ 114.28 15 Stock-based Compensation Expense 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 March 31, 2021 2020 Research and development $ 11,126 $ 9,249 Selling, general and administrative 17,382 14,775 Total stock-based compensation expense $ 28,508 $ 24,024 The following table summarizes stock-based compensation expense by grant type included within the unaudited condensed consolidated statements of operations and comprehensive loss: For the Three Months Ended March 31, 2021 2020 Stock options $ 17,019 $ 15,355 Restricted stock awards/units 9,931 6,745 Employee stock purchase plan 1,558 1,924 Total stock-based compensation expense $ 28,508 $ 24,024 13. OTHER (LOSS) INCOME The following table summarizes other (loss) income for the periods indicated: For the Three Months Ended March 31, 2021 2020 Interest expense $ ( 15,651 ) $ ( 13,615 ) Interest income 59 2,139 Amortization of investment discount 136 2,964 Gain from sale of Priority Review Voucher — 108,069 Other (expense) income, net ( 72 ) 1,092 Total other (loss) income $ ( 15,528 ) $ 100,649 14. NET LOSS PER SHARE Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding. Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding. For the three 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 March 31, 2021 2020 Net loss $ ( 167,250 ) $ ( 17,492 ) Weighted-average common shares outstanding - basic 79,454 76,432 Effect of dilutive securities* — Weighted-average common shares outstanding - diluted 79,454 76,432 Net loss per share - basic and diluted $ ( 2.10 ) $ ( 0.23 ) 16 * 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. 15. COMMITMENTS AND CONTINGENCIES Manufacturing Obligations The following table summarizes the aggregate non-cancelable contractual obligations arising from the Company’s manufacturing obligations: As of March 31, 2021 (in thousands) 2021 (April - December) $ 523,673 2022 261,697 2023 224,980 2024 120,585 2025 114,531 Thereafter 207,325 Total manufacturing commitments* $ 1,452,791 * 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. 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. 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 September 30, 2020, the Court endorsed a stipulation filed by the parties extending Sarepta’s time to respond to the complaint to and including November 6, 17 2020. 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 . 18