What changed in this filing

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Item 1. Financial Statements

2021-08-04 compared with 2021-05-05 · 141 added, 83 removed, 399 unchanged (36% of the section changed)

3 unchanged sentences

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

March 31, 2021

June 30, 2021

December 31, 2020

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

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

and 79,374,247 issued and outstanding at June 30, 2021, and

December 31, 2020, respectively

Additional paid-in capital

Accumulated other comprehensive (loss) income, net of tax

Accumulated other comprehensive income, net of tax

Accumulated deficit

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For the Three Months Ended

For the Six Months Ended

Products, net

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Operating loss

Other (loss) income:

Other expense, net

Other income (loss):

Gain from sale of Priority Review Voucher

Total other (loss) income

Other expense, net

Total other income (loss)

Loss before income tax (benefit) expense

Income tax (benefit) expense

Other comprehensive (loss) income:

Unrealized (losses) gains on investments, net of tax

Total other comprehensive (loss) income

Other comprehensive loss:

Unrealized gains (losses) on investments, net of tax

Total other comprehensive loss

Comprehensive loss

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Balance at March 31, 2021

Exercise of options for common stock

Vest of restricted stock units

Shares withheld for taxes

Stock-based compensation

Unrealized losses from available-for-sale

securities, net of tax

Balance at June 30, 2021

Comprehensive

Stockholders'

Income (Loss)

Balance at December 31, 2019

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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

See accompanying notes to unaudited condensed consolidated financial statements.

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(unaudited, in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities:

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

Gain from sale of Priority Review Voucher, net of commission

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:

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Net (decrease) increase in deferred revenue

Net decrease in accounts payable, accrued expenses and other liabilities

Net increase (decrease) in accounts payable, accrued expenses and other liabilities

Net cash (used in) provided by operating activities

1 unchanged sentence

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

Proceeds from sale of Priority Review Voucher, net of commission

Net cash provided by (used in) investing activities

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Net cash provided by financing activities

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

Increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash:

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

Intangible assets and property and equipment included in accrued expenses

Intangible assets and property and equipment included in accounts payable and accrued expenses

Shares withheld for tax 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.

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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.

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 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.

As of June 30, 2021, the Company had approximately $ 1,736.6 million of cash, cash equivalents and investments, consisting of $ 1,697.3 million of cash and cash equivalents, $ 30.0 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.

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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.

The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year.

Estimates and Uncertainties

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

As of June 30, 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.

Three individual customers accounted for 46 %, 40 % and 11 % of net product revenues for the three months ended June 30, 2021 and 48 %, 40 % and 9 % of net product revenues for the six months ended June 30, 2021.

Three individual customers accounted for 50 %, 39 % and 10 % of product revenues for the three months ended June 30, 2020 and 47 %, 40 % and 11 % of net product revenues for the six months ended June 30, 2020.

Three individual customers accounted for 47 %, 39 % and 10 % of accounts receivable from product sales as of June 30, 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.

As of June 30, 2021, the Company believes that such customers are of high credit quality.

As of June 30, 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.

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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):

There have not been any material changes to the Company’s accounting policies through June 30, 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 .”

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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.

The Company 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).

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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.

As a result of the adoption of this guidance, interest expense and net loss was reduced by $ 5.5 million and $ 11.0 million, or $ 0.07 and $ 0.14 per share, respectively, for the three and six months ended June 30, 2021.

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

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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.

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.

Hoffman-La Roche Ltd.

For the three and six months ended June 30, 2021, the Company recognized $ 22.3 million and $ 44.3 million of collaboration revenue, respectively, associated with the license, collaboration and option agreement (the “Roche Agreement”) with F.

Hoffman-La Roche Ltd.

For the three and six months ended June 30, 2020, the Company recognized $ 26.0 million and $ 39.2 million, respectively, of collaboration revenue primarily related to the Roche Agreement.

As of June 30, 2021, the Company has total deferred revenue of $ 708.5 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.

rights to certain DMD-specific programs was $ 485.0 million as of June 30, 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.

For the three and six months ended June 30, 2021, costs reimbursable by Roche and reflected as a reduction to operating expenses were $ 18.0 million and $ 31.4 million, respectively.

For the three and six months ended June 30, 2020, costs reimbursable by Roche and reflected as a reduction to operating expenses were $ 8.9 million and $ 25.4 million, respectively.

As of June 30, 2021, there was $ 17.7 million of collaboration receivable included in other current assets.

Nationwide Children’s Hospital

In December 2016, the Company entered into an exclusive option agreement with Nationwide Children’s Hospital (“Nationwide”) from which the Company obtained an exclusive right to acquire a worldwide license of the micro-dystrophin gene therapy technology for DMD and Becker muscular dystrophy.

In October 2018, the Company exercised the option and entered into a license agreement with Nationwide, which granted the Company exclusive worldwide rights to develop, manufacture and commercialize a micro-dystrophin gene therapy product candidate.

In July 2021, the Company entered into an agreement with Nationwide to settle a dispute relating to a sublicense payment owed by the Company resulting from the upfront payment received from Roche under the Roche Agreement.

The total sublicense payment payable to Nationwide under the agreement is $ 38.0 million, which was paid in July 2021.

Approximately $ 9.3 million of this amount was previously accrued as of December 31, 2020 with the remaining $ 28.7 million accrued during the three months ended June 30, 2021.

The expense relating to this payment is recognized to research and development expense.

As a result of this payment, the Company has no further financial obligations to Nationwide resulting from the upfront payment received under the Roche Agreement.

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.

(“BioMarin”) of $ 10.0 million under the terms of the previous settlement agreement with BioMarin.

This amount, which was expensed to operations as incurred, is separately presented as settlement and license charges in the Company’s unaudited condensed consolidated statement of operations and comprehensive loss for the six months ended June 30, 2021.

Research and Option Agreements

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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.

As of June 30, 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.

As of June 30, 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 June 30, 2021, which are discussed above.

For the three and six months ended June 30, 2021, the Company recognized up-front, development milestone, settlement and other expenses of $ 31.7 million and $ 45.7 million, respectively, as research and development expense in the

accompanying unaudited condensed consolidated statement of operations and comprehensive loss , inclusive of the expenses discussed above .

For the three and six months ended June 30, 2020 , the Company recognized up-front , development milestone , and other expenses of $ 12.8 million and $ 21.3 million, respectively, as research and development expense in the accompanying unaudited condensed consolidated statement of operations and comprehensive loss .

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 .

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.

Following the termination of the applicable waiting period under the Hart -Scott-Rodino Antitrust Improvements Act of 1976, as amended, in April 2021, the Company completed its sale of the PRV and received proceeds of $ 102.0 million, with no commission costs, which was recorded as a gain from sale of the PRV as it did not have a carrying value at the time of the sale.

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

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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

Fair Value Measurement as of June 30, 2021

(in thousands)

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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.

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.

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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.

There were no changes in the fair value of the strategic investments during the six months ended June 30, 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.

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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.

There were no transfers between Levels 1, 2 and 3 during the six months ended June 30, 2021.

For the six months ended June 30, 2021, there have been no changes to the fair value of the contingent consideration liability.

As of June 30, 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.

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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.

The weighted average maturity of the Company’s available-for-sale securities as of June 30, 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

As of June 30, 2021

(in thousands)

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For the Three Months Ended

For the Six Months Ended

(in thousands)

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Payments/credits

Balance, as of March 31, 2021

Balance, as of June 30, 2021

Other Accruals

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Payments/credits

Balance, as of March 31, 2020

Balance, as of June 30, 2020

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

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Manufacturing-related deposits and prepaids

Prepaid clinical and pre-clinical expenses

Collaboration receivable

Prepaid clinical and pre-clinical expenses

Prepaid maintenance services

Prepaid research expenses

Prepaid income tax

Leasehold improvement receivable

Prepaid insurance

Prepaid income tax

Total other current assets

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(in thousands)

Product revenue related reserves

Accrued contract manufacturing costs

Accrued clinical and pre-clinical costs

Product revenue related reserves

Accrued milestone and license expense

Accrued employee compensation costs

Accrued clinical and pre-clinical costs

Accrued royalties

Accrued professional fees

Accrued milestone expense

Accrued collaboration cost sharing

Accrued royalties

Accrued property and equipment

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2024 Convertible Notes

On November 14, 2017, the Company issued $ 570.0 million senior notes due on November 15, 2024 (the “2024 Notes”).

On November 14, 2017, the Company issued $ 570.0 million senior notes due on November 15, 2024 .

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.

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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.

The effective interest rate on the liability component of the 2024 Notes for both the three and six months ended June 30, 2021 was 1.9 %.

For the three and six months ended June 30, 2021, the interest expense related to the 2024 Notes was $ 2.7 million and $ 5.3 million, respectively.

For the three and six months ended June 30, 2020, the interest expense related to the 2024 Notes was $ 7.8 million and $ 15.5 million, respectively.

The fair value of the Company’s 2024 Notes as of June 30, 2021 was $ 770.4 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.

There have been no material changes to the December 2019 Term Loan in the three and six months ended June 30, 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.

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

March 31, 2021

June 30, 2021

(in thousands)

2021 (April-December)

2021 (July-December)

Total payments

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

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Stock options

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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.

For the three months ended June 30, 2021 and 2020, total stock-based compensation expense was $ 29.0 million and $ 27.6 million, respectively.

For the six months ended June 30, 2021 and 2020, total stock-based compensation expense was $ 57.5 million and $ 51.6 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

For the Six Months Ended

(in thousands)

Research and development

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For the Three Months Ended

For the Six Months Ended

(in thousands)

Stock options

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Total stock-based compensation expense

OTHER (LOSS) INCOME

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

OTHER INCOME (LOSS)

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

For the Three Months Ended

For the Six Months Ended

(in thousands)

Interest expense

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Other (expense) income, net

Total other (loss) income

Total other income (loss)

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

There have been no significant changes to the real estate leases in the six months ended June 30, 2021.

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

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

(“Thermo”) as the Company determined that it controls the use of clean room suites and the related equipment therein.

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, 2020.

The lease on four of the eight dedicated clean room suites at Thermo commenced during the second quarter of fiscal 2020.

The lease on the remaining four of the eight dedicated clean room suites at Thermo commenced during the second quarter of fiscal 2021, which is when the dedicated clean room suites became available for use by the Company.

As a result, as of June 30, 2021, the Company recorded additional aggregate right of use (“ROU”) assets of $ 10.5 million and aggregate lease liabilities of $ 8.8 million relating to these additional dedicated clean room suites.

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

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

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.

NET LOSS PER SHARE

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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 and six months ended June 30, 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

For the Six Months Ended

(in thousands, except per share amounts)

Weighted-average common shares outstanding - basic

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Net loss per share - basic and diluted

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.

For the three and six months ended June 30, 2021 and 2020, stock options, RSAs, RSUs, and ESPP to purchase 9.8 million and 10.0 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.

During the three and six months ended June 30, 2021, the inclusion of the potential share settlement of the 2024 Notes was anti-dilutive.

COMMITMENTS AND CONTINGENCIES

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

March 31, 2021

June 30, 2021

(in thousands)

2021 (April - December)

2021 (July - December)

Total manufacturing commitments*

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.

Related to the leases at Catalent and Thermo, the Company has ROU assets and lease liabilities recorded on the unaudited condensed consolidated balance sheets as of June 30, 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:

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.

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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,

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.

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

On July 13, 2021, Nippon Shinyaku Co., Ltd.

(“Nippon Shinyaku” or “NS”) filed a lawsuit against the Company in the U.S.

District Court for the District of Delaware.

NS asserts a claim for breach of contract arising from Sarepta filing seven petitions for Inter Partes Review (“IPR Petitions”) with the Patent Trial and Appeal Board at the USPTO (PTAB Case Nos.

IPR2021-01134, IPR2021-01135, IPR2021-01136, IPR2021-01137, IPR2021-01138, IPR2021-01139, IPR2021-01140) in which Sarepta is seeking to invalidate certain NS patents concerning exon 53 skipping technology (U.S.

9,708,361, 10,385,092, 10,407,461, 10,487,106, 10,647,741, 10,662,217, and 10,683,322, respectively, and collectively the “NS Patents”).

In addition, NS asserts claims for patent infringement of each of the NS Patents arising from Sarepta’s alleged activities concerning, including the sale of, its exon 53 skipping product, VYONDYS 53 (golodirsen).

NS further seeks a determination of non-infringement by NS arising from NS’s alleged activities concerning, including the sale of, its exon 53 skipping product, Viltepso (viltolarsen) and invalidity of certain patents licensed to the Company from UWA (U.S.

9,994,851, 10,227,590, and 10,266,827).

NS filed a motion for preliminary injunction solely seeking Sarepta’s withdrawal of the IPR Petitions.

The Company’s deadline for responding to NS’s motion for preliminary injunction is August 11, 2021 and for responding to NS’s complaint is September 3, 2021.

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

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