What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-04 compared with 2021-05-05 · 155 added, 102 removed, 283 unchanged (48% of the section changed)

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the expected or potential impact of the ongoing COVID-19 pandemic on our business, including our commercial sales, ongoing and planned clinical trials, manufacturing and operations;

our belief that our proprietary technology platforms and collaborations can be used to develop novel pharmaceutical products to treat a broad range of diseases;

our intention to leverage our technology platforms, organizational capabilities, collaborations and resources to lead the field of precision genetic medicines, including the treatment of rare, neuromuscular and other diseases, with a diversified portfolio of product candidates;

our technologies and programs, including those with strategic partners, and their respective potential benefits, including our PMO based compounds’ potential to be designed to create more, less, or none of certain proteins, or produce analogues of endogenous proteins;

the potential of our PPMO to be tailored to reach other organs beyond muscle and result in enhanced delivery into the cell with less frequent dosing than PMOs;

and the benefits of the AAVrh.74 vector, the MHCK7 promoter and the transgene;

our belief that our proprietary technology platforms and collaborations can be used to develop potential therapeutic candidates to treat a broad range of diseases;

our expectation that our partnerships with manufacturers will support our clinical and commercial manufacturing capacity for our micro-dystrophin Duchenne muscular dystrophy gene therapy programs and Limb-girdle muscular dystrophy programs, while also acting as a manufacturing platform for potential future gene therapy programs, and our belief that our current network of manufacturing partners are able to fulfil the requirements of our commercial plan;

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estimated timelines and milestones for 2021 and beyond, including discussing with the U.S.

Food and Drug Administration (“FDA”) the path for the commencement of Part B of Study 5051-201, announcing additional results from Part 2 of Study SRP-9001-102 in the first quarter of 2022, reporting expression and safety results from Study SRP-9001-103 in the second quarter of 2021, completing GMP runs for SRP-9003 in 2021, and seeking the FDA confirmation to initiate our pivotal trial for SRP-9003 in 2021;

Food and Drug Administration (“FDA”) the path for commencing Part B of Study 5051-201 in 2021, announcing additional results from Part 2 of Study SRP-9001-102 in the first quarter of 2022, initiating our pivotal trial (Study 301) for SRP-9001 in 2021, completing GMP runs for SRP-9003 in 2021, and meeting with the FDA in 2021 to discuss our pivotal trial for SRP-9003;

our plan to expand our pipeline through internal research and development and through strategic transactions;

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our ability to further secure long-term supply of our commercial products and our product candidates to satisfy our planned commercial, early access programs (“EAP”) and clinical needs;

the impact of regulations and regulatory decisions by the FDA and other regulatory agencies on our business, as well as the development of our product candidates and our financial and contractual obligations;

the possible impact of regulations and regulatory decisions by the FDA and other regulatory agencies on our business, as well as the development of our product candidates and our financial and contractual obligations;

the possible impact of any competing products on the commercial success of our products and our product candidates and our ability to compete against such products;

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our plans and ability to file and progress to issue additional patent applications to enhance and protect our new and existing technologies and programs;

our belief that our owned and licensed patents and patent applications provide us with a competitive advantage;

our estimates regarding how long our currently available cash and cash equivalents will be sufficient to finance our operations and business plans and statements about our future capital needs;

our estimates regarding future revenues, research and development expenses, other expenses, capital requirements and payments to third parties;

our expectations relating to potential funding from government and other sources for the development of some of our product candidates;

our expectation regarding the impact of environmental laws and regulations on our business;

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In May 2021, we announced results from the 30 mg/kg cohort of Part A of Study 5051-201.

We will discuss with the FDA the path for the commencement of Part B of Study 5051-201.

We will discuss with the FDA the path for commencing Part B of Study 5051-201 in 2021.

SRP-9001 (DMD, micro-dystrophin gene therapy program), aims to express micro-dystrophin – a smaller but functional version of dystrophin.

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We expect additional results from Part 2 of Study 102 in the first quarter of 2022.

We have com pleted dosing in Study 103, an open-label study evaluating the safety and expression of commercially representative material for SRP-9001, and expect to report expression and safety results from Study 103 in the second quarter of 2021.

We have com pleted dosing in the first cohort in Study 103, an open-label study evaluating the safety and expression of commercially representative material for SRP-9001 .

In May 2021, we announced 12-week expression and safety results from the first 11 participants enrolled in Study 103 .

We plan to initiate our pivotal trial (Study 301) in 2021 .

SRP-9003 (LGMD, gene therapy program).

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In September 2020, we announced six-month functional data from three clinical trial participants in the high-dose cohort, and eighteen-month functional data from three clinical trial participants in the low-dose cohort.

In March 2021, we announced 24-month functional and expression data from the three clinical trial participants in the low-dose cohort and twelve-month functional data from the three clinical trial participants in the high-dose cohort.

We expect to complete GMP runs for SRP-9003 in 2021.

We also plan to seek FDA confirmation to initiate our pivotal trial in 2021.

We also plan to meet with the FDA in 2021 to discuss our pivotal trial .

Our pipeline includes more than 40 programs in various stages of pre-clinical and clinical development, reflecting our multifaceted approach and expertise in precision genetic medicine to make a profound difference in the lives of patients suffering from rare diseases.

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While there are a limited number of companies that can produce raw materials and APIs in the quantities and with the quality and purity that we require for our commercial products, based on our diligence to date, we believe our current network of CMOs are able to fulfill these requirements, and are capable of expanding capacity as needed.

Additionally, we have, and will continue to evaluate further relationships with additional suppliers to increase overall capacity as well as further reduce risks associated with reliance on a limited number of suppliers for manufacturing.

Additionally, we have, and will

continue to evaluate further relationships with additional suppliers to increase overall capacity as well as further reduce risks associated with reliance on a limited number of suppliers for manufacturing.

Our commercial products are distributed in the U.S.

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Cash, Cash Equivalents and Investments

As of March 31, 2021, we 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 of short-term investments, and $9.3 million of long-term restricted cash and investments.

As of June 30, 2021, we 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.

We believe that our balance of cash, cash equivalents and investments is sufficient to fund our current operational plan for at least the next twelve months.

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Our business operations and financial condition and results have been impacted to varying degrees, and we expect the impact will continue in future quarters.

Commercialization :

We have activated business continuity plans to minimize disruption to patients.

The response to COVID-19 by healthcare providers has made it difficult for some patients, especially those dependent on a hospital setting, to receive infusions or initiate treatment with our commercial products.

In addition, as a result of the pandemic, some patients may choose to delay or stop treatment to avoid a visit to a hospital or a visit of a third party in their homes to minimize the risk of infection.

The impact of COVID-19 may also result in delays in processing reauthorizations and modifications to program benefits by insurers, making it difficult for patients to obtain or maintain favorable coverage decisions for our products.

In addition, the increase in unemployment due to the pandemic has resulted in decreased insurance coverage for many individuals.

These challenges may continue for the duration of the COVID-19 pandemic, which is uncertain, and are expected to reduce our revenue and cash flows.

Clinical Trials :

The impact of COVID-19 has caused disruptions and may cause delays in some of our clinical trials.

Missing data could undermine data integrity and probability of success.

The response to COVID-19 by healthcare providers and regulatory agencies could delay the commencement of trials, site initiation, compliance in the trials, the completion of trials, including the completion of post-marketing requirements and commitments, slow down enrollment, and make the ongoing collection of data for patients enrolled in studies more difficult or intermittent.

We are implementing certain strategy and technology in an attempt to mitigate this risk in the event of subsequent outbreaks.

In addition, as COVID-19 continues to spread, some participants and clinical investigators may be unable or unwilling to comply with clinical trial protocols.

For example, quarantines or other travel limitations (whether voluntary or required) have been implemented in many countries, and may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, which may negatively impact the execution of clinical trials.

Significant delays or disruptions to our clinical trials could adversely affect our ability to timely initiate studies, conduct successful studies, obtain or maintain regulatory approvals, or commercialize our product candidates.

On March 13, 2020, to protect the health of our employees and their families, and our communities, and in accordance with direction from state and local government authorities, we instituted mandatory work-from-home for all employees and contingent workers other than those who are facility-dependent.

Facility-dependent employees, including those needed to maintain manufacturing and clinical research, are reporting to work under strict protocols designed to help those employees remain healthy.

Our increased reliance on personnel working from home may negatively impact productivity or disrupt, delay or otherwise adversely impact our business.

To date, our remote working arrangements have not impacted our ability to maintain critical business operations.

In addition, remote working could increase our cyber security risk.

General protective measures put into place at various governmental levels, including quarantines, travel restrictions and business shutdowns, may also negatively affect our operations.

Further, if the spread of the COVID-19 pandemic continues and our operations are adversely impacted, including due to an outbreak in a facility, we risk a delay, default and/or nonperformance under existing agreements.

Manufacturing :

A significant outbreak at one of our partner sites could lead to delays in the manufacturing of our products and product candidates.

In addition, the need to prioritize rated orders issued by the Federal Emergency Management Agency pursuant to the U.S.

Defense Production Act could impact the manufacturing, supply chain and distribution of our products and product candidates.

We are continuing to assess the potential impact of the COVID-19 pandemic on our business, operations and financial condition and results.

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Aside from the removal of valuation of product options as a critical accounting policy as of January 1, 2021, there have been no changes to our critical accounting policies and significant estimates as detailed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Results of Operations for the Three Months Ended March 31, 2021 and 20 20

Results of Operations for the Three and Six Months Ended June 30, 2021 and 20 20

The following tables set forth selected unaudited condensed consolidated statements of operations data for each of the periods indicated:

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Total revenues

Cost and expenses:

Cost of sales (excluding amortization of in-licensed rights)

Research and development

Selling, general and administrative

Amortization of in-licensed rights

Total cost and expenses

Operating loss

Other income (loss):

Gain from sale of Priority Review Voucher

Other expense, net

Total other income (loss)

Loss before income tax (benefit) expense

Income tax (benefit) expense

Net loss per share - basic and diluted

For the Six Months Ended

(in thousands, except per share amounts)

Products, net

Collaboration

Total revenues

Costs and expenses:

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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

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If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and net loss in the period such variances become known.

Net product revenues for our products for the three months ended March 31, 2021, increased by $24.5 million compared with the three months ended March 31, 2020.

These increases primarily reflects increasing demand for our products in the U.S.

Collaboration revenue relates to our collaboration arrangement with Roche.

For the three months ended March 31, 2021 and 2020, we recognized $22.0 million and $13.2 million of collaboration revenue, respectively.

Net product revenues for our products for the three and six months ended June 30, 2021 increased by $30.5 million and $55.0 million, respectively, compared with the three and six months ended June 30, 2020.

These increases primarily reflect increasing demand for our products in the U.S.

and the commercial launch of AMONDYS 45.

Collaboration revenue relates primarily to our collaboration arrangement with F.

Hoffman-La Roche Ltd .

For the three and six months ended June 30, 2021, we recognized $22.3 million and $44.3 million of collaboration revenue, respectively.

For the three and six months ended June 30, 2020, we recognized $26.0 million and $39.2 million of collaboration revenue, respectively.

For more information, please read Note 3, Collaboration and License Agreements within our Annual Report on Form 10-K for the year ended December 31, 2020.

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Prior to receiving regulatory approval for EXONDYS 51, VYONDYS 53, and AMONDYS 45 by the FDA in September 2016, December 2019, and February 2021, respectively, we expensed such manufacturing and material costs as research and development expenses.

For AMONDYS 45 sold in the three months ended March 31, 2021, and VYONDYS 53 sold in the three months ended March 31, 2020, the majority of related manufacturing costs incurred had previously been expensed as research and development expenses, as such costs were incurred prior to the FDA approval of the products.

For VYONDYS 53 sold in the three months ended March 31, 2021, and EXONDYS 51 sold in the three months ended March 31, 2021 and 2020, only part of the related manufacturing costs incurred had previously been expensed as research and development expenses.

If product related costs had not previously been expensed as research and development expenses prior to receiving FDA approval, the incremental inventory costs related to our products sold would have been approximately $6.3 million and $5.6 million for the three months ended March 31, 2021 and 2020, respectively.

For AMONDYS 45 sold in the three and six months ended June 30, 2021, and VYONDYS 53 sold in the three and six months ended June 30, 2020, the majority of related manufacturing costs incurred had previously been expensed as research and development expenses, as such costs were incurred prior to the FDA approval of the products.

For VYONDYS 53 sold in the three and six months ended June 30, 2021, and EXONDYS 51 sold in the three and six months ended June 30, 2021 and 2020, only part of the related manufacturing costs incurred had previously been expensed as research and development expenses.

If product related costs had not previously been expensed as research and development expenses prior to receiving FDA approval, the incremental inventory costs related to our products sold would have been approximately $14.2 million and $11.4 million for the six months ended June 30, 2021 and 2020, respectively.

The following tables summarize the components of our cost of sales for each of the periods indicated:

For the Three Months Ended

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Total cost of sales

The cost of sales for the three months ended March 31, 2021 increased by $9.7 million, or 77%, compared with the same period in 2020.

The cost of sales for the three months ended June 30, 2021 increased by $6.2 million, or 46%, compared with the same period in 2020.

The changes were primarily driven by the following:

$8.1 million increase in inventory costs related to products sold primarily as a result of increasing demand for our products as well as the write-offs of certain batches of our products not meeting our quality specifications for the three months ended March 31, 2021, with no similar activity for the three months ended March 31, 2020;

$4.0 million increase in inventory costs related to products sold primarily as a result of increasing demand for our products;

$2.2 million increase in royalty payments to BioMarin and UWA also reflects increasing demand for our products.

For the Six Months Ended

(in thousands)

Inventory costs related to products sold

Royalty payments

Total cost of sales

The cost of sales for the six months ended June 30, 2021 increased by $15.9 million, or 61%, compared with the same period in 2020.

The changes were primarily driven by the following:

$12.1 million increase in inventory costs related to products sold primarily as a result of increasing demand for our products as well as write-offs of certain batches of our products not meeting our quality specifications for the six months ended June 30, 2021, with no similar activity for the six months ended June 30, 2020;

$3.8 million increase in royalty payments to BioMarin and UWA reflects increasing demand for our products.

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As a result, a significant portion of our research and development expenses are not tracked on a project-by-project basis, as the costs may benefit multiple projects.

The following tables summarize our research and development expenses by project for each of the periods indicated:

For the Three Months Ended

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Other gene therapies

Up-front and milestone expenses

PPMO platform

Eteplirsen (exon 51)

Casimersen (exon 45)

Golodirsen (exon 53)

Collaboration cost-sharing

Other projects

Internal research and development expenses

Roche collaboration reimbursement

Total research and development expenses

For the Six Months Ended

(in thousands)

Micro-dystrophin

Other gene therapies

Up-front, milestone, and other expenses

PPMO platform

Casimersen (exon 45)

Golodirsen (exon 53)

Eteplirsen (exon 51)

Collaboration cost-sharing

Up-front, milestone, and other expenses

Other projects

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Total research and development expenses

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The following tables summarize our research and development expenses by category for each of the periods indicated:

For the Three Months Ended

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Manufacturing expenses

Up-front and milestone expenses

Compensation and other personnel expenses

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Stock-based compensation

Collaboration cost-sharing

Pre-clinical expenses

Professional services

Collaboration cost-sharing

Research and other

Roche collaboration reimbursement

Total research and development expenses

Research and development expenses for the three months ended June 30, 2021 increased by $51.1 million, or 27%, compared with the three months ended June 30, 2020.

The increase was primarily driven by the following:

$16.6 million increase in manufacturing expenses primarily due to a continuing ramp-up of our gene therapy programs;

$18.9 million increase in up-front and milestone expenses primarily due to a $28.7 million increase of an accrued sublicense fee to Nationwide and a $3.0 million expense incurred as a result of a milestone achievement in a research and license agreement during the three months ended June 30, 2021, offset by $12.0 million of up-front payments as a result of the execution of certain research and license agreements during the same period of 2020;

$2.1 million increase in compensation and other personnel expenses primarily due to a net increase in headcount;

$9.8 million increase in clinical trial expenses primarily due to increased patient enrollment for our ESSENCE and MOMENTUM programs as well as certain start-up activities for our SRP-9001 micro-dystrophin program;

$4.0 million increase in facility- and technology-related expenses due to our continuing expansion efforts;

$1.7 million increase in stock-based compensation expense primarily driven by increases in headcount and changes in stock price;

$3.2 million increase in pre-clinical expenses primarily due to an increase of toxicology studies in our PPMO platforms;

$1.0 million decrease in collaboration cost sharing with Genethon on its micro-dystrophin drug candidate;

$6.0 million increase in research and other primarily driven by an increase in sponsored research with academic institutions during the three months ended June 30, 2021;

$9.3 million increase in the offset to expense associated with a collaboration reimbursement from Roche primarily due to continuing development of our SRP-9001 micro-dystrophin gene therapy.

For the Six Months Ended

(in thousands)

Manufacturing expenses

Compensation and other personnel expenses

Clinical trial expenses

Up-front, milestone, and other expenses

Facility- and technology-related expenses

Stock-based compensation

Pre-clinical expenses

Collaboration cost-sharing

Professional services

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Total research and development expenses

NM = Not Meaningful

Research and development expenses for the three months ended March 31, 2021, increased by $59.0 million, or 43%, compared with the three months ended March 31, 2020.

Research and development expenses for the six months ended June 30, 2021 increased by $110.1 million, or 34%, compared with the six months ended June 30, 2020.

The increase was primarily driven by the following:

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$6.2 million increase in compensation and other personnel expenses primarily due to a net increase in headcount;

$10.0 million increase in clinical trial expenses primarily due to increased patient enrollment for our ESSENCE program as well as certain start-up activities for our micro-dystrophin program;

$19.8 million increase in clinical trial expenses primarily due to increased patient enrollment for our ESSENCE and MOMENTUM programs as well as certain start-up activities for our SRP-9001 micro-dystrophin program;

$14.4 million increase in up-front, milestone and other expenses primarily due to a $28.7 million increase of an accrued sublicense fee to Nationwide and $7.0 million of expense incurred as a result of milestone achievements in certain research and license agreements during the six months ended June 30, 2021, offset by $9.3 million of expense related to sublicense payments accrued to Nationwide and $12.0 million of up-front payments as a result of the execution of certain research and license agreements during the same period of 2020;

$8.0 million increase in facility- and technology-related expenses due to our continuing expansion efforts;

$3.6 million increase in stock-based compensation expense primarily driven by increases in headcount and changes in stock price;

$3.6 million increase in collaboration cost sharing with Genethon on its micro-dystrophin drug candidates and Lysogene on its MPS IIIA drug candidate;

$7.8 million increase in pre-clinical expenses primarily due to an increase of toxicology studies in our PPMO platforms;

$4.5 million decrease in up-front, milestone and other expenses primarily due to $4.0 million of milestone expense incurred in the three months ended March 31, 2021, offset by $8.8 million of milestone expense accrued to an academic institution during the same period of 2020;

$1.9 million decrease in professional service expenses primarily due to a decrease in reliance on third-party research and development contractors as a result of an increase in hiring and headcount;

$6.9 million increase in research and other primarily driven by an increase in sponsored research with academic institutions during the three months ended March 31, 2021;

$3.3 million increase in the offset to expense associated with a collaboration reimbursement from Roche primarily due to continuing development of our micro-dystrophin gene therapy.

$2.5 million increase in collaboration cost sharing with Genethon on its micro-dystrophin drug candidate;

$2.7 million decrease in professional service expenses primarily due to a decrease in reliance on third-party research and development contractors;

$12.9 million increase in research and other primarily driven by an increase in sponsored research with academic institutions during the six months ended June 30, 2021;

$6.0 million increase in the offset to expense associated with a collaboration reimbursement from Roche primarily due to continuing development of our SRP-9001 micro-dystrophin gene therapy.

Selling, General and Administrative Expenses

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Other general and administrative expenses include an allocation of our facility- and technology-related costs and professional fees for legal, consulting and accounting services.

The following tables summarize selling, general and administrative expenses by category for each of the periods indicated:

For the Three Months Ended

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Compensation and other personnel expenses

Professional services

Stock-based compensation

Facility- and technology-related expenses

Roche collaboration reimbursement

Total selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended June 30, 2021 decreased by $1.3 million, or 2%, compared with the three months ended June 30, 2020.

This was primarily driven by the following:

$0.7 million decrease in compensation and other personnel expenses primarily due to a change in headcount period over period;

$0.6 million decrease in professional service expenses primarily due to a decrease in reliance on third-party selling, general and administrative contractors.

For the Six Months Ended

(in thousands)

Compensation and other personnel expenses

Professional services

Stock-based compensation

Facility- and technology-related expenses

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Total selling, general and administrative expenses

NM = Not Meaningful

Selling, general and administrative expenses for the three months ended March 31, 2021 decreased by $11.6 million, or 14%, compared with the three months ended March 31, 2020.

Selling, general and administrative expenses for the six months ended June 30, 2021 decreased by $13.0 million, or 8%, compared with the six months ended June 30, 2020.

This was primarily driven by the following:

$1.3 million increase in compensation and other personnel expenses primarily due to a net increase in headcount;

$2.6 million increase in stock-based compensation primarily due to increases in headcount and changes in stock price;

$15.6 million decrease in professional services primarily due to a decrease in reliance on third-party selling, general and administrative contractors as a result of an increase in hiring and headcount, as well as a transaction fee for the Roche transaction incurred during the three months ended March 31, 2020, with no similar activity incurred during the three months ended March 31, 2021.

$16.2 million decrease in professional service expenses primarily due to a decrease in reliance on third-party selling, general and administrative contractors, as well as a transaction fee for the Roche transaction incurred during the six months ended June 30, 2020, with no similar activity incurred during the six months ended June 30, 2021;

$2.2 million increase in stock-based compensation primarily due to changes in stock price.

Settlement and License Charges

In February 2021, we recognized a $10.0 million settlement charge related to contingent settlement payments to BioMarin as a result of the approval of AMONDYS 45.

This was a result of a settlement and license agreement with BioMarin in July 2017.

In February 2021, we recognized a $10.0 million settlement charge related to contingent settlement payments to BioMarin as a result of the approval of AMONDYS 45 in the United States.

This was a result of a settlement and license agreement with BioMarin executed in July 2017.

There was no such expense recognized during the same period of 2020 .

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Each in-licensed right is being amortized on a straight-line basis over the life of the patent from the first commercial sale of each product.

For both the three months ended March 31, 2021 and 2020, we recorded amortization of in-licensed rights of approximately $0.2 million.

For both the three months ended June 30, 2021 and 2020, we recorded amortization of in-licensed rights of approximately $0.2 million.

For both the six months ended June 30, 2021 and 2020, we recorded amortization of in-licensed rights of approximately $0.3 million.

Other expense, net

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Interest expense includes interest accrued on our convertible notes and term loan.

For the three months ended March 31, 2021, other expense, net, increased by approximately $8.1 million compared with the three months ended March 31, 2020.

For the three and six months ended June 30, 2021, other expense, net, increased by approximately $3.7 million and $11.8 million compared with the three and six months ended June 30, 2020.

The increase primarily reflected an increase in interest expense incurred on our term loan debt facilities due to an increase in the outstanding balance partially offset by a reduction of interest expense incurred on our convertible debt related to the adoption of ASU 2020-06, as well as a decrease in interest income and the amortization of investment discounts due to the investment mix of the Company’s investment portfolio.

As a result of the adoption of ASU 2020-06, interest expense was reduced by $5.4 million for the three months ended March 31, 2021.

Gain from s ale of Priority Review Voucher

In February 2021, we entered into an agreement to sell the rare pediatric disease Priority Review Voucher (“PRV”) we 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.

As a result of the adoption of ASU 2020-06, interest expense was reduced by $5.5 million and $11.0 million for the three and six months ended June 30, 2021, respectively.

Gain from sale of Priority Review Voucher

In February 2021, we entered into an agreement to sell the rare pediatric disease Priority Review Voucher (“PRV”) we 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, we completed our 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, we entered into an agreement to sell the rare pediatric disease PRV we received from the FDA in connection with the approval of VYONDYS 53.

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Income tax (benefit) expense

Income tax benefit for the three months ended March 31, 2021 was approximately $0.1 million.

Income tax expense for the three months ended March 31, 2020 was approximately $0.1 million.

Income tax (benefit) expense for all periods presented relate to state taxes.

Income tax benefit for the three and six months ended June 30, 2021 was approximately $0.4 million and $0.5 million, respectively.

Income tax expense for the three and six months ended June 30, 2020 was less than $0.1 million and approximately $0.1 million, respectively.

Income tax (benefit) expense for all periods presented relates to state taxes.

Liquidity and Capital Resources

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Total working capital

For the periods ended March 31, 2021, and December 31, 2020, our principal sources of liquidity were primarily derived from our collaboration arrangement with Roche, net proceeds from sale of the PRV and product sales of our products.

For the periods ended June 30, 2021 and December 31, 2020, our principal sources of liquidity were primarily derived from our collaboration arrangement with Roche, net proceeds from sale of the PRV, product sales of our products and net proceeds for debt financing.

Our principal uses of cash are research and development expenses, selling, general and administrative expenses, investments, capital expenditures, business development transactions and other working capital requirements.

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For more information on the adoption and impact of ASU 2020-06, please read Note 11, Indebtedness.

Our working capital changes reflect that current assets are lower primarily as a result of reductions in short-term investments, reflecting overall use of cash in operating activities.

Our current liabilities decrease primarily reflects decreases in accounts payable due to decreased obligations as a result of our operating activities.

The changes in our working capital primarily reflect use of cash in operating activities.

Our future expenditures and capital requirements may be substantial and will depend on many factors, including but not limited to the following:

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the costs of filing, prosecuting, defending and enforcing patent claims and our other intellectual property rights.

Our cash requirements are expected to continue to increase as we advance our research, development and commercialization programs and we expect to seek additional financings primarily from, but not limited to, the sale and issuance of equity, debt securities, the licensing or sale of our technologies or additional government contracts.

Our cash requirements are expected to continue to increase as we advance our research, development and commercialization programs and we expect to seek additional financings primarily from, but not limited to, the sale and issuance of equity, debt financing, the licensing or sale of our technologies or additional government contracts.

We cannot provide assurances that financing will be available when and as needed or that, if available, the financings will be on favorable or acceptable terms.

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To the extent we issue additional equity securities, our existing stockholders could experience substantial dilution.

For the Three Months Ended

For the Six Months Ended

(in thousands)

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Financing activities

(Decrease) increase in cash and cash equivalents

Increase in cash and cash equivalents

NM = Not Meaningful

Operating Activities

Cash used in operating activities was $180.4 million for the three months ended March 31, 2021.

Cash provided by operating activities for the three months ended March 31, 2020 was $627.8 million.

Cash used in operating activities was $289.5 million for the six months ended June 30, 2021.

Cash provided by operating activities for the six months ended June 30, 2020 was $520.2 million.

The unfavorable change was primarily driven by the following items:

$74.3 million increase in net loss, excluding the gain from the sale of the PRV, primarily driven by an increase in research and development expense, offset by increases in net product revenues and collaboration revenue and a decrease in selling, general and administrative expense;

$842.4 million net decrease in the change in deferred revenue primarily as a result of the collaboration arrangement with Roche being executed during the three months ended March 31, 2020, with no similar activity during the three months ended March 31, 2021.

7 million decrease in the change in deferred revenue primarily as a result of the collaboration arrangement with Roche being executed during the six months ended June 30 , 2020, with no similar activity during the six months ended June 30 , 2021 .

The decreases were partially offset by:

$8.7 million net increase in non-cash adjustments;

$68.2 million net decrease in use of operating assets and liabilities, excluding deferred revenue.

$94.6 million net increase in use of operating assets and liabilities, excluding deferred revenue.

Investing Activities

Cash provided by investing activities was $156.7 million for the three months ended March 31, 2021.

Cash used in investing activities was $17.7 million for the three months ended March 31, 2020.

Cash provided by investing activities was $477.7 million for the six months ended June 30, 2021.

Cash used in investing activities was $51.9 million for the six months ended June 30, 2020.

The favorable change was primarily driven by the following:

$335.4 million decrease in purchase of available-for-sale securities during the three months ended March 31, 2021.

$726.7 million decrease in purchase of available-for-sale securities during the six months ended June 30, 2021;

$1.2 million decrease in purchase of property and equipment during the six months ended June 30, 2021.

The changes were partially offset by:

$108.1 million decrease in net proceeds from the sale of the PRV during the three months ended March 31, 2021;

$40.0 million decrease in proceeds from the sale or maturity of available-for-sale securities during the three months ended March 31, 2021;

$12.0 million increase in purchase of property and equipment during the three months ended March 31, 2021.

$191.0 million decrease in proceeds from the sale or maturity of available-for-sale securities during the six months ended June 30, 2021;

$6.1 million decrease in net proceeds from the sale of the PRV during the six months ended June 30, 2021.

Financing Activities

Cash provided by financing activities decreased by $316.1 million for the three months ended March 31, 2021 compared with the three months ended March 31, 2020, primarily driven by the following:

Cash provided by financing activities decreased by $330.2 million for the six months ended June 30, 2021 compared with the six months ended June 30, 2020, primarily driven by the following:

$312.1 million decrease in net proceeds from the issuance of common stock to Roche;

$16.6 million decrease in proceeds from the exercise of options and the purchase of stock under our Employee Stock Purchase Program;

$1.5 million increase in taxes paid related to net share settlement of equity awards.

The changes were partially offset by:

$1.7 million increase in proceeds from the exercise of options and the purchase of stock under our Employee Stock Purchase Program.

Off-Balance Sheet Arrangements

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In our continuing operations, we have entered into long-term contractual arrangements from time to time for our facilities, the provision of goods and services, and acquisition of technology access rights, among others.

The following table presents contractual obligations arising from these arrangements as of March 31, 2021:

The following table presents contractual obligations arising from these arrangements as of June 30, 2021:

Payment Due by Period

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Payments under these agreements generally become due and payable upon achievement of certain development, regulatory or commercial milestones.

Because the achievement of these milestones is not probable, and payment is not required as of March 31, 2021, such contingencies have not been recorded in our unaudited condensed consolidated financial statements.

Because the achievement of these milestones is not probable, and payment is not required as of June 30, 2021, such contingencies have not been recorded in our unaudited condensed consolidated financial statements.

Amounts related to contingent milestone payments are not yet considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory approval and sales milestones.

2 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis