UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM TO
Commission File Number : 001-14895
Sarepta Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
215 First Street
Suite 415
Cambridge, MA
(Address of principal executive offices)
93-0797222
(I.R.S. Employer
Identification Number)
02142
(Zip Code)
Registrant’s telephone number, including area code: (617) 274-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 par value
Trading
Symbol(s)
SRPT
Name of each exchange on which registered
The NASDAQ Stock Market LLC
(The NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☒ NO ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
☒
☐
Non-accelerated filer
☐
Emerging growth company
☐
Smaller reporting company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on The Nasdaq Global
Select Market on June 30, 2022, was approximately $6,561,646,013.
The number of shares of Registrant’s Common Stock outstanding as of February 23, 2023 was 87,981,885.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant has incorporated by reference into Part II and Part III of this Annual Report on Form 10-K portions of its definitive Proxy Statement for the 2023 Annual Meeting of Stockholders
to be filed no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Sarepta Therapeutics, Inc.
FORM 10-K INDEX
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
-i-
Page
6
6
32
68
69
69
69
70
70
70
71
82
82
83
83
84
84
85
85
85
85
85
85
86
86
92
Forward-Looking Information
This Annual Report on Form 10-K, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
section in Item 7, and other materials accompanying this Annual Report on Form 10-K contain forward-looking statements or incorporate by reference
forward-looking statements. Statements that are not purely historical are forward-looking statements. Forward-looking statements are often identified by
words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “estimate,” “could,” “continue,” “ongoing,” “predict,” “potential,”
“likely,” “seek” and other similar expressions, as well as variations or negatives of these words. These statements address expectations, projections of
future results of operations or financial condition, or other “forward-looking” information. These statements relate to our future plans, objectives,
expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements include, but are
not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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 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 is able to fulfill the
requirements of our commercial plan;
our plan to continue building out our network for commercial distribution in jurisdictions in which our products are approved;
estimated timelines and milestones for 2023 and beyond, including announcing additional data for SRP-9001 in 2023, and meeting with the
U.S. Food and Drug Administration (the “FDA”) in 2023 to discuss a potentially pivotal trial for SRP-9003;
our plan to expand our pipeline through internal research and development and through strategic transactions;
the timely completion and satisfactory outcome of our post-marketing requirements and commitments, including verification of a clinical
benefit for our products;
our engagement with regulatory authorities outside of the U.S.;
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;
our ability to enter into research, development or commercialization alliances with universities, hospitals, independent research centers, non-
profit organizations, pharmaceutical and biotechnology companies and other entities for specific molecular targets or selected disease
indications and our ability to selectively pursue opportunities to access certain intellectual property rights that complement our internal
portfolio through license agreements or other arrangements;
our expectations regarding the potential benefits of the partnership, licensing and/or collaboration arrangements and other strategic
arrangements and transactions we have entered into or may enter into in the future;
the potential benefits of our technologies and programs, including those with strategic partners;
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 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;
the potential impact of the ongoing COVID-19 pandemic on our business, including our commercial sales, ongoing and planned clinical
trials, manufacturing and operations;
our expectation regarding the impact of environmental laws and regulations on our business; and
our beliefs and expectations regarding milestone, royalty or other payments that could be due to third parties under existing agreements.
-2-
We undertake no obligation to update any of the forward-looking statements contained in this Annual Report on Form 10-K after the date of this report,
except as required by law or the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). We caution readers not to place undue
reliance on forward-looking statements. Our actual results could differ materially from those discussed in this Annual Report on Form 10-K. The forward-
looking statements contained in this Annual Report on Form 10-K, and other written and oral forward-looking statements made by us from time to time, are
subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements,
including the risks, uncertainties and assumptions identified under the heading “Risk Factors” in this Annual Report on Form 10-K.
-3-
Our business is subject to numerous risks and uncertainties, including those described in Item 1A “Risk Factors”. These risks include, but are not limited to
the following:
Risk Factors Summary
• We are highly dependent on the commercial success of our products in the U.S. We may not be able to meet expectations with respect to sales of
our products or attain profitability and positive cash-flow from operations.
•
•
Even though EXONDYS 51, VYONDYS 53 and AMONDYS 45 have received accelerated approval from the FDA, they face future post-
approval development and regulatory requirements, which present additional challenges for us to successfully navigate.
Failure to obtain or maintain regulatory exclusivity for our products could result in our inability to protect our products from competition and our
business may be adversely impacted.
• We are subject to uncertainty relating to reimbursement policies which, if not favorable, could hinder or prevent the commercial success of our
products and/or product candidates.
•
Our products may not be widely adopted by patients, payors or healthcare providers, which would adversely impact our potential profitability
and future business prospects.
• We cannot predict whether historical revenues from eteplirsen, golodirsen and casimersen through our early access program ("EAP") outside the
U.S. will continue or whether we will be able to continue to distribute our products through our EAP.
• We face intense competition and rapid technological change, which may result in other companies discovering, developing or commercializing
competitive products.
• We have entered into multiple collaborations and strategic transactions, including our collaboration with Roche, and may seek or engage in future
collaborations, strategic alliances, acquisitions or licensing agreements that complement or expand our business. We may not be able to complete
such transactions, and such transactions, if executed, may increase our capital requirements, dilute our stockholders, cause us to incur debt or
assume contingent liabilities and subject us to other risks.
• We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of our product candidates.
•
•
•
•
•
Failures or delays in the commencement or completion of ongoing and planned clinical trials of our product candidates could negatively impact
commercialization efforts; result in increased costs; and delay, prevent or limit our ability to gain regulatory approval of product candidates and
to generate revenues and continue our business.
Clinical development is lengthy and uncertain. Clinical trials of our novel gene therapy candidates may be delayed, including as a result of the
COVID-19 pandemic, and certain programs may never advance in the clinic or may be more costly to conduct than we anticipate, any of which
could have a material adverse impact on our business.
Results from pre-clinical and early‑stage clinical trials may not be indicative of efficacy in late‑stage clinical trials, and pre-clinical and clinical
trials may fail to demonstrate acceptable levels of safety, efficacy, and quality of our product candidates, which could prevent or significantly
delay their regulatory approval.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent regulatory approval of product
candidates, limit the commercial potential or result in significant negative consequences following any potential marketing approval.
If there are significant delays in obtaining or we are unable to obtain or maintain required regulatory approvals, we will not be able to
commercialize our product candidates in a timely manner or at all, which could impair our ability to generate sufficient revenue and have a
successful business.
-4-
• We are investing significant resources in the development of novel gene therapy product candidates. Only a few gene therapy products have been
approved in the U.S. and the European Union (“EU”). If we are unable to show the safety and efficacy of these product candidates, experience
delays in doing so or are unable to successfully commercialize at least one of these drugs, our business would be materially harmed;
•
Because we are developing product candidates for the treatment of certain diseases in which there is little clinical experience and we are using
new endpoints or methodologies, there is increased risk that the FDA, the European Medicines Agency (the "EMA") or other regulatory
authorities may not consider the endpoints of our clinical trials to provide clinically meaningful results and that these results may be difficult to
analyze;
• We may not be able to advance all of our programs, and we may use our financial and human resources to pursue particular programs and fail to
capitalize on programs that may be more profitable or for which there is a greater likelihood of success.
•
If we are unable to maintain our agreements with third parties to distribute our products to patients, our results of operations and business could
be adversely affected.
• We rely on third parties to conduct some aspects of our early stage research and pre-clinical and clinical development. The inadequate
performance by or loss of any of these third parties could affect the development and commercialization of our product candidate development.
The third parties we use in the manufacturing process for our products and product candidates may fail to comply with cGMP regulations.
• We currently rely on third parties to manufacture our products and to produce our product candidates. Our dependence on these parties, including
failure on our part to accurately anticipate product demand and timely secure manufacturing capacity to meet commercial, EAP, clinical and pre-
clinical product demand may impair the availability of product to successfully support various programs, including research and development
and the potential commercialization of additional product candidates in our pipeline.
•
•
•
Products intended for use in gene therapies are novel, complex and difficult to manufacture. We could experience production problems that result
in delays in our development or commercialization of gene therapy programs, limit the supply of our product candidates or future approved
products or otherwise harm our business.
Our success, competitive position and future revenue depend in part on our ability and the abilities of our licensors and other collaborators to
obtain, maintain and defend the patent protection for our products, product candidates, and platform technologies, to preserve our trade secrets,
and to prevent third parties from infringing on our proprietary rights.
The COVID-19 pandemic has resulted and may continue to result in disruptions to our commercialization, clinical trials, manufacturing and
other business operations, which could have a material adverse effect on our business, financial condition, operating results, cash flows and
prospects.
• We have incurred operating losses since our inception and we may not achieve or sustain profitability.
•
•
Our stock price is volatile and may fluctuate due to factors beyond our control.
Our revenues and operating results could fluctuate significantly, which may adversely affect our stock price.
-5-
Item 1. Business.
Overview
PART I
We are 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 our proprietary, highly-
differentiated and innovative technologies, and through collaborations with our strategic partners, we have developed multiple approved products for the
treatment of Duchenne muscular dystrophy (“Duchenne”) and are developing potential therapeutic candidates for a broad range of diseases and disorders,
including Duchenne, Limb-girdle muscular dystrophies (“LGMDs”) and other neuromuscular and central nervous system (“CNS”) related disorders.
Commercial Products
To date, we have developed and commercialized the following approved products for the treatment of Duchenne:
•
•
•
EXONDYS 51 (eteplirsen) Injection (“EXONDYS 51”) is indicated for the treatment of Duchenne in patients who have a confirmed
mutation of the dystrophin gene that is amenable to exon 51 skipping. EXONDYS 51 uses our phosphorodiamidate morpholino oligomer
(“PMO”) chemistry and exon-skipping technology to skip exon 51 of the dystrophin gene.
VYONDYS 53 (golodirsen) Injection (“VYONDYS 53”) is indicated for the treatment of Duchenne in patients who have a confirmed
mutation of the dystrophin gene that is amenable to exon 53 skipping. VYONDYS 53 uses our PMO chemistry and exon-skipping
technology to skip exon 53 of the dystrophin gene.
AMONDYS 45 (casimersen) Injection (“AMONDYS 45”) is indicated for the treatment of Duchenne in patients who have a confirmed
mutation of the dystrophin gene that is amenable to exon 45 skipping. AMONDYS 45 uses our PMO chemistry and exon-skipping
technology to skip exon 45 of the dystrophin gene.
Technology and Platforms
Exon skipping is intended to promote the production of an internally truncated but functional dystrophin protein. The original PMO structure and
variations of this structure that are so-called PMO-based (collectively “PMO-based”) are central to our proprietary chemistry platform. PMO technologies
can be used to selectively up-regulate or down-regulate the production of a target protein through pre-mRNA splice alteration. PMO-based compounds
have the potential to be designed to create more, less, or none of certain proteins, or produce analogues of endogenous proteins. This technology can be
used to correct disease-causing genetic errors by inducing the targeted expression of novel proteins.
The PMO chemistry platform is highly adaptable, and we have developed next-generation PMO-based chemistries for advancing RNA-targeted
therapeutics. These next-generation chemistries are specifically designed to enhance tissue targeting, intracellular delivery, target selectivity and drug
potency. One of these novel technologies is based on cell-penetrating peptide-conjugated PMO (“PPMO”). The PPMO features covalent attachment of a
cell-penetrating peptide to a PMO with the goal of enhanced delivery into the cell. Our most advanced PPMO product candidate is SRP-5051, which is
designed to treat Duchenne in patients with genetic mutations amenable to exon 51 skipping.
As part of our multifaceted approach to Duchenne, we are also developing gene therapy technologies to treat Duchenne. We are clinically
developing a product candidate, SRP-9001, that aims to express a smaller but still functional version of dystrophin. We use a unique adeno-associated virus
(“AAV”) vector called AAVrh.74 to transport the transgene – the genetic material that will make the protein of interest – to the target cells. A unique,
engineered dystrophin is used because naturally-occurring dystrophin is too large to fit in an AAV.
We are also developing gene therapy programs for various forms of LGMDs. Our most advanced LGMD product candidate, SRP-9003, is
designed to transfer a gene that codes for and restores beta-sarcoglycan protein with the goal of restoring the dystrophin associated protein complex. SRP-
9003 utilizes the AAVrh.74 vector, the same vector used in SRP-9001.
Our pipeline includes more than 40 programs at various stages of discovery, pre-clinical and clinical development, reflecting our aspiration to
apply our multifaceted approach and expertise in precision genetic medicine to make a profound difference in the lives of patients suffering from rare
diseases.
-6-
Objectives and Business Strategy
We believe that our proprietary technology platforms and collaborations can be used to develop novel pharmaceutical products to treat a broad
range of diseases and address key currently-unmet medical needs. We intend 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. In pursuit of this objective, we intend to focus on the following activities:
•
•
•
•
continuing to build our gene therapy engine, including developing gene therapy product candidates, operationalizing our manufacturing
strategy and furthering our commercial capabilities in preparation for potential regulatory approvals;
advancing our RNA technologies (e.g., PMO and PPMO), launching potential approved products and supporting commercialization of
approved products;
investing in next-generation precision medicine through internal research, strategic partnerships, collaborations and other potential
opportunities; and
continuing to nurture our culture, which is based on strong patient focus, bias to action, a self-starter mentality, smart and appropriate risk-
taking and high ethics.
Core Therapeutic Areas
Duchenne: Duchenne is a rare X-linked recessive genetic disorder affecting children (primarily males) that is characterized by progressive
muscle deterioration and weakness. It is the most common type of muscular dystrophy. Duchenne is caused by an absence of dystrophin, a protein that
protects muscle cells. The absence of dystrophin in muscle cells leads to significant cell damage and ultimately causes muscle cell death and fibrotic
replacement. In the absence of dystrophin protein, affected individuals generally experience the following symptoms, although disease severity and life
expectancy vary:
•
•
•
•
•
•
muscle damage characterized by inflammation, fibrosis and loss of myofibers beginning at an early age;
muscle weakness and progressive loss of muscle function beginning in the first few years of life;
decline of ambulation and respiratory function after the age of seven;
total loss of ambulation in the pre-teenage or early teenage years;
progressive loss of upper extremity function during mid- to late-teens; and
respiratory and/or cardiac failure, resulting in death before the age of 30.
LGMDs are autosomal recessive, monogenic, rare neuromuscular diseases caused by missense and deletion mutations. These diseases affect
males and females equally. Some types of LGMDs affect skeletal muscle and cardiac muscle. More severe forms of LGMDs mimic Duchenne. LGMDs as
a class affect an estimated range of approximately 1 in every 14,500 to 1 in every 123,000 individuals. Currently, there are no approved treatment options
for LGMDs.
Charcot-Marie-Tooth (“CMT”) Disease is a group of hereditary, degenerative nerve diseases that are caused by mutations in genes that produce
proteins involved in the structure and function of either the peripheral nerve axon or the myelin sheath. CMT can cause degeneration of motor skills,
resulting in muscle weakness, and limiting patients’ ability to walk or use their hands, and in some cases, can cause degeneration of sensory nerves,
resulting in a reduced ability to feel heat, cold, and pain. CMT affects approximately 1 in every 2,500 individuals, while CMT type 1A, which is most often
caused by an extra copy of the PMP22 gene, affects approximately 50,000 patients in the U.S. Most patients are diagnosed at infancy, while other patients
develop symptoms at adolescence. Currently, there are no available treatment options.
-7-
Our Commercial Products
EXONDYS 51. We launched our first commercial product, EXONDYS 51, in 2016. EXONDYS 51 is indicated for the treatment of Duchenne in
patients who have a confirmed mutation of the dystrophin gene that is amenable to exon 51 skipping. EXONDYS 51 uses our PMO chemistry and exon-
skipping technology to skip exon 51 of the dystrophin gene. PMO-based compounds are synthetic compounds that bind to complementary sequences of
RNA by standard Watson-Crick nucleobase pairing. The two key structural differences between PMO-based compounds and naturally occurring RNA are
that the PMO nucleobases are bound to synthetic morpholino rings instead of ribose rings, and the morpholino rings are linked by phosphorodiamidate
groups instead of phosphodiester groups. Replacement of the negatively charged phosphodiester in RNA with the uncharged phosphorodiamidate group in
PMO eliminates linkage ionization at physiological pH. Due to these modifications, PMO-based compounds are resistant to degradation by plasma and
intracellular enzymes. Unlike the RNA-targeted technologies such as siRNAs and DNA gapmers, PMO-based compounds operate by steric blockade rather
than by cellular enzymatic degradation to achieve their biological effects. Thus, PMOs use a fundamentally different mechanism from other RNA-targeted
technologies.
EXONDYS 51 targets the most frequent series of mutations that cause Duchenne. Approximately 13% of Duchenne patients are amenable to
exon 51 skipping.
VYONDYS 53. We launched VYONDYS 53 in 2019. VYONDYS 53 is indicated for the treatment of Duchenne in patients who have a confirmed
mutation of the dystrophin gene that is amenable to exon 53 skipping. VYONDYS 53 uses our PMO chemistry and exon-skipping technology to skip exon
53 of the dystrophin gene. VYONDYS 53 has the potential to treat up to 8% of Duchenne patients who are amenable to exon 53 skipping.
AMONDYS 45. We launched AMONDYS 45 in the first quarter of 2021. AMONDYS 45 is indicated for the treatment of Duchenne in patients
who have a confirmed mutation of the dystrophin gene that is amenable to exon 45 skipping. AMONDYS 45 uses our PMO chemistry and exon-skipping
technology to skip exon 45 of the dystrophin gene. AMONDYS 45 has the potential to treat up to 8% of Duchenne patients who are amenable to exon 45
skipping.
We are conducting various clinical trials for EXONDYS 51, VYONDYS 53 AND AMONDYS 45, including studies that are required to comply
with our post-marketing FDA requirements and commitments to verify and describe the clinical benefit of the three products.
For the years ended December 31, 2022, 2021 and 2020, the Company recorded net revenues of $843.8 million, $612.4 million and $455.9
million, respectively, related to the sale of our products.
Our Pipeline – Key Programs
SRP-5051 (Duchenne PPMO program) uses our next-generation chemistry platform, PPMO, and our exon-skipping technology to skip exon 51
of the dystrophin gene. The PPMO technology features covalent attachment of a cell-penetrating peptide to a PMO with the goal of enhanced delivery into
the cell. In pre-clinical research, our proprietary class of PPMO compounds demonstrated an increase in dystrophin production and a more durable response
compared to PMO. In addition, PPMO treatment in non-human primates resulted in high levels of exon-skipping in skeletal, cardiac and smooth muscle
tissues. Pre-clinical trials also indicated that PPMOs may require less frequent dosing than PMOs, and that PPMOs could potentially be tailored to reach
other organs beyond muscle.
In 2019, we commenced a multiple ascending dose study for the treatment of Duchenne with SRP-5051 in patients who are amenable to exon 51
skipping (“Study 5051-201”). In December 2020 and May 2021, we announced results from Part A of Study 5051-201. We initiated Part B of Study 5051-
201 in the fourth quarter of 2021 and are currently enrolling. In August 2022, the FDA lifted the clinical hold placed on Study 5051-201 following a serious
adverse event of hypomagnesemia. We anticipate Part B of Study 5051-201 to be our potentially pivotal trial.
SRP-9001 (Duchenne gene therapy program) aims to express a smaller but still functional version of dystrophin. A unique, engineered
dystrophin is used because naturally-occurring dystrophin is too large to fit in an AAV vector. SRP-9001 employs the AAVrh.74 vector, which is designed
to be systemically and robustly delivered to skeletal, diaphragm and cardiac muscle without promiscuously crossing the blood brain barrier, which we
believe makes it a strong candidate to treat peripheral neuromuscular diseases. An MHCK7 promoter was chosen for its ability to robustly express in the
heart, which is critically important for patients with Duchenne, who typically die from pulmonary or cardiac complications. Lastly, the transgene was
designed to maintain spectrin-like repeats 2 and 3, which has been reported to be critical to maintaining muscle force.
In the fourth quarter of 2017, an investigational new drug (“IND”) application for SRP-9001 was cleared by the FDA, and a Phase 1/2a clinical
trial in individuals with Duchenne was initiated (Study 101). In October 2018, Nationwide Children’s Hospital (“Nationwide”) presented results from Study
101 in four individuals with Duchenne enrolled in the trial. In March 2019, we presented
-8-
nine-month functional and creatine kinase ("CK") data from baseline from these four individuals, and twelve-month CK data from baseline from one of
these individuals. In the fourth quarter of 2018, we commenced a randomized, double-blind, placebo-controlled trial of SRP-9001 with the goal to establish
the functional benefits of SRP-9001 protein expression (Study 102). In January 2021, we released top-line results for Part 1 of Study 102 (the 48-week
assessment of the 41 participants) and interim expression results from Part 2 of Study 102 (the crossover phase). We announced topline results for Part 2 of
Study 102 in January 2022. In May 2021, we announced 12-week expression and safety results from the first 11 participants enrolled in Study 103, an
open-label study evaluating the safety and expression of commercially representative material for SRP-9001 (Study 103). In October 2021, we announced
functional data from the first 11 patients and tolerability data for all 32 patients enrolled in Study 103. We also initiated our pivotal trial of SRP-9001 for the
treatment of Duchenne (Study 301) in October 2021 and expect the data read out in the fourth quarter of 2023. In July 2022, we announced additional data
from Study 102 and Study 103.
In September 2022, we announced that we submitted a biologics license application (“BLA”) seeking accelerated approval of SRP-9001 for the
treatment of ambulant individuals with Duchenne. In November 2022, the FDA accepted for filing and granted priority review for the BLA for SRP-9001
with an anticipated regulatory action date of May 29, 2023.
SRP-9003 (LGMD, gene therapy program). We are developing gene therapy programs for various types of LGMDs. Our LGMD programs use
the AAVrh.74 vector, the same vector used in our SRP-9001 gene therapy program, to transfect a restorative gene. The most advanced of our LGMD
product candidates, SRP-9003, aims to treat LGMD2E, also known as beta-sarcoglycanopathy, a severe and debilitating form of LGMD characterized by
progressive muscle fiber loss, inflammation and muscle fiber replacement with fat and fibrotic tissue. SRP-9003 is designed to transfect a gene that codes
for and restores beta-sarcoglycan protein with the goal of restoring the dystrophin associated protein complex. SRP-9003 has generated positive pre-
clinical safety and efficacy data utilizing the AAVrh.74 vector.
A Phase 1/2a trial of SRP-9003 commenced in the fourth quarter of 2018. In February 2019, we announced two-month biopsy data from the first
three-patient cohort dosed in the SRP-9003 trial, and in October 2019, we announced nine-month functional data from these three patients. In June 2020,
we announced safety and expression results from three clinical trial participants in the high-dose cohort measured at 60 days, and one-year functional data
from three clinical trial participants in the low-dose cohort. In September 2020, we announced six-month functional data from three clinical trial
participants in the in the high-dose cohort, and eighteen-month functional data from three clinical trial participants in the low-dose cohort. We also
announced one-year functional data in the high-dose cohort and two-year functional data in the low-dose cohort in March 2021. In March 2022, we
announced 36-month functional data from three clinical trial participants in the low-dose cohort and 24-month functional data from two clinical trial
participants in the high-dose cohort. We plan to meet with the FDA in 2023 to discuss our potentially pivotal trial.
-9-
The chart below summarizes the status of our programs, including those with our strategic partners:
-10-
Manufacturing, Supply and Distribution
We have developed proprietary state-of-the-art Chemistry, Manufacturing and Controls (“CMC”) and manufacturing capabilities that allow
manufacturing and testing of our products and product candidates to support both clinical development as well as commercialization. We continue to refine
and optimize our manufacturing processes. We have entered into certain manufacturing and supply arrangements with third-party suppliers which will in
part utilize these capabilities to support production of certain of our product candidates and their components. In 2017, we opened a facility in Andover,
Massachusetts, which significantly enhanced our research and development manufacturing capabilities. However, we currently do not have internal large-
scale Good Manufacturing Practices (“GMP”) manufacturing capabilities to produce our products and product candidates for commercial and/or clinical
use. For our current and future manufacturing needs, we have entered into supply agreements with specialized contract manufacturing organizations (each a
“CMO”) to produce custom raw materials, the active pharmaceutical ingredients (“APIs”), drug product and finished goods for our products and product
candidates for both commercial and clinical use. All of our CMO partners have extensive technical expertise, GMP experience and experience
manufacturing our specific technology.
For our commercial products, we have worked with our existing CMOs to increase product capacity from mid-scale to large-scale. While there is
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 is able to fulfill these requirements, and is 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.
Our commercial products are distributed in the U.S. through a limited network of home infusion specialty pharmacy providers that deliver the
medication to patients and a specialty distributor that distributes our products to hospitals and hospital outpatient clinics. With respect to the pre-
commercial distribution of our products to patients outside of the U.S., we have contracted with third party distributors and service providers to distribute
our products in certain countries through our EAPs. We plan to continue building out our network for commercial distribution in jurisdictions in which our
products are approved.
Our gene therapy manufacturing capabilities have been greatly enhanced through partnerships with Thermo Fisher Scientific Inc. (“Thermo”),
Catalent, Inc. (“Catalent”) and Aldevron LLC (“Aldevron”). We have adopted a hybrid development and manufacturing strategy in which we are building
internal manufacturing expertise relative to all aspects of AAV-based manufacturing, including gene therapy and gene editing supply, while closely
partnering with manufacturing partners to expedite development and commercialization of our gene therapy programs. We expect that our partnerships with
Thermo and Catalent will support our clinical and commercial manufacturing capacity for our SRP-9001 Duchenne program and LGMD programs, while
also acting as a manufacturing platform for potential future gene therapy programs. The collaboration integrates process development, clinical production
and testing, and commercial manufacturing. Aldevron is providing GMP-grade plasmid for our SRP-9001 Duchenne program and LGMD programs, as
well as plasmid source material for future gene therapy programs, such as CMT and other neuromuscular and CNS related disorders.
Manufacturers and suppliers of our commercial products and product candidates are subject to the FDA’s current GMP (“cGMP”) requirements
and other rules and regulations prescribed by foreign regulatory authorities. We depend on our third-party partners for continued compliance with cGMP
requirements and applicable foreign standards.
Material Agreements
We believe that our RNA-targeted and gene therapy technologies could be broadly applicable for the potential development of pharmaceutical
products in many therapeutic areas. To enhance and further exploit our core technologies, we have and may continue to enter into research, development or
commercialization alliances with universities, hospitals, independent research centers, non-profit organizations, pharmaceutical and biotechnology
companies and other entities for new technologies, including for specific molecular targets or selected disease indications. We may also selectively pursue
opportunities to access certain intellectual property rights that complement our internal portfolio through license agreements or other arrangements.
F. Hoffman-La Roche Ltd
License, Collaboration, and Option Agreement
On December 21, 2019, we entered into a license, collaboration, and option agreement (the “Collaboration Agreement”) with F. Hoffman-La
Roche Ltd (“Roche”) pursuant to which we granted Roche an exclusive license under certain of our intellectual property rights to develop, manufacture,
and commercialize SRP-9001 in all countries outside of the U.S. We retained all rights to SRP-9001 in the U.S. The transaction closed on February 4, 2020.
We have entered into Amendments 1 through 10 to the Collaboration Agreement on: October 23, 2020, October 28, 2020, February 4, 2021, June 23, 2021,
August 31, 2021, November 30, 2021, January 5, 2022, January 28, 2022, April 4, 2022, and July 26, 2022, respectively.
-11-
Also, under the terms of the Collaboration Agreement, Roche granted us a license to use certain of its intellectual property rights to perform
development activities worldwide under a joint global development plan, commercialize SRP-9001 in the U.S., and perform certain manufacturing and
medical affairs activities worldwide. Such license is non-exclusive under Roche’s background intellectual property rights, exclusive in the U.S. under
intellectual property rights developed by Roche under the Collaboration Agreement, and non-exclusive outside the U.S. under intellectual property rights
developed by Roche under the Collaboration Agreement.
We intend to manufacture and supply all clinical and, upon approval in the relevant market, commercial supply of SRP-9001.
Roche Options and Negotiation Rights
Pursuant to the Collaboration Agreement, we granted Roche an exclusive option to obtain an exclusive license to develop, manufacture and
commercialize the following products outside of the U.S.: (i) certain exon-skipping products that target the dystrophin gene to induce exon skipping,
including eteplirsen, golodirsen, casimersen and SRP-5051; (ii) certain gene therapy products other than SRP-9001 that encode and directly express
dystrophin or a derivative thereof; and (iii) certain gene-editing products that modify, repair, or activate an endogenous dysfunctional dystrophin gene. The
products subject to Roche’s options are collectively referred to as the “Option Products.” Upon option exercise, the Option Product that is the subject of the
option exercise will be included under the Collaboration Agreement as a product licensed to Roche subject to similar obligations, including with respect to
development, manufacturing, commercialization, and cost-sharing as those that apply to SRP-9001.
Pursuant to the Collaboration Agreement, Roche has a right of first negotiation if we seek to grant a third-party license to commercialize SRP-
9001 in the U.S. Roche had a similar right of first negotiation with respect to our LGMDs products, but such right has expired.
Exclusivity
Other than under the Collaboration Agreement, Roche may not perform any clinical trials for, or commercialize, any gene therapy product, gene-
editing product, or antisense oligonucleotide for Duchenne for a period of five years following the execution of the Collaboration Agreement. The
exclusivity period for one or more types of products may be extended if Roche exercises its option with respect to one or more exon-skipping products,
gene therapy products, or gene-editing products, in each case, for a period of five years from the time of option exercise.
Development
The parties will use commercially reasonable efforts to conduct development activities with respect to SRP-9001 under the Collaboration
Agreement pursuant to agreed-upon development plans. Subject to certain exceptions, we will perform all development activities directed to obtaining and
maintaining regulatory approvals for SRP-9001 in the U.S. and the EU, as set forth in a joint global development plan. Subject to certain exceptions, the
parties will share the costs of the development activities under such joint global development plan. Roche will have sole responsibility to perform all
development activities set forth in a territory-specific development plan for SRP-9001, including additional activities not set forth in the joint global
development plan that are specifically directed to obtaining and maintaining regulatory approvals for SRP-9001 outside of the U.S. Roche will be solely
responsible for costs arising from the territory-specific development plan for SRP-9001.
Governance
Governing committees will facilitate collaboration between the parties with respect to development, manufacturing, medical affairs, intellectual
property protection, and commercialization of SRP-9001 and any other licensed products.
Financial Terms
In consideration for the rights that we granted and for prepaid funding for development activities, in February 2020, Roche and Roche Finance
Ltd, an affiliate of Roche (“Roche Finance”), together paid us an up-front payment of approximately $1.2 billion. Of the $1.2 billion cash received from
Roche, (i) $312.1 million, net of issuance costs, was allocated to the approximately 2.5 million shares of our common stock issued to Roche based on the
closing price when the shares were issued, (ii) $485.0 million was allocated to the option to purchase the Option Products, and (iii) $348.7 million was
allocated to a single, combined performance obligation comprised of: (i) the license of IP relating to SRP-9001 transferred to Roche, (ii) the related
research and development services provided under the joint global development plan, (iii) the services provided to manufacture clinical supplies of SRP-
9001, and (iv) our participation in a joint steering committee with Roche, because we determined that the license of IP and related activities were not
capable of being distinct from one another. Additionally, we are eligible to receive up to $1.7 billion in development, regulatory and sales milestone
payments with respect to SRP-9001.
-12-
In addition, the Collaboration Agreement provides that Roche will pay us royalties on net sales of SRP-9001, at a tiered royalty rate based on the
average cost to manufacture SRP-9001.
In the event that Roche chooses to exercise its option with respect to one or more Option Products, we will be paid an option exercise fee upon
each such exercise and the Option Products that are the subject of the option exercise will be subject to separate milestone payments and royalties on sales
of such Option Product.
Term; Termination
Unless earlier terminated as described below, the Collaboration Agreement will continue with respect to SRP-9001 or any Option Product for
which Roche has exercised its option, on a product-by-product and country-by-country basis, until the end of the royalty term for such product in such
country. The royalty term expires on the later of (a) twelve years after first commercial sale in such country, (b) loss of regulatory exclusivity in such
country and (c) expiration of all valid claims of specific licensed patents in such country.
Either party may terminate the Collaboration Agreement for the other party’s material breach if such breach is not cured within a specified cure
period.
If Roche breaches its development or commercialization diligence obligations with respect to a licensed product or fails to develop or
commercialize a particular licensed product in a particular region for a specified period of time, then we may terminate the Collaboration Agreement with
respect to such licensed products in such regions.
Roche may terminate the Collaboration Agreement if we fail to supply SRP-9001 to Roche in accordance with the terms of the Collaboration
Agreement and the supply agreements to be entered into between the parties. Roche may also terminate the Collaboration Agreement for convenience with
extended advance notice, in its entirety or on a licensed product-by-licensed product and region-by-region basis.
The foregoing description of the terms of the Collaboration Agreement is not complete and is qualified in its entirety by reference to the text of
the Collaboration Agreement, a copy of which is filed as an exhibit to this Annual Report.
Myonexus Therapeutics Inc.
On May 3, 2018, we purchased from Myonexus Therapeutics Inc. (“Myonexus”), a privately-held Delaware corporation, a warrant to purchase
common stock of Myonexus (the “Warrant”), which, in combination with amendments to the Myonexus certificate of incorporation, provided us with an
exclusive option (the “Option”) to acquire Myonexus. In consideration for the Warrant, we made an up-front payment of $60.0 million to Myonexus. On
February 27, 2019, we announced that we exercised the exclusive option to acquire Myonexus and, on April 4, 2019, we paid the Myonexus shareholders
approximately $173.8 million and completed the acquisition of Myonexus. As part of the consideration for the transaction, we are required to make
contingent payments to the former shareholders of Myonexus upon achievement of a threshold amount of net sales of Myonexus products and the receipt
and subsequent sale of a Priority Review Voucher (“PRV”) with respect to a Myonexus product.
BioMarin Pharmaceutical Inc.
License Agreement
On July 17, 2017, we executed a license agreement (as amended on April 14, 2019 and November 17, 2021, the “License Agreement”) with
BioMarin Leiden Holding BV, BioMarin Nederlands BV and BioMarin Technologies BV (collectively, “BioMarin”), pursuant to which BioMarin granted
us a royalty-bearing, worldwide license under patent rights (“Licensed Patents”) and know-how (“Licensed Know-How”) controlled by BioMarin with
respect to BioMarin’s Duchenne program, which are potentially necessary or useful for the treatment of Duchenne, to practice and exploit the Licensed
Patents and Licensed Know-How in all fields of use and for all purposes, including to develop and commercialize antisense oligonucleotide products that
target one or more exons of the dystrophin gene to induce exon skipping, including eteplirsen, golodirsen and casimersen (collectively, the “Products”).
The license granted to us by BioMarin is co-exclusive with BioMarin, with respect to the Licensed Patents, and is non-exclusive with respect to
Licensed Know-How. Pursuant to the amendment to the License Agreement dated November 17, 2021 (the “2021 Amendment”), BioMarin exercised its
right to convert the exclusive license under the Licensed Patents to the current co-exclusive license.
-13-
Under the terms of the License Agreement, we were required to pay BioMarin an up-front payment of $15.0 million. Pursuant to the 2021
Amendment, BioMarin is eligible to receive up to $20.0 million from us per dystrophin gene exon (other than exon 51) targeted by one or more Products in
specified regulatory milestones, as well as an additional $10.0 million milestone, payable following the regulatory approval of eteplirsen by the EMA.
BioMarin is also eligible to receive through June 30, 2022 royalties segmented by specified geographic markets, in some jurisdictions dependent on the
existence of a patent, ranging from 4% to 8% of net sales on a product-by-product and country-by-country basis. Beginning July 1, 2022, pursuant to the
2021 Amendment, BioMarin was eligible to receive royalties of 4% in the U.S. and 5% outside the U.S. of net sales of Products covered by a Licensed
Patent on a product-by-product and country-by-country basis.
Milestones and royalties are payable with respect to the Products through June 30, 2022. Beginning July 1, 2022, pursuant to the 2021
Amendment, milestones and royalties are payable only with respect to the Products covered by a Licensed Patent. Beginning July 1, 2022, pursuant to the
2021 Amendment, the royalty term applicable to the Products covered by a Licensed Patent will expire upon March 31, 2024 in the U.S. and December 31,
2024 outside the U.S. The royalties for all Products covered by a Licensed Patent are subject to reductions, including for generic competition and, under
specified conditions, for a specified portion of payments that we may become required to pay under third-party license agreements, subject to a maximum
royalty reduction.
Unless earlier terminated, the License Agreement will expire upon the expiration of the last-to-expire royalty term. Either party may terminate
the License Agreement in the event of the other party’s uncured material breach. BioMarin may also terminate the License Agreement on a Licensed
Patent-by-Licensed Patent basis under specified circumstances relating to patent challenges by us.
Settlement Agreement
On July 17, 2017, Sarepta and The University of Western Australia (“UWA”) on the one hand, and the BioMarin Parties and Academisch
Ziekenhuis Leiden (“AZL”) on the other hand (collectively, the “Settlement Parties”), executed a Settlement Agreement pursuant to which all legal actions
in the U.S. and certain legal actions in Europe (the “Actions”) would be stopped or withdrawn as between the Settlement Parties. Specifically, the terms of
the Settlement Agreement required that existing efforts pursuing ongoing litigation and opposition proceedings would be stopped as between the Settlement
Parties, and the Settlement Parties would cooperate to withdraw the Actions before the European Patent Office (except for actions involving third parties),
the U.S. Patent and Trademark Office (“USPTO”), the U.S. Court of Appeals for the Federal Circuit and the High Court of Justice of England and Wales,
except for the cross-appeal of the Interlocutory Decision of the Opposition Division dated April 15, 2013 of the European Patent Office of EP 1619249B1
(“EP ‘249 Appeal”) in which Sarepta agreed to withdraw its appeal and BioMarin/AZL agreed to continue with its appeal with Sarepta having oversight of
the continued appeal by BioMarin/AZL.
Additionally, under the terms of the Settlement Agreement, the Settlement Parties agreed to release each other and the customers, end-users,
agents, suppliers, distributors, resellers, contractors, consultants, services and partners of Sarepta or BioMarin (as applicable) from claims and damages
related to (i) the patent rights controlled by the releasing party that are involved in the Actions, (ii) with respect to Sarepta and UWA, its patent rights
related to the patent rights involved in the Actions, and (iii) with respect to BioMarin and AZL, all of the Licensed Patents and Licensed Know-How.
Under the terms of the Settlement Agreement, we made an up-front payment of $20.0 million to BioMarin.
University of Western Australia
In April 2013, we entered into an agreement with UWA under which an existing exclusive license agreement between the two parties was
amended and restated and, in June 2016, we entered into the first amendment to the license agreement (the “UWA License Agreement”). The UWA License
Agreement grants us specific rights to compounds for the treatment of Duchenne by inducing exon skipping. EXONDYS 51, VYONDYS 53 and
AMONDYS 45 fall under the scope of the license agreement. Under the UWA License Agreement, we are required to make payments of up to $6.0 million
in the aggregate to UWA based on the successful achievement of certain development and regulatory milestones relating to EXONDYS 51, VYONDYS 53,
AMONDYS 45 and up to three additional product candidates. As of December 31, 2022, $4.2 million of the $6.0 million development and regulatory
milestone payments had been made. We are also obligated to make payments to UWA of up to $20.0 million upon the achievement of certain sales
milestones. Additionally, we are required to pay a low-single-digit percentage royalty on net sales of products covered by issued patents licensed from
UWA during the term of the UWA License Agreement.
Currently, the latest date on which an issued patent covered by the UWA License Agreement expires is November 2030 (excluding any patent
term extension, supplemental protection certificate or pediatric extensions that may be available); however, patents granted from pending patent
applications could result in a later expiration date.
-14-
Patents and Proprietary Rights
Our success depends in part upon our ability to obtain and maintain exclusivity for our products, product candidates and platform technologies.
We typically rely on a combination of patent protection and regulatory exclusivity to maintain exclusivity for our products and product candidates, whereas
exclusivity for our platform technologies is generally based on patent protection and trade secret protection. In addition to patent protection, regulatory
exclusivity, and trade secret protection, we also protect our products, product candidates and platform technologies with copyrights, trademarks, and
contractual protections.
We actively seek patent protection for our product candidates and certain of our proprietary technologies by filing patent applications in the U.S.
and other countries as appropriate. These patent applications are directed to various inventions, including, but not limited to, active ingredients,
pharmaceutical formulations, methods of use, and manufacturing methods. In addition, we actively acquire exclusive rights to third party patents and
patent applications to protect our in-licensed product candidates and corresponding platform technologies.
We do not have patents or patent applications in every jurisdiction where there is a potential commercial market for our product candidates. For
each of our programs, our decision to seek patent protection in specific foreign markets, in addition to the U.S., is based on many factors, including:
•
•
•
•
•
•
our available resources;
the number and types of patents already filed or pending;
the likelihood of success of the product candidate;
the size of the commercial market;
the presence of a potential competitor in the market; and
whether the legal authorities in the market effectively enforce patent rights.
We continually evaluate our patent portfolio and patent strategy and believe our owned and licensed patents and patent applications provide us
with a competitive advantage; however, if markets where we do not have patents or patent applications become commercially important, our business may
be adversely affected. A discussion of certain risks and uncertainties that may affect our freedom to operate, patent position, regulatory exclusivities and
other proprietary rights is set forth in Item 1A. Risk Factors included in this report, and a discussion of legal proceedings related to the key patents
protecting our products and product candidates are set forth below in the footnotes to the tables in this section.
Certain of our product candidates are in therapeutic areas that have been the subject of many years of extensive research and development by
academic organizations and third parties who may control patents or other intellectual property that they might assert against us, should one or more of our
product candidates in these therapeutic areas succeed in obtaining regulatory approval and thereafter be commercialized. We continually evaluate the
intellectual property rights of others in these areas in order to determine whether a claim of infringement may be made by others against us. Should we
determine that a third party has intellectual property rights that could impact our ability to freely market a compound, we consider a number of factors in
determining how best to prepare for the commercialization of any such product candidate. In making this determination we consider, among other things,
the stage of development of our product candidate, the anticipated date of first regulatory approval, whether we believe the intellectual property rights of
others are valid, whether we believe we infringe the intellectual property rights of others, whether a license is available upon commercially reasonable
terms, whether we will seek to challenge the intellectual property rights of others, the term of the rights, and the likelihood of and liability resulting from an
adverse outcome should we be found to infringe the intellectual property rights of others.
Currently, U.S. patents, as well as most foreign patents, are generally effective for 20 years from the date the earliest regular application was
filed. In some countries, the patent term may be extended to recapture a portion of the term lost during regulatory review of the claimed therapeutic. For
example, in the U.S., under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, a patent
that covers an FDA-approved drug may be eligible for patent term extension (for up to 5 years, but not beyond a total of 14 years from the date of product
approval) as compensation for patent term lost during the FDA regulatory review process. In the U.S., only one patent may be extended for any product
based on FDA delay. In addition to patent term extension, patents in the U.S. may be granted additional term due to delays at the USPTO during
prosecution of a patent application. We actively strive to maximize the potential for patent protection for our products and product candidates in
accordance with the law.
-15-
Key Patents & Regulatory Exclusivities
Our products, product candidates and our technologies are primarily protected by composition of matter and methods of use patents and patent
applications. A summary of granted composition of matter and/or methods of use patents that we solely own or control (or in the case of BioMarin/AZL
patents, control with BioMarin), which cover our products in the U.S. and Europe, is provided below. To the extent the product indicated above the tables
that immediately follow the name of such product is covered by a patent that is licensed to Sarepta, we may owe milestones and/or royalties to the indicated
licensor in connection with the development and/or commercial sale of the product.
Eteplirsen
Patent Number
Country/Region*
Patent Type
Expiration Date**
1
U.S. RE47,751
U.S. 9,018,368
US 10,781,451
2
U.S. RE48,468
3
U.S. RE47,769
U.S. 9,506,058
U.S. 10,364,431
U.S. 10,337,003
United States
United States
United States
United States
United States
United States
United States
United States
Methods of Use
Composition of Matter
Composition of Matter
Methods of Use
Composition of Matter
Methods of Use
Methods of Use
Methods of Use
June 28, 2025
June 28, 2025
June 28, 2025
October 27, 2028
February 2, 2029
March 14, 2034
March 14, 2034
March 14, 2034
Owner/Licensor
(if not Sarepta)
UWA
UWA
UWA
BioMarin/AZL
UWA
Sarepta
Sarepta
Sarepta
1.
2.
3.
Reissue of U.S. 8,486,907, which previously was involved in U.S. Patent Interference No. 106,013 and ordered to be cancelled pursuant to Judgment
dated September 29, 2015 (Decision dated December 29, 2015 denied our (UWA) Request for Rehearing. Appeal by us (UWA) to the Court of
Appeals for the Federal Circuit (Case Nos. 2016-1937, 2016-2086 (consolidated)) voluntarily dismissed July 27, 2017.)
Reissue of U.S. 9,243,245.
Reissue of U.S. 7,807,816, which previously was involved in U.S. Patent Interference No. 106,008 (Judgment dated September 20, 2016 ordered
cancellation of all claims of U.S. Application No. 13/550,210 to BioMarin (AZL). Appeal by BioMarin (AZL) to the Court of Appeals for the
Federal Circuit (Case No. 2017-1078) voluntarily dismissed July 27, 2017.)
Patent Number
Country/Region*
Patent Type
Expiration Date**
EP 1 766 010 B1
EP 3 238 737 B1
Europe
Europe
Composition of Matter &
Methods of Use
Composition of Matter
June 28, 2025
October 27, 2028
BioMarin/AZL
Owner/Licensor
(if not Sarepta)
UWA
The various types of regulatory exclusivity for which our products have been granted and our product candidates are anticipated to be eligible to
receive are generally discussed below, under ‘Government Regulation’ – ‘Data and Market Exclusivities’ and ‘Orphan Drug Designation and Exclusivity’.
In connection with its FDA approval on September 19, 2016, EXONDYS 51 (eteplirsen) is protected with Orphan Drug Exclusivity until September 19,
2023.
Golodirsen
Patent Number
Country/Region*
Patent Type
Expiration Date**
1
U.S. RE47,691
U.S. 9,024,007
2
U.S. 9,994,851
2
U.S. 10,266,827
2
U.S. 10,227,590
U.S. 10,421,966
U.S. 10,968,450
U.S. 10,995,337
United States
United States
United States
United States
United States
United States
United States
United States
Composition of Matter
Composition of Matter
Composition of Matter
Methods of Use
Composition of Matter
Composition of Matter
Composition of Matter
Composition of Matter &
Methods of Use
June 28, 2025
June 28, 2025
June 28, 2025
June 28, 2025
June 28, 2025
June 28, 2025
June 28, 2025
June 28, 2025
-16-
Owner/Licensor
(if not Sarepta)
UWA
UWA
UWA
UWA
UWA
UWA
UWA
UWA
1.
2.
Reissue of U.S. 8,455,636, which previously was involved in U.S. Patent Interference No. 106,007. (Judgment dated April 29, 2016 ordered
cancellation of (i) all claims, except claim 77, of U.S. Application No. 11/233,495 to BioMarin (AZL); and (ii) U.S. 8,455,636 to us (UWA). Appeal
by BioMarin (AZL) to the Court of Appeals for the Federal Circuit (Case No. 2016-2262) voluntarily dismissed July 27, 2017.)
Involved in Nippon Shinyaku Co., Ltd. v. Sarepta Therapeutics, Inc., C.A. No. 21-1015 (LPS) (D. Del. 2021) filed on July 13, 2021 in which Nippon
Shinyaku is seeking a determination of invalidity and Sarepta is seeking counterclaims of infringement.
Patent Number
Country/Region*
Patent Type
Expiration Date**
EP 2 970 964 B1
Europe
Composition of Matter
March 14, 2034
Owner/Licensor
(if not Sarepta)
Sarepta
The various types of regulatory exclusivity for which our products have been granted and our product candidates are anticipated to be eligible to
receive are generally discussed below, under ‘Government Regulation’ – ‘Data and Market Exclusivities’ and ‘Orphan Drug Designation and Exclusivity’.
In connection with its FDA approval on December 12, 2019, the FDA granted VYONDYS 53 (golodirsen) new chemical entity ("NCE") exclusivity until
December 12, 2024, and Orphan Drug Exclusivity until December 12, 2026.
Casimersen
Patent Number
U.S. 9,447,415
1
U.S. RE48,960
U.S. 9,228,187
U.S. 9,758,783
U.S. 10,287,586
U.S. 10,781,450
1.
Reissue of U.S. 8,524,880.
Country/Region*
Patent Type
Expiration Date**
United States
United States
United States
United States
United States
United States
Composition of Matter June 28, 2025
June 28, 2025
Compositions of
Matter and
Methods of Use
Composition of Matter November 12, 2030
Methods of Use
November 12, 2030
Composition of Matter November 12, 2030
November 12, 2030
Methods of Use
Owner/Licensor
(if not Sarepta)
UWA
UWA
UWA
UWA
UWA
UWA
Patent Number
Country/Region*
Patent Type
Expiration Date**
EP 2 499 249 B1
Europe
Composition of Matter &
Methods of Use
November 12, 2030
Owner/Licensor
(if not Sarepta)
UWA
The various types of regulatory exclusivity for which our products have been granted and our product candidates are anticipated to be eligible to
receive are generally discussed below, under ‘Government Regulation’ – ‘Data and Market Exclusivities’ and ‘Orphan Drug Designation and Exclusivity’.
In connection with its FDA approval on February 25, 2021, the FDA granted AMONDYS 45 (casimersen) NCE exclusivity until February 25, 2026, and
Orphan Drug Exclusivity until February 25, 2028.
* Granted patents in the U.S. and Europe (EP) are shown here. Additional patent protection in the U.S., Europe (EP) or other countries or
regions through pending or granted foreign counterparts may be available.
** Stated expiration dates do not account for any patent term extension, supplemental protection certificate or pediatric extensions that may be
available.
In addition to the foregoing composition of matter and method of use patents that protect eteplirsen, casimersen and golodirsen, we either solely
own or control (or in the case of BioMarin/AZL patents, control with BioMarin) patents and patent applications in the U.S. and in major foreign markets
that, if granted, provide additional protection for eteplirsen, casimersen, and golodirsen, which cover the composition of matter, preparation and/or uses of
the products. These patents, and patent applications, if
-17-
granted, would expire through at least 2038, such expiration dates not accounting for any patent term extension, patent term adjustment, supplemental
protection certificate or pediatric extensions that may be available.
Platform Technologies
We separately own patents and patent applications in the U.S. and in major foreign markets that cover our proprietary PMO-based platform
technologies (e.g., PPMO) relevant to our products. These patents, and patent applications, if granted, expire through at least 2038, such expiration dates
not accounting for any patent term extension, supplemental protection certificate or pediatric extensions that may be available.
Trademarks
Our trademarks are important to us and are generally filed to protect our corporate brand, our products and platform technologies. We typically
file trademark applications and pursue their registration in the U.S., Europe and other markets in which we anticipate using such trademarks. We are the
owner of multiple federal trademark registrations in the U.S. including, but not limited to, Sarepta, Sarepta Therapeutics, the double-helix logo,
EXONDYS, EXONDYS 51, the EXONDYS 51 Logo, VYONDYS, VYONDYS 53, the VYONDYS 53 Logo, AMONDYS, AMONDYS 45, and the
AMONDYS 45 Logo. In addition, we have multiple pending trademark applications and registrations in the U.S. and in major foreign markets. Trademark
protection varies in accordance with local law, and continues in some countries as long as the trademark is used and in other countries as long as the
trademark is registered. Trademark registrations generally are for fixed but renewable terms.
Government Regulation
The testing, manufacturing, labeling, advertising, promotion, distribution, exportation and marketing of our products are subject to extensive
regulation by governmental authorities in the U.S. and in other countries. In the U.S., the FDA, under the Federal Food, Drug and Cosmetic Act and its
implementing regulations, regulates pharmaceutical products. Failure to comply with applicable U.S. requirements may subject us to administrative or
judicial sanctions, such as FDA refusal to approve pending marketing applications, withdrawal of approval of approved products, warning letters, untitled
letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, civil penalties and/or criminal prosecution.
U.S. Drug Approval Process
To obtain FDA approval of a product candidate, we must, among other things, submit clinical data providing substantial evidence of safety and
efficacy of the product for its intended use, as well as detailed information on product composition, its manufacture and controls and proposed labeling. The
testing and collection of data and the preparation of necessary applications are expensive and time-consuming. The FDA may not act quickly or favorably
in reviewing these applications, and we may encounter significant difficulties or costs in our efforts to obtain FDA approvals that could delay or preclude us
from marketing our products.
The steps required before a drug may be approved for marketing in the U.S. generally include the following:
•
•
•
•
•
•
pre-clinical laboratory tests and animal toxicity testing;
submission of an IND for conducting human clinical testing to the FDA, which must become effective before human clinical trials
commence;
approval by an Institutional Review Board (“IRB”) or independent ethics committee at each clinical trial site before each trial may be
initiated;
adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug product for each indication, including
controlled studies or comparison of treated group from clinical trials to data from natural history data or studies;
submission of a complete and compliant marketing application containing chemistry, manufacturing and control information for the drug
substance and drug product, reports of nonclinical and clinical trials, product labeling and administrative information;
satisfactory completion of an FDA inspection of the commercial manufacturing facilities at which the drug substance and drug product are
made to assess compliance with cGMP;
-18-
•
•
satisfactory FDA audit of the clinical trial site(s) that generated the pivotal safety and efficacy data included in the marketing application
and also potentially the nonclinical trial site(s) in the form of pre-approval inspections; and
FDA review and approval of the marketing application.
Pre-clinical trials may include laboratory evaluations of the product chemistry, pharmacology, toxicity and formulation, as well as animal studies
to assess the pharmacokinetics, metabolism, bio-distribution, elimination and toxicity of the product candidate. The conduct of the pre-clinical tests and
formulation of the compounds for testing must comply with federal regulations and requirements. The results of the pre-clinical trials, manufacturing
information, analytical data and a proposed first in human clinical trial protocol are submitted to the FDA as part of the IND, which must become effective
before clinical trials may be initiated. The IND will become effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions about
the supportive data, or the study design, particularly regarding potential safety issues with conducting the clinical trial as described in the protocol. In this
situation, the trials are placed on clinical hold and the IND sponsor must resolve any outstanding FDA concerns before clinical trials can proceed.
Clinical trials involve the administration of the product candidate to healthy volunteers or patient participants under the supervision of a qualified
principal investigator. Clinical trials are conducted under protocols detailing the objectives of the study, the administration of the investigational product,
subject selection and exclusion criteria, study procedures, parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each
protocol must be submitted to the FDA as a submission to the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s Good
Clinical Practice (“GCP”) requirements and federal and state laws and regulations protecting study subjects. Further, each clinical trial must be reviewed
and approved by the IRB at or servicing each institution in which the clinical trial will be conducted. The IRB will consider, among other things, rationale
for conducting the trial, clinical trial design, participant informed consent, ethical factors, the safety and rights of human subjects and the possible liability
of the institution. The FDA can temporarily or permanently halt a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial is
not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial subjects. The IRB may also require the
clinical trial at a particular site be halted, either temporarily or permanently, for failure to comply with GCP or the IRB’s requirements, or may impose other
conditions.
Clinical trials typically are conducted in three sequential drug development phases (Phases 1, 2 and 3) prior to approval, and a portion of these
phases may overlap. A fourth post-approval phase (Phase 4) may include additional clinical trials. A general description of clinical trials conducted in each
phase of development is provided below. However, the number of study subjects involved in each phase of drug development for rare diseases can be
significantly less than typically expected for more common diseases with larger patient populations:
•
•
•
•
Phase 1. Phase 1 clinical trials involve the initial introduction of the drug into human subjects. These studies are usually designed to
determine the safety of single and multiple doses of the compound and determine any dose limiting toxicities or intolerance, as well as the
metabolism and pharmacokinetics of the drug in humans. Phase 1 studies usually involve fewer than 100 subjects and are conducted in
healthy adult volunteers, unless it is unethical to administer the study drug to healthy volunteers, in which case they are tested in patients.
Phase 2. Phase 2 clinical trials are usually conducted in a limited patient population to evaluate the safety and efficacy of the drug for a
specific indication to determine optimal dosage and to identify possible adverse effects and safety risks. Phase 2 studies usually involve
patients with the disease under investigation and may vary in size from several dozen to several hundred.
Phase 3. If an investigational drug is found to be potentially effective and to have an acceptable safety profile in early phase studies, larger
Phase 3 clinical trials are conducted to confirm clinical efficacy, dosage and safety in the intended patient population, which may involve
geographically dispersed clinical trial sites. Generally, two adequate and well-controlled Phase 3 clinical trials which establish the safety
and efficacy of the drug for a specific indication are required for approval of a marketing application. Phase 3 studies usually include
several hundred to several thousand patients for larger, non-orphan drug indications/diseases. However, clinical trials for rare or orphan
diseases generally have fewer patients due to their lower prevalence. For these orphan diseases, a company may also try to demonstrate
efficacy and safety by comparing treated patients in clinical trials to untreated patients participating in placebo-controlled clinical trials or
to observational natural history studies.
Phase 4. Phase 4 trials are clinical trials conducted after the FDA has approved a product for marketing. Typically, there are two forms of
Phase 4 trials: those that are conducted to fulfill mandatory conditions of product approval and those that are voluntarily conducted to gain
additional experience from the treatment of patients in the intended therapeutic indication. The mandatory studies are used to confirm
clinical benefit in the case of drugs approved under the accelerated approval regulations or to provide additional clinical safety or efficacy
data for “full” approvals. Failure to promptly conduct and complete mandatory Phase 4 clinical trials could result in withdrawal of
approval for products approved under accelerated approval regulations.
-19-
A company seeking marketing approval for a new drug in the U.S. must submit the results of the pre-clinical and clinical trials to the FDA in the
form of a marketing application, together with, among other things, detailed information on the manufacture and composition of the product candidate and
proposed labeling, including payment of a user fee for FDA review of the application. The user fee is waived for an application for a product intended to
treat an Orphan Indication. The FDA assesses all submitted marketing applications for completeness before it accepts them for filing. In some cases, the
FDA may request additional information before accepting a marketing application for filing. Once the submission is accepted for filing, the FDA begins an
in-depth review of the marketing application. Applications receive either standard or priority review. Under the current goals mandated under the
Prescription Drug User Fee Act (the “PDUFA”), the FDA has ten months in which to complete its initial review of a standard marketing application and
respond to the applicant, and six months for a priority marketing application. The FDA does not always meet its PDUFA goal dates for standard or priority
marketing applications. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the marketing application
sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months
before the PDUFA goal date. The FDA may refer an application to an advisory committee for review, evaluation and recommendation as to whether the
application should be approved. Though the FDA is not bound by such recommendations, it considers them carefully when making decisions. If the FDA’s
evaluations of the marketing application and the clinical and manufacturing procedures and facilities are favorable, the FDA may issue an approval letter. If
the FDA finds deficiencies in the marketing application, it may issue a complete response letter, which defines the conditions that must be met in order to
secure final approval of the marketing application. If and when those conditions have been met to the FDA’s satisfaction, the FDA will issue an approval
letter, authorizing commercial marketing of the drug. Sponsors that receive a complete response letter may submit to the FDA information that represents a
complete response to the issues identified by the FDA. Resubmissions by the marketing application sponsor in response to a complete response letter
trigger new review periods of varying length (typically two to six months) based on the content of the resubmission. If the FDA’s evaluation of the
marketing application and the commercial manufacturing procedures and facilities is not favorable, the FDA may not approve the marketing application.
A sponsor may also seek designation of its drug candidates under programs designed to accelerate the FDA’s review and potential approval of
marketing applications. For instance, a sponsor may seek FDA designation of a drug candidate as a “fast track product.” Fast track products are those
products intended for the treatment of a serious or life-threatening disease or condition and which demonstrate the potential to address unmet medical needs
for such disease or condition. If fast track designation is obtained, the FDA may initiate early and frequent communication and begin reviewing sections of
a marketing application before the application is complete. This “rolling review” is available if the applicant provides, and the FDA approves, a schedule
for the remaining information. Eteplirsen was granted fast track status in 2007.
The Food and Drug Administration Safety and Innovation Act (“FDASIA”) enacted and signed into law in 2012 amended the criteria for the fast
track and accelerated approval pathways and, as a result, the pathways now share many common eligibility criteria. FDASIA provides both the sponsor
companies and the FDA with greater flexibility and expedited regulatory mechanisms. The statute clarifies that a fast track product may be approved
pursuant to an accelerated approval (Subpart – H) or under the traditional approval process. In addition, FDASIA codified the accelerated approval pathway
as separate and apart from the fast track pathway, meaning that for drugs to be eligible for accelerated approval, they do not need to be designated under the
fast track pathway. FDASIA reinforces the FDA’s authority to grant accelerated approval of a drug that treats a serious condition and generally provides a
meaningful advantage over available therapies and demonstrates an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a
clinical endpoint that can be measured earlier than irreversible morbidity or mortality (“IMM”) that is reasonably likely to predict an effect on IMM or
other clinical benefit (i.e., an intermediate clinical endpoint). Approvals of this kind typically include requirements for appropriate post-approval Phase 4
clinical trials to confirm clinical benefit. FDASIA retains this requirement and further requires those studies to verify and describe the predicted effect on
irreversible morbidity or mortality or other clinical benefit. The Food and Drug Omnibus Reform Act of 2022 (“FDORA”) signed by President Biden on
December 29, 2022 as part of the Consolidated Appropriations Act, 2023 (H.R. 2617) includes numerous reforms to the accelerated approval process for
drugs and biologics and enables FDA to require, as appropriate, that a post-approval study be underway prior to granting accelerated approval. FDORA
also expands the expedited withdrawal procedures already available to FDA to allow the agency to use expedited procedures if a sponsor fails to conduct
any required post-approval study of the product with due diligence including with respect to “conditions specified by the Secretary of HHS.” FDORA also
adds the failure of a sponsor of a product approved under accelerated approval to conduct with due diligence any required post-approval study with respect
to such product or to submit timely reports with respect to such product to the list of prohibited acts in the Food, Drug, and Cosmetic Act.
Additionally, FDASIA established a new, expedited regulatory mechanism referred to as breakthrough therapy designation. Breakthrough
therapy designation, fast track, and accelerated approval are not mutually exclusive and are meant to serve different purposes. The breakthrough therapy
designation is focused on expediting the development and review process and by itself does not create an alternate ground for product approval. A sponsor
may seek FDA designation of a drug candidate as a breakthrough therapy if the drug is intended, alone or in combination with one or more other drugs, to
treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement
over existing therapies on one or
-20-
more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA issued guidance entitled
“Expedited Programs for Serious Conditions––Drugs and Biologics” in May 2014.
Finally, if a drug candidate demonstrates a significant benefit over existing therapy, it may be eligible for priority review, which means it will be
reviewed within a six-month timeframe from the date a complete marketing application is accepted for filing. A Regenerative Medicine Advanced Therapy
(“RMAT”) designation is also designed to accelerate approval for regenerative advanced therapies such as our gene therapy product candidates, but the
exact mechanisms have not yet been announced by FDA.
We cannot be sure that any of our drug candidates will qualify for any of these expedited development, review and approval programs, or that, if
a drug does qualify, that the product candidates will be approved, will be accepted as part of any such program or that the review time will be shorter than a
standard review.
Holders of an approved marketing application are required to:
•
•
•
•
•
report serious adverse drug reactions to the FDA;
submit annual and periodic reports summarizing product information and safety data;
comply with requirements concerning advertising and promotional labeling;
continue to have quality control and manufacturing procedures conform to cGMP after approval; and
conduct any post-marketing study designated as a required condition of the marketing application approval.
The FDA periodically inspects the sponsor’s records related to safety reporting and/or manufacturing; this latter effort includes assessment of
compliance with cGMP. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to
maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an
approved marketing application, including withdrawal of the product from the market.
Foreign Regulatory Requirements
In 2018, the Committee for Medicinal Products for Human Use (“CHMP”) within the EMA confirmed its negative opinion for eteplirsen, and the
European Commission adopted the CHMP opinion.
As of the date of this Annual Report, EXONDYS 51, VYONDYS 53 and AMONDYS 45 have only been approved for sale and marketing in the
U.S. by the FDA, and EXONDYS 51 has been approved in addition for sale and marketing in Israel by the Israeli Ministry of Health.
Thus, in addition to regulations in the U.S., our business is subject to a variety of foreign regulations governing clinical trials and commercial
sales and distribution of our products. Irrespective of whether it concerns an FDA approved or investigational drug, the commencement of clinical trials and
the subsequent marketing of a drug product in foreign countries are subject to preliminary approvals from the corresponding regulatory authorities of such
countries. For example, the conduct of clinical trials in the EU is governed by the Clinical Trials Regulation (EU) No 536/2014 and the principles and
guidelines on GCP.
In April 2014, the EU adopted a new Clinical Trials Regulation (EU) (the "Regulation") No 536/2014 to replace the current Clinical Trials
Directive 2001/20/EC. Although the new Regulation has been adopted and has entered into force in 2014, it only came into application in the EU Member
States six months after the EC confirmed the functionality of the new Clinical Trials Information System (“CTIS”), which includes the centralized EU
portal and database for clinical trials introduced by the Regulation. On July 31, 2021, the EC published a notice in the Official Journal of the European
Union, confirming full functionality of the EU portal and database. The Regulation has, consequently, entered into application on January 31, 2022 and has
repealed the Clinical Trials Directive 2001/20/EC and its national implementation legislations. However, it does foresee in a three-year transition period.
During the first year, until January 31, 2023, sponsors of clinical trials were able to choose whether to file a clinical trial application (“CTA”) under the
regime of the Directive, using the EudraCT, or under the Regulation, using the CTIS. As of the second year, all new CTAs must be submitted under the
Regulation, via the CTIS. Clinical trials that were submitted under the Directive prior to January 31, 2023, will be allowed to continue under the old regime
until the end of the transition period, but sponsors may also opt to transition ongoing trials on a voluntary basis. By January 31, 2025, all clinical trials that
had been authorized under the Directive, must either have ended in the EU and European Economic Area (the “EEA”), or have been transitioned to the new
regime. No legislation needs to be adopted to implement the new Regulation into national EU Member State law as it is directly applicable. The new
Regulation provides an overhaul of the system, in order to harmonize the assessment of the submission and assessment of clinical trials conducted in EU
Member States and to ensure greater consistency with the highest standards of patient safety in the EU. Under the Clinical Trial Directive 2001/20/EC and
the Commission Directive 2005/28/EC laying down the requirements for the conduct of clinical trials in the
-21-
EU, a sponsor had to obtain approval from the competent national authority of the member state of the EU (“EU Member State”) in which the clinical trial
would be conducted, or in multiple EU Member States if the clinical trial would be conducted in a number of countries. Furthermore, the sponsor could
only start a clinical trial at a specific study site after the competent ethics committee issued a favorable opinion. The CTA had to include the supporting
information prescribed by Directive 2001/20/EC and Directive 2005/28/EC, corresponding national laws of the EU Member States, and as further detailed
in the applicable guidance documents. In contrast, the new legislation seeks to simplify and streamline approval of the clinical trials. Under the new
coordinated procedure, the sponsor of a clinical trial is required to submit a single application to a reporting EU Member State via the centralized EU portal
in the CTIS. The reporting EU Member State will consult and coordinate with all other EU Member States in which the clinical trial is planned to be
conducted. If the application is rejected, it can be amended and resubmitted through the central EU portal in the CTIS. If an approval is issued, the sponsor
can start the clinical trial in all EU Member States concerned. However, an EU Member State can in certain cases declare an “opt-out” from the approval.
In such a case, the clinical trial cannot be conducted in such EU Member State(s). The Regulation also aims to streamline and simplify the rules on safety
reporting for clinical trials.
In order to obtain marketing authorization for a medicinal product in the EU, applicants are required to submit a marketing authorization
application ("MAA") to either (a) the national competent authorities (through the decentralized, mutual recognition, or national procedures) or (b) the EMA
(through the centralized authorization procedure). Applicants are required to demonstrate the quality, safety and efficacy of the medicinal product in the
application for marketing authorization, which implies the requirement to conduct human clinical trials to generate the necessary clinical data. Furthermore,
all applications for marketing authorization for new medicines have to include the results of studies as described in an agreed pediatric investigation plan
(“PIP”) aimed at ensuring that the necessary data are obtained through studies in children, unless the medicine is exempt because of a deferral or waiver.
Deferrals allow an applicant to delay development of the medicine in children until, for instance, there is enough information to demonstrate its
effectiveness and safety in adults. Waivers, on the other hand, may be granted when the development of a medicine in children is not needed or is not
appropriate, such as for diseases that only affect the adult population. Regulation (EC) No 726/2004 of the European Parliament and of the Council lays
down the rules applicable to the centralized procedure for the authorization of medicinal products. The centralized procedure allows pharmaceutical
companies to submit a single application to the EMA, which is followed by a single evaluation and which results in a single approval to market the
medicinal product throughout the EEA, on the basis of a single market authorization. Approval via the centralized procedure is a two-step process whereby
the CHMP first evaluates the MAA and issues an opinion on whether the medicinal product may be authorized or not (step 1). The CHMP opinion is
subsequently sent to the EC, which takes a legally binding decision to grant a marketing authorization (step 2). The marketing authorization is valid
throughout the EU and is automatically recognized in three of the four European Free Trade Association states (Iceland, Liechtenstein and Norway). This
allows the marketing authorization holder to market the medicine and make it available throughout the EEA. The timeframe for the first step of the
centralized procedure (evaluation by the CHMP) opinion is 210 days from receipt of a valid application. However, the actual time needed to complete this
first step is generally longer than the 210 days, since procedural clock stops are required in order for the applicant to respond to additional requests for
information by the CHMP. Following a positive CHMP opinion, the EC has 67 days to issue its decision to grant the marketing authorization or not.
Accelerated evaluation of the MAA under the centralized procedure is possible in exceptional cases, following a justified request from the
applicant, when a medicinal product is of a major public health interest, particularly from the point of view of therapeutic innovation. The CHMP
determines what constitutes a major public interest on a case-by-case basis. Justifications must include the major benefits expected and present the
arguments to support the claim that the medicinal product introduces new methods of therapy or improves on existing methods, thereby addressing, to a
significant extent, the greater unmet needs for maintaining and improving public health. If the applicant provides sufficient justification for an accelerated
assessment, the CHMP can reduce the timeframe for review of a MAA to 150 days. The timeframe for the EC to issue its decision remains unaltered.
Article 3 of Regulation (EC) No 726/2004 defines in which cases the centralized application procedure must (mandatory scope) or may (optional
scope) be followed. The centralized procedure is mandatory for medicinal products derived from biotechnological and other high-tech processes, orphan
medicinal products, advanced therapy medicinal products and products indicated for the treatment of HIV/AIDS, cancer, diabetes, auto-immune and other
immune dysfunctions, viral diseases and neurodegenerative diseases. For medicinal products that do not fall under any of the aforementioned categories, a
submission via the centralized procedure is possible, provided that it concerns (i) a new active substance or (ii) product that can demonstrate a significant
therapeutic, scientific or technical innovation and for which approval would be in the interest of public health. Given the foregoing, our portfolio of
innovative orphan products for neurodegenerative diseases is subject to the mandatory centralized procedure.
Innovative medicinal products which have been authorized in accordance with the centralized procedure, benefit from an eight-year period of
data protection/exclusivity and a ten-year period of marketing protection/exclusivity. During the data exclusivity period, applicants for approval of generics
of these innovative products cannot reference or rely upon data contained in the marketing authorization dossier submitted for the innovative medicinal
product. Furthermore, the marketing protection entails that even if the generic product is approved, it cannot be placed on the market until the full ten-year
period of market protection has elapsed from the initial authorization of the reference medicinal product. The marketing protection period can be extended
to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder for the innovative product obtains an
-22-
authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant
clinical benefit in comparison with existing therapies.
Similar to the U.S., marketing authorization holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight
by the EMA and/or the national competent authorities of the EU Member States. This oversight applies both before and after the granting of manufacturing
and marketing authorizations. It includes compliance with EU GMP and GDP rules in relation to such activities as distribution, importing and exporting of
medicinal products, rules governing conduct of pharmacovigilance (including good pharmacovigilance practices (“GVP”)) and requirements governing
advertising, promotion and sale of medicinal products.
Failure to comply with the EU Member State laws implementing the EU Community Code on medicinal products, and EU rules governing the
promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices, with the EU
Member State laws that apply to the promotion of medicinal products, statutory health insurance, bribery and anti-corruption or with other applicable
regulatory requirements can result in enforcement action by the relevant EU Member State authorities. This may include any of the following sanctions:
fines, imprisonment, orders forfeiting products or prohibiting or suspending their supply to the market, orders to suspend, vary, or withdraw the marketing
authorization or requiring the manufacturer to issue public warnings, or to conduct a product recall.
The approval process in other countries outside the U.S. and the EU varies from country to country, and the time may be longer or shorter than
that required for the FDA approval. In addition, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement for
market access vary greatly from country to country. In all cases, clinical trials are conducted in accordance with GCP and the applicable regulatory
requirements and the ethical principles that have their origin in the Declaration of Helsinki.
Data and Market Exclusivities
In addition to patent exclusivities, the FDA and certain other foreign health authorities may grant data or market exclusivity for a newly approved
chemical entity or biologic, which runs in parallel to any patent protection. Regulatory data protection or exclusivity prevents a potential generic competitor
from relying on clinical trial data generated by the sponsor when establishing the safety and efficacy of its competing product. Market exclusivity prohibits
any marketing of the same drug for the same indication.
In the U.S., the FDA will generally grant an NCE that is the subject of an NDA with five years of regulatory data exclusivity, during which time
a competitor generally may not submit an application to the FDA based on a sponsor’s clinical data. A competitor, however, may file an Abbreviated New
Drug Application (“ANDA”) seeking approval of a generic drug four years from the date of approval of the innovative product if it is accompanied by a so-
called Paragraph IV certification. For a newly approved biologic that is the subject of a BLA, the FDA will generally grant 12 years of market exclusivity,
during which time a competitor may not market the same drug for the same indication.
In addition, the FDA may provide six months of pediatric exclusivity to a sponsor of a marketing application if the sponsor conducted a pediatric
study or studies of a product. This process is applied to products developed for adult use and is initiated by the FDA as a written request for pediatric
studies that applies to a sponsor’s product. If the sponsor conducts qualifying studies and the studies are accepted by the FDA, then an additional six
months of pediatric exclusivity will be added to previously granted exclusivity, such as orphan drug exclusivity and NCE exclusivity, as well as certain
patent-based exclusivities.
Orphan Drug Designation and Exclusivity
In the U.S., the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000
individuals in the U.S., or more than 200,000 individuals in the U.S. for which there is no reasonable expectation that the cost of developing and making
available in the U.S. a drug for this type of disease or condition will be recovered from sales in the U.S. for that drug. An orphan drug designation must be
requested before submitting an application for marketing approval. An orphan drug designation does not shorten the duration of the regulatory review and
approval process. The approval of an orphan designation request does not alter the regulatory requirements and process for obtaining marketing approval.
Safety and efficacy of a compound must be established through adequate and well-controlled studies. If a chemical or biological product which has an
orphan drug designation subsequently receives FDA approval for the indication for which it has such designation, the product is generally entitled to an
orphan drug exclusivity period of seven years, which means the FDA may not grant approval to any other application to market the same chemical or
biological product for the same indication for a period of seven years, except in limited circumstances, such as where an alternative product demonstrates
clinical superiority to the product with orphan exclusivity. The FDA has historically taken the position that the scope of orphan exclusivity aligns with the
approved indication or use of a product, rather than the disease or condition for which the product received orphan designation. However, on September 30,
2021, the U.S. Court of Appeals for the 11th Circuit issued a decision in Catalyst Pharms., Inc. v. Becerra holding that the scope of orphan drug exclusivity
-23-
must align with the disease or condition for which the product received orphan designation, even if the product’s approval was for a narrower use or
indication. It remains to be seen how this decision affects orphan drug exclusivity going forward. In addition, holders of exclusivity for orphan drugs are
expected to assure the availability of sufficient quantities of their orphan drugs to meet the needs of patients. Failure to do so could result in the withdrawal
of orphan exclusivity for the drug. Competitors may receive approval of different drugs or biologics for the indications for which a prior approved orphan
drug has exclusivity.
Pharmaceutical companies can apply for the designation as an orphan medicine. In the EU, applications for orphan designation are evaluated by
the EMA in accordance with Regulation (EC) No 141/2000. In order to qualify as an orphan medicine, the medicinal product must be intended to diagnose,
prevent or treat a condition that is life-threatening or chronically debilitating, with a prevalence of no more than 5 in 10,000 people in the EU or for which it
is unlikely that its sale would generate sufficient returns to justify the investment needed for its development. In addition, the sponsor is required to
demonstrate that no satisfactory method of diagnosis, prevention or treatment of the condition has been authorized in the EU or, if such method exists, the
medicinal product is of significant benefit to those affected by the condition as compared to approved methods. The benefits of being granted orphan
designation are significant, including up to ten years of market exclusivity. During this ten-year period, the EMA may not accept a new marketing
application for a similar medicinal product for the same therapeutic indication as the approved orphan medicinal product. Pursuant to Regulation (EC)
1901/2006 on medicinal products for pediatric use, the ten-year orphan market exclusivity can be extended to a maximum period of twelve years upon the
satisfactory completion of all the key elements of the agreed PIP. We have been granted orphan drug designation for eteplirsen in the EU.
Expanded / Early Access
In certain countries, drug products approved in the U.S. or the EU can be accessed by patients before the drug has obtained marketing approval in
such country. There are various forms of this access including, but not limited to, the actual purchase of product by the purchaser, which is often times the
government for patients, on a named patient basis, and providing the product free of charge on a named patient basis for compassionate use. Each country
has its own laws and regulations that apply to these forms of access and the extent and nature of such laws and regulations vary by country. For example, in
2018, the so-called Right to Try Act became law in the U.S. The law, among other things, allows eligible patients to access certain investigational new drug
products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval without enrolling in clinical trials and without
obtaining FDA permission under the FDA expanded access program. There is no obligation for a pharmaceutical manufacturer to make its drug products
available to such eligible patients as a result of the Right to Try Act.
We established a global EAP for eteplirsen, golodirsen and casimersen in some countries where eteplirsen, golodirsen and casimersen currently
have not been approved. The EAP provides a mechanism through which physicians can prescribe our products, within their professional responsibility, to
patients who meet pre-specified medical and other criteria and can secure funding.
-24-
Other Regulatory Requirements
In addition to regulations enforced by the FDA and foreign authorities relating to the clinical development and marketing of products, we are or
may become subject to regulation under the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other present and potential future foreign, federal, state and local laws and regulations. Our research and development processes involve
the controlled use of hazardous materials and chemicals and produce waste products. We are subject to federal, state and local environmental laws and
regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products. Although we believe that we are in
material compliance with applicable environmental laws that apply to us, we cannot predict whether new regulatory restrictions will be imposed by state or
federal regulators and agencies or whether existing laws and regulations will adversely affect us in the future. While it is impossible to accurately predict
the future costs associated with environmental compliance and potential remediation activities, we understand the importance of complying with all current
and future applicable environmental laws and regulations. Compliance with environmental laws is not expected to require significant capital expenditures
and has not had, and is not expected to have, a material adverse effect on our operations.
Healthcare Fraud and Abuse Laws
We are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry, including anti-kickback and false
claims laws. Violations of fraud and abuse laws may be punishable by crime or civil sanctions, including fines and civil monetary penalties, and/or
exclusion from federal health care programs (including Medicare and Medicaid). Federal and state authorities are paying increased attention to enforcement
of these laws within the pharmaceutical industry, and private individuals have been active in alleging violations of the laws and bringing suits on behalf of
the government under the federal False Claims Act (“FCA”). Violations of international fraud and abuse laws could result in similar penalties, including
exclusion from participation in health programs outside the U.S. Given the broad scope of these laws, our activities could be subject to scrutiny under the
laws. If we were subject to allegations concerning, or were convicted of violating, these laws, our business could be harmed.
The federal Anti-Kickback Statute generally prohibits, among other things, a pharmaceutical manufacturer from directly or indirectly soliciting,
offering, receiving, or paying any remuneration in cash or in kind where one purpose is either to induce the referral of an individual for, or the purchase or
prescription of, a particular drug that is payable by a federal health care program, including Medicare or Medicaid. A person or entity does not need to have
actual knowledge of the statute or a specific intent to violate the statute. Violations of the federal Anti-Kickback Statute can result in exclusion from
Medicare, Medicaid or other governmental programs as well as civil and criminal fines and penalties of up to $112,131 per violation and three times the
amount of the unlawful remuneration. A claim arising from a violation of the federal Anti-Kickback Statute also constitutes a false or fraudulent claim for
purposes of the FCA. A new federal anti-kickback statute enacted in 2018 prohibits certain payments related to referrals of patients to certain providers
(such as clinical laboratories) and applies to services reimbursed by private health plans as well as government health care programs.
Federal and state false claims laws generally prohibit anyone from knowingly and willfully, among other activities, presenting, or causing to be
presented for payment to third party payors (including Medicare and Medicaid) claims for drugs or services that are false or fraudulent (which may include
claims for services not provided as claimed or claims for medically unnecessary services). False or fraudulent claims for purposes of the FCA carry fines
and civil penalties for violations ranging from $12,537 to $25,076 for each false claim, plus up to three times the amount of damages sustained by the
federal government and may provide the basis for exclusion from federally funded healthcare programs. There is also a criminal FCA statute by which
individuals or entities that submit false claims can face criminal penalties. In addition, under the federal Civil Monetary Penalty Law, the Department of
Health and Human Services (“HHS”) Office of Inspector General has the authority to exclude from participation in federal health care programs or to
impose civil penalties against any person who, among other things, knowingly presents, or causes to be presented, certain false or otherwise improper
claims. A federal healthcare fraud statute prohibits the knowing and willful execution, or attempt to execute, a scheme to defraud a health care benefit
program, including private health plans, or obtain, through false or fraudulent pretenses, money or property owned by, or under the custody or control of,
such a health care benefit program.
The majority of states also have anti-kickback, false claims, and similar fraud and abuse laws and although the specific provisions of these laws
vary, their scope is generally broad, and there may not be regulations, guidance or court decisions that apply the laws to particular industry practices.
Laws and regulations have also been enacted by the federal government and various states to regulate the sales and marketing practices of
pharmaceutical manufacturers. The laws and regulations generally limit financial interactions between manufacturers and health care providers; require
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance
promulgated by the U.S. federal government; and/or require disclosure to the government and/or public of financial interactions (so-called “sunshine
laws”). State laws may also require disclosure of pharmaceutical pricing information and marketing expenditures. Manufacturers must also submit
information to the FDA on the identity and quantity of drug samples requested and distributed by a manufacturer during each year. Many of these laws and
-25-
regulations contain ambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in laws and their
implementation, our activities could be subject to the penalty provisions of the pertinent federal and state laws and regulations.
Data Privacy and Security
We may be subject to privacy and security laws in the various jurisdictions in which we operate, obtain or store personally identifiable
information. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on
privacy and data protection issues with the potential to affect our business. Our ongoing efforts to comply with evolving laws and regulations may be costly
and require ongoing modifications to our policies, procedures and systems. Failure to comply with laws regarding data protection would expose us to risk
of enforcement actions and penalties under such laws. Even if we are not determined to have violated these laws, government investigations into these
issues typically require the expenditure of significant resources and generate negative publicity, which could harm our business, financial condition, results
of operations or prospects.
Within the U.S., there are numerous federal and state laws and regulations related to the privacy and security of personal information. For
example, at the federal level, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended, and its implementing regulations
establish privacy and security standards that limit the use and disclosure of individually identifiable health information, or protected health information, and
require the implementation of administrative, physical and technological safeguards to protect the privacy of protected health information. While we have
determined that we are neither a “covered entity” nor a “business associate” directly subject to HIPAA, many of the U.S. health care providers with which
we interact are subject to HIPAA, and we may have assumed obligations related to protecting the privacy of personal information. States are increasingly
regulating the privacy and security of personal information. For example, the California Consumer Privacy Act (“CCPA”), which as of January 1, 2023 and
was amended and expanded by the California Privacy Rights Act (“CPRA”), gives California consumers (defined to include all California residents) certain
rights, including the right to ask covered companies to disclose copies of personal information collected and delete a consumer’s personal information and
requires covered companies to provide notice to California consumers regarding their data processing activities. Together the CCPA and CPRA place
limitations on a covered company’s ability to sell personal information and share it for purposes of cross-context behavioral advertising. The Virginia
Consumer Data Protection Act (“VCDPA”) has also gone into effect and other states either have comprehensive laws similar to the VCDPA, CCPA and
CDPRA going into operation this year, in the case of Colorado, Connecticut and Utah, or are considering such laws.
In addition, we may be subject to privacy and security laws in the various jurisdictions in which we operate, obtain or store personally
identifiable information. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing
focus on privacy and data protection issues with the potential to affect our business. For example, the processing of personal data relating to EEA citizens
or in the context of the activities of an establishment in the EEA is subject to the General Data Protection Regulation (the “GDPR”), which took effect in
May 2018. The GDPR increases obligations with respect to clinical trials conducted in the EEA, such as in relation to the provision of fair processing
notices, responding to data subjects who exercise their rights and reporting certain data breaches to regulators and affected individuals. The GDPR also
requires us to enter certain contractual arrangements with third parties that process GDPR-covered personal data on our behalf. The GDPR also increases
the scrutiny applied to transfers of personal data from the EEA (including from clinical trial sites in the EEA) to countries that are considered by the EC to
lack an adequate level of data protection, such as the U.S. The July 2020 invalidation by the Court of Justice of the EU of the EU-U.S. Privacy Shield
framework, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the U.S., has led to increased scrutiny on data transfers
from the EEA to the U.S. generally and may increase our costs of compliance with data privacy legislation. If our or our partners’ or service providers’
privacy or data security measures fail to comply with the GDPR requirements, we may be subject to litigation, regulatory investigations, enforcement
notices requiring us to change the way we use personal data and/or fines of up to EURO 20 million or up to 4% of the total worldwide annual turnover of
the preceding financial year, whichever is higher, as well as claims by affected individuals, negative publicity, reputational harm and a potential loss of
business and goodwill.
Pharmaceutical Pricing and Reimbursement
We have an ongoing dialogue with payors globally with the goal of obtaining broad coverage for our products. To date, payors’ policies on
coverage for our products have varied widely, including policies that allow broad coverage per the respective product’s prescribing information, policies
that provide limited coverage and policies that have denied coverage. The majority of payors have policies that provide for case-by-case coverage or
restricted coverage. Our revenue depends, in part, upon the extent to which payors provide coverage for our products and the amount that payors, including
government authorities or programs, private health insurers and other organizations, reimburse patients and healthcare providers for the cost of our
products. Reimbursement coverage policies and inadequate reimbursement may reduce the demand for, or the price purchasers are willing to pay for, our or
our partners’ products. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on
third-party payors to reimburse all or part of the costs associated with their prescription drugs. Patients are unlikely
-26-
to use our products unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of such products.
Third Party Reimbursement and Pricing in the U.S.
Commercial Insurance. Coverage and reimbursement of our products vary from commercial payor to commercial payor. Many commercial
payors, such as managed care plans, manage access to FDA approved products, and may use drug formularies and medical policies (which may include
specific coverage requirements such as prior authorization, re-authorization and achieving performance metrics under value-based contracts) to control
utilization. Exclusion from or restriction in coverage can reduce product usage.
Medicaid. Our products are eligible to be reimbursed by Medicaid. Medicaid is a joint federal and state program that is administered by the states
for low income and disabled beneficiaries. Under the Medicaid Drug Rebate Program, participating manufacturers are required to pay a rebate for each unit
of product reimbursed under the state Medicaid programs. The amount of the rebate for each product is set by law and depends in part on the prices at
which our products are sold to certain other purchasers and may be subject to an additional discount if certain pricing increases more than inflation. State
Medicaid programs and Medicaid managed care plans can seek additional “supplemental” rebates from manufacturers in connection with favorable
positioning on formularies.
Medicare. Medicare is a federal program that is administered by the federal government that covers individuals age 65 and over, disabled
individuals and individuals with certain conditions. Our products are eligible for reimbursement under Medicare Part B. Medicare Part B generally covers
drugs that are usually administered by physicians or other clinicians. Medicare Part B pays for such drugs under a payment methodology based on the
average sales price (“ASP”) of the drugs. Reimbursement levels and reimbursement methodologies have come under scrutiny and may be subject to
change. See “Government Regulation – Healthcare and Other Reform.” The Centers for Medicare & Medicaid Services (“CMS”) are also increasingly
bundling drug reimbursement into procedure costs, which can severely decrease the reimbursement rates for some manufacturers’ drugs.
Federal Purchasers. Drug products are subject to discounted pricing when purchased by federal agencies via the Federal Supply Schedule
(“FSS”). FSS participation is required for a drug product to be covered and reimbursed by certain federal agencies and for coverage under Medicaid,
Medicare Part B and the Public Health Service (“PHS”) 340B drug pricing program. FSS pricing is negotiated periodically with the Department of Veterans
Affairs. FSS pricing is intended not to exceed the price that a manufacturer charges its most-favored non-federal customer for its product. In addition, prices
for drugs purchased by the Veterans Administration, Department of Defense (including drugs purchased by military personnel and dependents through the
TRICARE retail pharmacy program), Coast Guard, and PHS are subject to a cap on pricing (known as the “federal ceiling price”) and may be subject to an
additional discount if pricing increases more than the rate of inflation.
PHS 340B Drug Pricing Program. To maintain coverage of drugs under the Medicaid Drug Rebate Program and Medicare Part B, manufacturers
are required to extend discounts to certain purchasers under the PHS 340B drug pricing program. Purchasers eligible for discounts include hospitals that
serve a disproportionate share of financially needy patients, community health clinics and other entities that receive health services grants from the PHS.
Healthcare and Other Reform. In the U.S., federal and state governments continue to propose and pass legislation designed to reform delivery of,
or payment for, health care, which include initiatives to reduce the cost of healthcare. For example, in March 2010, the U.S. Congress enacted the Patient
Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (the “Healthcare Reform Act”), which expanded health care
coverage through Medicaid expansion, implemented the “individual mandate” for health insurance coverage (by imposing a tax penalty on individuals who
did not obtain insurance) and changed the coverage and reimbursement of drug products under government healthcare programs. There have been ongoing
efforts to modify or repeal all or certain provisions of the Healthcare Reform Act. For example, tax reform legislation was enacted at the end of 2017 that
eliminated the tax penalty established under the Healthcare Reform Act for individuals who do not maintain mandated health insurance coverage beginning
in 2019. The Healthcare Reform Act has also been subject to judicial challenge. On June 17, 2021, the U.S. Supreme Court dismissed the latest judicial
challenge to the Healthcare Reform Act brought by several states without specifically ruling on the constitutionality of the Healthcare Reform Act.
Beyond the Healthcare Reform Act, there have been ongoing healthcare reform efforts. Some recent healthcare reform efforts have sought to
address certain issues related to the COVID-19 pandemic, including an expansion of telehealth coverage under Medicare and accelerated or advanced
Medicare payments to healthcare providers. Other reform efforts affect pricing or payment for drug products. Drug pricing and payment reform was a
focus of the Trump Administration and has been a focus of the Biden Administration. For example, federal legislation enacted in 2021 eliminates a
statutory cap on Medicaid drug rebate program rebates effective January 1, 2024. As another example, in 2022, the Inflation Reduction Act ("IRA") of
2022 contains numerous drug pricing and payment reforms. Among other provisions, the IRA imposes a yearly cap ($2,000 in 2025) on out-of-pocket
prescription drug costs in Medicare Part D, implements a new Medicare Part D manufacturer discount drug program in 2025; requires manufacturers to
-27-
pay a rebate to the federal government if prices for single-source drugs and biologicals covered under Medicare Part B and nearly all covered drugs under
Medicare Part D increase faster than the rate of inflation and, starting in 2026, creates a drug price negotiation program under which the prices for certain
high Medicare spend drugs and biologicals without generic or biosimilar competition will be limited by a cap that is defined by reference to, among other
things, a specified non-federal average manufacturer price.
Healthcare reform efforts have been and may continue to be subject to scrutiny and legal challenge. For example, revisions to regulations under
the federal anti-kickback statute would remove protection for traditional Medicare Part D discounts offered by pharmaceutical manufacturers to pharmacy
benefit managers and health plans. Pursuant to court order, the removal was delayed and recent legislation imposed a moratorium on implementation of the
rule until January 1, 2032.
Adoption of new healthcare reform legislation at the federal or state level could affect demand for, or pricing of, our products or product
candidates if approved for sale. We cannot predict, however, the ultimate content, timing or effect of any healthcare reform legislation or action, or its
impact on us, and healthcare reform could increase compliance costs and may adversely affect our future business and financial results.
There have also been efforts by government officials or legislators to implement measures to regulate prices or payment for pharmaceutical
products, including legislation on drug importation. Recently, there has been considerable public and government scrutiny of pharmaceutical pricing and
proposals to address the perceived high cost of pharmaceuticals. There have also been recent state legislative efforts to address drug costs, which generally
have focused on increasing transparency around drug costs or limiting drug prices. Certain state legislation has been subject to legal challenges. Adoption
of new legislation regulating drug pricing at the federal or state level could further affect demand for, or pricing of, our products.
General legislative cost control measures may also affect reimbursement for our products. The Budget Control Act of 2011, as amended, resulted
in the imposition of reductions in Medicare (but not Medicaid) payments to providers in 2013 and remains in effect through 2031 (except May 1, 2020 to
March 31, 2022) unless additional Congressional action is taken. Any significant spending reductions affecting Medicare, Medicaid or other publicly
funded or subsidized health programs that may be implemented and/or any significant taxes or fees that may be imposed on us could have an adverse
impact on our results of operations.
Third Party Reimbursement and Pricing outside the U.S.
We currently have no products approved for marketing outside the U.S., other than a marketing authorization for EXONDYS 51 in Israel. We
may need to conduct long-term pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products. In the EU and certain other
territories, price controls and Health Technology Assessments for new, highly priced medicines are expected. Uncertainty exists about the pricing and
reimbursement status of newly approved products in the EU. Criteria such as cost-effectiveness, cost per quality-adjusted life year, budget impact, or others,
in addition to the clinical benefit, are often required to demonstrate added value or benefit of a drug and vary by country. Third party reimbursement limits
may reduce the demand for our products. The pace of the application process in some countries could also delay commercial product launches. Gaining
acceptance of our product pipeline and an economically viable reimbursement terms in the EU and other markets will require strong education and
awareness efforts around Duchenne as well as strong data supporting its effectiveness and cost-effectiveness.
-28-
Competition
The pharmaceutical and biotechnology industries are intensely competitive, and any product or product candidate developed by us competes or
would likely compete with existing drugs and therapies. There are many pharmaceutical companies, biotechnology companies, public and private
universities, government agencies and research organizations that compete with us in developing various approaches to the treatment of rare,
neuromuscular and other diseases. Many of these organizations have substantially greater financial, technical, manufacturing and sales and marketing
resources than we have. Several of them have developed or are developing therapies that could be used for treatment of the same diseases that we are
targeting. In addition, some of these competitors have significantly greater commercial infrastructures than we have. Our ability to compete successfully
depends largely on:
•
•
•
•
•
•
•
•
•
•
the efficacy, safety and reliability of our products and product candidates;
the dosing, strength, convenience and other product profile attributes of our products and product candidates;
product acceptance by physicians and other health-care providers;
protection of our proprietary rights and the level of generic or innovative competition;
the ability to have freedom to operate to commercialize our products and product candidates;
our ability to supply commercial quantities of a product meeting FDA specifications to the market and the cost of supplying our products and
product candidates;
our ability to complete clinical development and obtain regulatory approvals for our product candidates;
obtaining reimbursement for product use in approved indications and the price of our products;
our ability to recruit and retain skilled employees; and
the availability of substantial capital resources to fund development and commercialization activities.
EXONDYS 51, VYONDYS 53 and AMONDYS 45 were the first three disease modifying therapeutics approved by the FDA for the treatment of
Duchenne for patients with a confirmed mutation that is amenable to exon 51 skipping, exon 53 skipping or exon 45 skipping, respectively. However, in the
field of Duchenne alone, these products and those in our pipeline face a variety of competitors who either have FDA approval or are being clinically
developed for the treatment of Duchenne. For example, Nippon Shinyaku Co. Ltd. (“Nippon”) announced on August 13, 2020 that the FDA approved
VILTEPSO (viltolarsen) injection for patients with Duchenne who are amenable to exon 53 skipping therapy. On March 25, 2020, Nippon announced that
the Japanese Ministry of Health, Labor, and Welfare (“MHLW”) approved Viltepso Intravenous Infusion 250 mg (viltolarsen) for the treatment of patients
with Duchenne who are amendable to exon 53 skipping therapy making it the first non-steroidal treatment for Duchenne approved in Japan. Nippon has
announced plans to pursue global registration for viltolarsen.
In addition, there are many companies who have announced plans to transition pre-clinical candidates to clinical development for the treatment
of Duchenne, including the following:
•
•
•
Wave Life Sciences (“Wave”) announced in September 2021 that it initiated dosing in a Phase 1b/2a clinical trial evaluating WVE-N531, its
exon 53 skipping product candidate.
Daiichi Sankyo (“Daiichi”) announced a Phase 1/2 clinical trial conducted in Japan for its exon 45 skipping oligonucleotide candidate, DS-
5141b. In April 2018, Daiichi announced top-line results of the Phase 1/2 clinical trial of DS-5141 and that Daiichi will continue to develop
DS-5141b. Daiichi is sponsoring a Phase 2 clinical trial of DS-5141b.
Pfizer Inc. (“Pfizer”), presented initial Phase 1b clinical data for its AAV-9 / mini-dystrophin gene transfer product candidate for Duchenne,
PF-06939926/BMB-D0016, in June 2019. In January 2021, Pfizer announced the first dose of its Phase 3 CIFFREO study that will evaluate
the efficacy and safety of PF-06939926 in boys with Duchenne.
There are several companies in addition to those mentioned above that are pursuing disease modifying programs for Duchenne that are at the pre-
clinical stage or clinical stage. These companies are pursuing oligonucleotides, gene transfer therapy or gene editing. Other companies continue to pursue
development and approval of products for the treatment of Duchenne and their products may or may not prove to be safer and/or more efficacious than the
products and product candidates in our Duchenne pipeline. Regarding any of these competitors, it is unknown if clinical development of these or other
compounds is planned or would be continued.
Additionally, companies have product candidates with mechanisms of action distinct from ours in different stages of development or approval in
Duchenne which we believe could be seen as complementary to exon skipping and not a direct replacement of our products or product candidates at this
time.
-29-
Several companies and institutions have also entered into collaborations or other agreements for the development of product candidates,
including mRNA, gene (CRISPR, AAV, etc.) or small molecule therapies that are potential competitors to therapies being developed by us in the muscular
dystrophy, neuromuscular, CNS and rare disease space.
We also believe that other biotechnology and pharmaceutical companies share a focus on RNA-targeted drug discovery and development.
For additional information on the various risks posed by competition, refer to Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K.
Human Capital Resources
Our urgent mission – to engineer precision genetic medicine for rare diseases that devastate lives and cut futures short – is dependent on our
ability to attract, develop and retain the industry’s best and brightest talent across all dimensions of diversity. This understanding informs our approach to
managing our human capital resources.
General Information. As of December 31, 2022, we had 1,162 employees globally, 562 of whom hold advanced degrees. Of these employees,
779 are engaged directly in research and development activities and 383 are in selling and general and administration. None of our employees in the U.S.
are covered by collective bargaining agreements and we consider relations with our employees to be good.
Equity, diversity, and inclusion. We promote diversity, inclusion and equity across the organization. In the area of gender diversity,
representation of women has increased over the past several years: in 2019 and 2020 women made up 54% and 55% of our workforce, respectively, and in
2021, this percentage increased to 56%. As of December 31, 2022, women made up 57% of our workforce. The number of women in leadership positions
has also consistently increased. In 2017, women represented 35% of the leadership positions at the Director level and above. This percentage increased to
36% in 2018, 44% in 2019, 47% in 2020, 48% in 2021 and 52% as of December 31, 2022. In addition, as of December 31, 2022, women held 25% of the
seats of our Board of Directors, including the Chair of the Board.
Racial and ethnic diversity has also increased in the past few years, from 23% of our workforce being racially/ethnically diverse in 2017 and
2018, increasing to 26% in 2019 and to 30% in 2020 and 2021. As of December 31, 2022, this number increased to 34%.
As of December 31, 2022, 63% of our Executive Committee, which represents the most senior leadership positions in the Company, is diverse
based on gender and ethnicity.
Compensation, Benefits and Ongoing Professional Development. We face intense competition for qualified and specialized employees from
other pharmaceutical and biotechnology companies, universities and government entities, and we are committed to rewarding, supporting, and developing
our employees who make it possible to deliver on our strategy. To that end, we offer a comprehensive total rewards package that includes market-
competitive pay, broad-based equity grants and bonuses, healthcare benefits, retirement savings plans, paid time off and family leave, caregiving support,
fitness subsidies, and an Employee Assistance Program. We also offer robust learning opportunities for employees at every stage in their career and provide
annual training to employees on various topics.
In recognition of the ongoing challenges brought on by the COVID-19 pandemic, we have taken various steps to support our employees,
including transitioning to remote/hybrid work and offering flexible schedules, childcare assistance and sessions focused on resilience and happiness in
uncertain times. At the same time, we continue to take steps to protect our facility-dependent employees to ensure they remain healthy and feel supported
and safe in our facilities.
General Corporate Information
We were originally incorporated in the State of Oregon on July 22, 1980, and on June 6, 2013, we reincorporated in the State of Delaware. Our
principal executive offices are located at 215 First Street, Suite 415, Cambridge, MA 02142 and our telephone number is (617) 274-4000. Our common
stock is quoted on the Nasdaq Global Select Market under the symbol “SRPT”.
While we achieve revenue from our products in the U.S. and through distribution of eteplirsen, golodirsen and casimersen through our EAP
outside the U.S., we are likely to continue to incur operating losses in the near term associated with our ongoing operations, research and development
activities and potential business development activities. For more information about our revenues and operating losses, see Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
-30-
As of December 31, 2022, we had approximately $2,008.4 million of cash, cash equivalents and investments, consisting of $966.8 million of
cash and cash equivalents, $1,022.6 million of short-term investments and $19.0 million of long-term restricted cash. 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. In addition to pursuing additional
cash resources through public or private financings, we may also seek to enter into contracts, including collaborations or licensing agreements with respect
to our technologies, with third parties, including government entities.
Where You Can Find Additional Information
We make available free of charge through our corporate website, www.sarepta.com, our annual reports, quarterly reports, current reports, proxy
statements and all amendments to those reports as soon as reasonably practicable after such material is electronically filed or furnished with the SEC. These
reports may also be obtained without charge by submitting a written request via mail to Investor Relations, Sarepta Therapeutics, Inc., 215 First Street,
Suite 415, Cambridge, MA 02142 or by e-mail to investorrelations@sarepta.com. Our internet website and the information contained therein or
incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K. In addition, the Securities and Exchange Commission (the
“SEC”) maintains an Internet site that contains reports, proxy and information statements, and other information regarding reports that we file or furnish
electronically with the SEC at www.sec.gov.
We have adopted a Code of Business Conduct and Ethics and written charters for our Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee. Each of the foregoing is available on our website at www.sarepta.com under “For Investors—
Corporate Governance.” In accordance with SEC rules, we intend to disclose any amendment (other than any technical, administrative, or other non-
substantive amendment) to the above code, or any waiver of any provision thereof with respect to any of our executive officers, on our website within four
business days following such amendment or waiver. In addition, we may use our website as a means of disclosing material non-public information and for
complying with our disclosure obligations under Regulation Fair Disclosure promulgated by the SEC. These disclosures will be included on our website
under the “For Investors” section.
-31-
Item 1A. Risk Factors.
Set forth below and elsewhere in this report and in other documents we file with the SEC are descriptions of risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. Because of the following
factors, as well as other variables affecting our operating results, past financial performance should not be considered a reliable indicator of future
performance and investors should not use historical trends to anticipate results or trends in future periods. The risks and uncertainties described below are
not the only ones facing us. Other events that we do not currently anticipate or that we currently deem immaterial also affect our results of operations and
financial condition.
Risks Related to Our Business
We are highly dependent on the commercial success of our products in the U.S. We may not be able to meet expectations with respect to sales
of our products or attain profitability and positive cash-flow from operations.
The FDA granted accelerated approval for EXONDYS 51, VYONDYS 53 and AMONDYS 45, respectively, as therapeutic treatments for
Duchenne in patients who have a confirmed mutation in the dystrophin gene that is amenable to exon 51, exon 53 and exon 45 skipping, respectively.
EXONDYS 51 is currently commercially available in the U.S. and Israel only, and VYONDYS 53 and AMONDYS 45 are currently commercially
available in the U.S. only, although they are available in additional countries through our EAP. The commercial success of our products continues to depend
on a number of factors attributable to one of our products or the products of our competitors, including, but not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the effectiveness of our sales, managed markets, marketing efforts and support for our products;
the generation and dissemination of new data analyses and the consistency of any new data with prior results, whether they support a favorable
safety, efficacy and effectiveness profile of our products and any potential impact on our FDA accelerated approval status and/or FDA package
insert for our products;
the effectiveness of our ongoing commercialization activities, including negotiating and entering into any additional commercial, supply and
distribution contracts, ongoing manufacturing efforts and hiring any additional personnel as needed to support commercial efforts;
our ability to timely comply with FDA post-marketing requirements and commitments, including through successfully conducting additional
studies that confirm clinical efficacy, effectiveness and safety of our products and acceptance of the same by the FDA and medical community
since continued approval may be contingent upon verification of a clinical benefit in confirmatory trials, particularly in light of FDA's expanded
expedited withdrawal procedures as set forth in FDORA;
the occurrence of any side effects, adverse reactions or misuse, or any unfavorable publicity in these areas;
the generation of evidence describing payers, patients and/or societal value of our products;
whether we can consistently manufacture our products and product candidates at acceptable costs;
the rate and consistency with which our products are prescribed by physicians, which depends on physicians’ views on the safety, effectiveness
and efficacy of our products;
our ability to secure and maintain adequate reimbursement for our products, including the duration of the prior-authorization as well as the
number and duration of re-authorization processes required for patients who initially obtained coverage by third parties, including by government
payors, managed care organizations and private health insurers;
our ability to obtain and maintain patent protection for our products, to preserve our trade secrets, to prevent third parties from infringing on our
proprietary rights and to operate without infringing on the proprietary rights of third parties;
the development, commercialization or pricing of competing products or therapies for the treatment of Duchenne, or its symptoms, and the
existence of competing clinical trials;
our ability to increase awareness of the importance of genetic testing and knowing/understanding Duchenne mutations, and identifying and
addressing procedural barriers to obtaining therapy;
our ability to remain compliant with laws and regulations that apply to us and our commercial activities;
the actual market-size, ability to identify patients and the demographics of patients eligible for our products, which may be different than
expected;
the sufficiency of our drug supply to meet commercial and clinical demands and standards, which are negatively impacted by various factors,
including when our projections on the potential number of amenable patients and their average weight are
-32-
inaccurate; the potential impacts of the COVID-19 pandemic; if regulatory requirements increase our drug supply needs; if our current drug
supply is destroyed or negatively impacted at our manufacturing sites, storage sites or in transit; failure to meet cGMP requirements; or if we
encounter delays expanding the number of patients on our products and portions of our products’ supply expire before sale;
•
•
•
our ability to obtain regulatory approvals to commercialize our product candidates, and to commercialize our products in markets outside of the
U.S.;
the process leading to a patient’s first infusion of our products may be slower for certain patients. For example, the time to first infusion may take
longer if a patient chooses to put in an intravenous port, which eases access to the vein. Delays in the process prior to first infusion could
negatively impact the sales of our products; and
the exercise by Roche of its option to obtain an exclusive license to commercialize one or more of our Duchenne products beyond SRP-9001
outside of the U.S. and Roche’s subsequent commercialization efforts.
In addition, the response to COVID-19 by healthcare providers has made it difficult for some patients to receive infusions or initiate treatment
with our commercial products. The need to prioritize rated orders issued by the Federal Emergency Management Agency pursuant to the U.S. Defense
Production Act could also impact the manufacturing, supply chain and distribution of our products and product candidates. For this and other reasons, such
as delays in processing reauthorizations and modifications to program benefits by insurers, we expect that COVID-19 will reduce our revenue from
commercial product sales. We experience significant fluctuations in sales of our products from period to period and, ultimately, we may never generate
sufficient revenues from our products to reach or maintain profitability or sustain our anticipated levels of operations.
Even though EXONDYS 51, VYONDYS 53 and AMONDYS 45 have received accelerated approval from the FDA, they face future post-
approval development and regulatory requirements, which present additional challenges for us to successfully navigate.
The accelerated approvals for EXONDYS 51, VYONDYS 53 and AMONDYS 45 granted by the FDA were based on an increase in the
surrogate biomarker of dystrophin in skeletal muscles observed in some patients treated with these products. These products are subject to ongoing FDA
requirements governing labeling, packaging, storage, advertising, promotion and recordkeeping, and we are required to submit additional safety, efficacy
and other post-marketing information to the FDA.
Under the accelerated approval pathway, continued approval may be contingent upon verification of a clinical benefit in confirmatory trials.
These post-approval requirements and commitments may not be feasible and/or could impose significant burdens and costs on us; could negatively impact
our development, manufacturing and supply of our products; and could negatively impact our financial results. Failure to meet post-approval commitments
and requirements, including completion of enrollment and in particular, any failure to obtain positive safety and efficacy data from our ongoing and planned
studies of our products, would lead to negative regulatory action from the FDA and/or withdrawal of regulatory approval of EXONDYS 51, VYONDYS 53
or AMONDYS 45. The recently enacted FDORA has expanded FDA's expedited withdrawal procedures for drugs approved via the accelerated approval
pathway if a sponsor fails to conduct any required post-approval study with due diligence.
Manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory
authorities for compliance with cGMP regulations. Drug product manufacturers are required to continuously monitor and report adverse events from
clinical trials and commercial use of the product. If we or a regulatory agency discover previously unknown adverse events or events of unanticipated
severity or frequency, a regulatory agency may require labeling changes, implementation of risk evaluation and mitigation strategy program, or additional
post-marketing studies or clinical trials. If we or a regulatory agency discover previously unknown problems with a product, such as problems with a
facility where the API or drug product is manufactured or tested, a regulatory agency may impose restrictions on that product and/or the manufacturer,
including removal of specific product lots from the market, withdrawal of the product from the market, suspension of manufacturing or suspension of
clinical trials using the same manufacturing materials. Sponsors of drugs approved under FDA accelerated approval provisions also are required to submit
to the FDA, at least 30 days before initial use, all promotional materials intended for use after the first 120 days following marketing approval. If we or the
manufacturing facilities for our products fail to comply with applicable regulatory requirements, a regulatory agency may:
•
•
•
•
•
•
issue warning letters or untitled letters;
seek an injunction or impose civil or criminal penalties or monetary fines;
suspend or withdraw or alter the conditions of our marketing approval;
mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;
suspend any ongoing clinical trials;
require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due
dates for specific actions and penalties for noncompliance;
-33-
•
•
•
•
refuse to approve pending applications or supplements to applications submitted by us;
suspend or impose restrictions on operations, including costly new manufacturing requirements;
seize or detain products, refuse to permit the import or export of products or require us to initiate a product recall; or
refuse to allow us to enter into supply contracts, including government contracts.
We are subject to uncertainty relating to reimbursement policies which, if not favorable, could hinder or prevent the commercial success of
our products and/or product candidates.
Our ability to successfully maintain and/or increase sales of our products in the U.S. depends in part on the coverage and reimbursement levels
set by governmental authorities, private health insurers and other third-party payors. Third party payors are increasingly challenging the effectiveness of
and prices charged for medical products and services. We may not be able to obtain or maintain adequate third-party coverage or reimbursement for our
products, and/or we may be required to provide discounts or rebates on our products in order to obtain or maintain adequate coverage.
We expect that private insurers will continue to consider the efficacy, effectiveness, cost-effectiveness and safety of our products, including any
new data and analyses that we are able to collect and make available in a compliant manner, in determining whether to approve reimbursement for our
products and at what levels. If there are considerable delays in the generation of new evidence or if any new data and information we collect is not
favorable, third party insurers may make coverage decisions that negatively impact sales of our products. We continue to have discussions with payors,
some of which may eventually deny coverage. We may not receive approval for reimbursement of our products from additional insurers on a satisfactory
rate or basis, in which case our business would be materially adversely affected. In addition, obtaining these approvals can be a time consuming and
expensive process. Our business would be materially adversely affected if we are not able to maintain favorable coverage decisions and/or fail to receive
additional favorable coverage decisions from third party insurers, in particular during re-authorization processes for patients that have already initiated
therapy. Our business could also be adversely affected if government health programs, private health insurers, including managed care organizations, or
other reimbursement bodies or payors limit the indications for which our products will be reimbursed or fail to recognize accelerated approval and
surrogate endpoints as clinically meaningful.
In addition, the impact of the ongoing COVID-19 pandemic has resulted 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. Furthermore, we cannot predict to
what extent the COVID-19 pandemic, depending on its duration, an economic recession, changes in fiscal policy or general increase in unemployment rates
may disrupt global healthcare systems and access to our products or result in a widespread loss of individual health insurance coverage due to
unemployment or trends in employee attrition, a shift from commercial payor coverage to government payor coverage, or an increase in demand for patient
assistance and/or free drug programs, any of which would adversely affect access to our products and our net sales.
In some foreign countries, particularly Canada and the countries of Europe, Latin America and Asia Pacific, the pricing of prescription
pharmaceuticals is subject to strict governmental control. In these countries, pricing negotiations with governmental authorities can take 12 to 24 months or
longer after the receipt of regulatory approval and product launch. In order to obtain favorable reimbursement for the indications sought or pricing approval
in some countries, we may be required to collect additional data, including conducting additional studies. Furthermore, several countries around the world
have implemented government measures to either freeze or reduce pricing of pharmaceutical products. If reimbursement for our products is unavailable in
any country in which reimbursement is sought, limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be materially
harmed. In addition, many foreign countries reference to other countries’ official public list price, hence an unsatisfactory price level in one country could
consequently impinge negatively upon overall revenue.
We expect to experience pricing pressures in connection with the sale of our current and future products due to a number of factors, including
current and future healthcare reforms and initiatives by government health programs and private insurers (including managed care plans) to reduce
healthcare costs, the scrutiny of pharmaceutical pricing, the ongoing debates on reducing government spending and additional legislative proposals. These
healthcare reform efforts or any future legislation or regulatory actions aimed at controlling and reducing healthcare costs, including through measures
designed to limit reimbursement, restrict access or impose unfavorable pricing modifications on pharmaceutical products, could impact our and our
partners’ ability to obtain or maintain reimbursement for our products at satisfactory levels, or at all, which could materially harm our business and
financial results.
Additionally, our gene therapy product candidates represent novel approaches to treatment that will call for new levels of innovation in both
pricing, reimbursement, payment and drug access strategies. Current reimbursement models may not accommodate the unique factors of our gene therapy
product candidates, including high up-front costs, lack of long-term efficacy and safety data and
-34-
fees associated with complex administration, dosing and patient monitoring requirements. Hence, it may be necessary to restructure approaches to payment,
pricing strategies and traditional payment models to support these therapies.
The downward pressure on healthcare costs in general has become intense. As a result, increasingly high barriers are being erected to the entry of
new products. If we are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell our products and product candidates
will be harmed. The manner and level at which reimbursement is provided for services related to our products and product candidates (e.g., for
administration of our products to patients) is also important. Inadequate reimbursement for such services may lead to physician resistance and limit our
ability to market or sell our products.
Healthcare policy reform and other governmental and private payor initiatives may have an adverse effect upon, and could prevent
commercial success of our products and product candidates.
The U.S. government and individual states continue to aggressively pursue healthcare reform, which includes ongoing attempts to manage
utilization as well as control and/or lower the cost of prescription drugs and biologics. See “Item 1. Business—Government Regulation—Third Party
Reimbursement and Pricing in the U.S.” There is no assurance that federal or state health care reform will not adversely affect our future business and
financial results, and we cannot predict how future federal or state legislative, judicial or administrative changes relating to healthcare policy will affect our
business.
The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs to
limit the growth of government-paid healthcare costs, including proposed or implemented reforms involving price controls, waivers from Medicaid drug
rebate law requirements, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs and the
introduction of international reference pricing in the U.S. We anticipate that the U.S. Congress, state legislatures and the private sector will continue to
consider and may adopt healthcare policies intended to curb rising healthcare costs. These cost containment measures may include, among other possible
actions, implementation or modification of:
•
•
•
•
•
•
•
controls on government funded reimbursement for drugs;
caps or mandatory discounts under certain government sponsored programs;
challenges to the pricing of drugs or limits or prohibitions on reimbursement for specific products through other means;
reform of drug importation laws;
delegation of decision making to state Medicaid agencies and waiver of reimbursement requirements;
expansion of use of managed care systems in which healthcare providers contract to provide comprehensive healthcare for a fixed cost per
person; and
prohibition on direct-to-consumer advertising or drug marketing practices.
In recent years, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their commercial
products, which has resulted in several Congressional inquiries and proposed and enacted state and federal legislation designed to, among other things,
bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program
reimbursement methodologies for pharmaceutical products.
We are unable to predict what additional legislation, regulations or policies, if any, relating to the healthcare industry or third party coverage and
reimbursement may be enacted in the future or what effect such legislation, regulations or policies would have on our business. Any cost containment
measures, including those listed above, or other healthcare system reforms that are adopted, could significantly decrease the available coverage and the
price we might establish for our products and product candidates, which would have an adverse effect on our net revenues and operating results.
-35-
Our products may not be widely adopted by patients, payors or healthcare providers, which would adversely impact our potential profitability
and future business prospects.
The commercial success of our products, particularly in the U.S., depends upon the level of market adoption by patients, payors and healthcare
providers. If our products do not achieve an adequate level of market adoption for any reason, or if market adoption does not persist, our potential
profitability and our future business prospects will be severely adversely impacted. The degree of market acceptance of our products depends on a number
of factors, including:
•
•
•
•
•
•
our ability to demonstrate to the medical and payor community, including specialists who may purchase or prescribe our products, the
clinical efficacy, effectiveness and safety of our products as the prescription products of choice for their respective indications;
the effectiveness of our sales and marketing organizations and distribution networks;
the ability of patients or providers to be adequately reimbursed for our products in a timely manner from government and private payors;
the ability to timely demonstrate to the satisfaction of payors real world effectiveness and the economic, humanistic and societal benefits
of our products;
the actual and perceived efficacy and safety profile of our products, particularly if unanticipated adverse events related to our products’
treatment arise and create safety concerns among potential patients or prescribers or if new data and analyses we obtain for our products
do not support, or are interpreted by some parties to not support, the efficacy of our products; and
the efficacy and safety of our other exon-skipping and gene therapy product candidates and third parties’ competitive therapies.
Further, the potential commercial success of our product candidates, including SRP-9001, will depend on additional factors, including the
capacity of any infusion centers responsible for the administration of our product candidates.
We may not be able to expand the global footprint of our products outside of the U.S.
Even though EXONDYS 51 was approved for marketing in the U.S. and in Israel, and VYONDYS 53 and AMONDYS 45 were approved for
marketing in the U.S., we may not receive approval to commercialize these products in additional countries. In November 2016, we submitted a MAA for
eteplirsen to the EMA and the application was validated in December 2016. As we announced on June 1, 2018, the CHMP of the EMA adopted a negative
opinion for eteplirsen. In September 2018, the CHMP of the EMA confirmed its negative opinion for eteplirsen, and the European Commission adopted the
CHMP opinion in December 2018. During 2019, we sought follow-up EMA scientific advice for eteplirsen. Once data from our ongoing studies are
available, we plan to evaluate future engagement with the EMA on potential next steps.
In order to market any product in a country outside of the U.S., we must comply with numerous and varying regulatory requirements for approval
in those countries regarding demonstration of evidence of the product’s safety and efficacy and governing, among other things, labeling, distribution,
advertising, and promotion, as well as pricing and reimbursement of the product. Obtaining marketing approval in a country outside of the U.S. is an
extensive, lengthy, expensive and uncertain process, and the regulatory authority may reject an application or delay, limit or deny approval of any of our
products for many reasons, including:
•
•
•
•
•
•
we may not be able to demonstrate to the satisfaction of regulatory authorities outside the U.S. the risk benefit of our products;
the results of clinical trials may not meet the level of statistical or clinical significance required for approval by regulatory authorities
outside the U.S.;
regulatory authorities outside the U.S. may disagree with the adequacy (number, design, size, controls, conduct or implementation) of our
clinical trials prior to granting approval, and we may not be able to generate the required data on a timely basis, or at all;
regulatory authorities outside the U.S. may conclude that data we submit to them fail to demonstrate an appropriate level of safety or
efficacy of our products, or that our products’ respective clinical benefits outweigh their safety risks;
regulatory authorities outside the U.S. may not accept data generated at our clinical trial sites or require us to generate additional data or
information;
regulatory authorities outside the U.S. may impose limitations or restrictions on the approved labeling of our products, thus limiting
intended users or providing an additional hurdle for market acceptance of the product;
-36-
•
•
regulatory authorities outside the U.S. may identify deficiencies in the manufacturing processes, or may require us to change our
manufacturing process or specifications; and
regulatory authorities outside the U.S. may adopt new or revised approval policies and regulations.
Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time
required to obtain approval in other countries might differ significantly from that required to obtain approval in the U.S. In particular, in many foreign
countries, it is required that a product receives pricing and reimbursement approval before the product can be distributed commercially. Many foreign
countries undertake cost-containment measures that could affect pricing or reimbursement of our products. This can result in substantial delays, and the
price that is ultimately approved in some countries may be lower than the price for which we expect to offer our products.
Marketing approval in one country does not ensure marketing approval in another, but a failure or delay in obtaining marketing approval in one
country may have a negative effect on the approval process in others. Failure to obtain marketing approval in other countries or any delay or setback in
obtaining such approval would impair our ability to develop foreign markets for our products and could adversely affect our business and financial
condition. In addition, failure to obtain approval in one country or area may affect sales under the EAP in other countries or areas. Even if we are successful
in obtaining regulatory approval of our products in additional countries, our revenue earning capacity will depend on commercial and medical
infrastructure, pricing and reimbursement negotiations and decisions with third party payors, including government payors.
In addition, we have granted Roche an exclusive option to obtain an exclusive license to commercialize certain products, including eteplirsen,
golodirsen and casimersen, outside of the U.S. If this option is exercised, Roche will have sole control over and decision-making authority with respect to
the commercialization of such products outside the U.S.
Historical revenues from eteplirsen, golodirsen and casimersen through our EAP outside the U.S. may not continue and we may not be able
to continue to distribute eteplirsen, golodirsen and casimersen through our EAP.
We established a global EAP for eteplirsen, golodirsen and casimersen in some countries where these products currently have not been approved.
While we generate revenue from the distribution of these products through our EAP, we cannot predict whether historical revenues from this program will
continue, whether we will be able to continue to distribute our products through our EAP, or whether revenues will exceed revenues historically generated
from sales through our EAP. Reimbursement through national EAPs may cease to be available if authorization for an EAP expires or is terminated. For
example, healthcare providers in EAP jurisdictions may not be convinced that their patients benefit sufficiently from our products or alternatively, may
prefer to wait until such time as our products are approved by a regulatory authority in their country before prescribing any of our products. Even if a
healthcare provider is interested in obtaining access to our products for its patient through the EAP, the patient may not be able to obtain access to our
products if funding for the drug is not secured.
Our business and financial results have not yet been adversely affected by the ongoing conflict between Russia and Ukraine. As our revenue from
countries outside of the United States increases, our access to patients in that region through our EAP and our ability to generate revenue from commercial
sales of our products in Russia or Ukraine may be adversely affected. The United States and other nations have raised the possibility of sanctions on
companies that do business with Russia or its allies, including Belarus. We also may be adversely impacted by sanctions imposed on third parties with
which we do business, such as third-party distributors and service providers of our EAP.
Any failure to maintain revenues from sales of eteplirsen, golodirsen or casimersen through our EAP and/or to generate revenues from
commercial sales of these products exceeding historical sales due to issues under our EAP or due to global instability, like that resulting from the ongoing
conflict between Russia and Ukraine, could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
-37-
Failure to obtain or maintain regulatory exclusivity for our products could result in our inability to protect our products from competition
and our business may be adversely impacted. If a competitor obtains an authorization to market the same or substantially same product before a
product of ours is authorized in a given country and is granted regulatory exclusivity, then our product may not be authorized for sale as a result of the
competitor’s regulatory exclusivity and as a result, our investment in the development of that product may not be returned.
In addition to any patent protection, we rely on various forms of regulatory exclusivity to protect our products. During the development of our
products, we anticipate any one form of regulatory exclusivities becoming available upon approval of our products. Implementation and enforcement of
regulatory exclusivity, which may consist of regulatory data protection and market protection, varies widely from country to country. Failure to qualify for
regulatory exclusivity, or failure to obtain or maintain the extent or duration of such protections that we expect in each of the markets for our products due
to challenges, changes or interpretations in the law or otherwise, could affect our revenues for our products or our decision on whether to market our
products in a particular country or countries or could otherwise have an adverse impact on our results of operations. We are not guaranteed to receive or
maintain regulatory exclusivity for our current or future products, and if our products that are granted orphan status were to lose their status as orphan drugs
or the data or marketing exclusivity provided for orphan drugs, our business and operations could be adversely affected.
Due to the nature of our products and product candidate pipeline, in addition to NCE exclusivity and new biologic exclusivity, orphan drug
exclusivity is especially important for our products that are eligible for orphan drug designation. For eligible products, we plan to rely on orphan drug
exclusivity to maintain a competitive position. If we do not have adequate patent protection for our products, then the relative importance of obtaining
regulatory exclusivity is even greater. While orphan status for any of our products, if granted or maintained, would provide market exclusivity for the time
periods specified above upon approval, we would not be able to exclude other companies from obtaining regulatory approval of products using the same or
similar active ingredient for the same indication during or beyond the exclusivity period applicable to our product on the basis of orphan drug status (e.g.,
seven years in the U.S.). For example, the exclusivity period for EXONDYS 51 will end in September 2023. Orphan drug designation neither shortens the
development time or regulatory review time of a drug, nor gives the drug any advantage in the regulatory review or approval process. A recent decision in
2021 by the U.S. Court of Appeals for the Eleventh Circuit in Catalyst Pharmaceuticals, Inc. vs. Becerra regarding interpretation of the Orphan Drug Act’s
exclusivity provisions as applied to drugs and biologics approved for orphan indications narrower than the product’s orphan designation has the potential to
significantly broaden the scope of orphan exclusivity for such products. Depending on how FDA applies the Catalyst decision, it could impact our ability to
obtain or seek to work around orphan exclusivity and might affect our ability to retain orphan exclusivity that the FDA previously has recognized for our
products. Legislation has been introduced to amend the Orphan Drug Act in a way that may prevent these effects of the Catalyst decision, but it is unclear if
or when such legislation could be enacted.
In addition, we may face risks with maintaining regulatory exclusivities for our products, and our protection may be circumvented, even if
maintained. For instance, orphan drug exclusivity in the U.S. may be rescinded if (i) an alternative, competing product demonstrates clinical superiority to
our product with orphan exclusivity; or (ii) we are unable to assure the availability of sufficient quantities of our orphan products to meet the needs of
patients. Moreover, competitors may receive approval of different drugs or biologics for indications for which our prior approved orphan products have
exclusivity. Orphan drug exclusivity in Europe may be modified for several reasons, including a significant change to the orphan medicinal product
designations or status criteria after-market authorization of the orphan product (e.g., product profitability exceeds the criteria for orphan drug designation),
problems with the production or supply of the orphan drug, or a competitor drug, although similar, is safer, more effective or otherwise clinically superior
than the initial orphan drug. Thus, other companies may have received, or could receive, approval to market a product candidate that is granted orphan
drug exclusivity for the same drug or similar drug and same orphan indication as any of our product candidates for which we plan to file an NDA, BLA or
MAA. If that were to happen, our prior approved orphan products may face competition and any pending NDA, BLA or MAA for our product candidate
for that indication may not be approved until the competing company’s period of exclusivity has expired in the U.S. or the EU, as applicable. For example,
in September 2021, the FDA issued guidance concerning its position on interpreting when gene therapy products would be considered the “same” or
“different” for purposes of orphan drug exclusivity. The guidance states that if two gene therapy products have or use different vectors, the FDA generally
intends to consider them to be “different” drugs. Further, according to the guidance, the FDA generally intends to consider vectors from the same viral
group (e.g., adeno-associated virus 2 (AAV2) vs. adeno-associated virus 5 (AAV5)) to be different, when the differences between the vectors impact factors
such as tropism, immune response avoidance, or potential insertional mutagenesis. However, there is considerable uncertainty as to the interpretation of
these guidelines. As illustrated by this guidance, orphan drug exclusivity as applied to gene therapy products is an evolving area subject to change and
interpretation by the FDA and therefore, we cannot be certain as to how the FDA will apply those rules to our products.
-38-
If we are unable to successfully maintain and further develop internal commercialization capabilities, sales of our products may be negatively
impacted.
We have hired and trained a commercial team and put in the organizational infrastructure we believe we need to support the commercial success
of our products in the U.S. Factors that may inhibit our efforts to maintain and further develop commercial capabilities include:
•
•
•
•
•
an inability to retain an adequate number of effective commercial personnel;
an inability to train sales personnel, who may have limited experience with our company or our products, to deliver a consistent message
regarding our products and be effective in educating physicians on how to prescribe our products;
an inability to equip sales personnel with compliant and effective materials, including medical and sales literature to help them educate
physicians and our healthcare providers regarding our products and their proper administration and educate payors on the safety, efficacy
and effectiveness profile of our products to support favorable coverage decisions;
unforeseen costs and expenses associated with maintaining and further developing an independent sales and marketing organization; and
restrictions on the ability of our employees to perform their jobs due to the COVID-19 pandemic, such as quarantines and self-isolations.
If we are not successful in maintaining an effective commercial, sales and marketing infrastructure, we will encounter difficulty in achieving,
maintaining or increasing projected sales of our products in the U.S., which would adversely affect our business and financial condition.
The patient population suffering from Duchenne, LGMDs, and CMT 1A is small and has not been established with precision. If the actual
number of patients is smaller than we estimate, our revenue and ability to achieve profitability may be adversely affected.
Duchenne, LGMD, and CMT 1A are rare, fatal genetic disorders. Duchenne affects an estimated one in approximately every 3,500 to 5,000
males born worldwide, of which up to 13% are estimated to be amenable to exon 51 skipping, up to 8% are estimated to be amenable to exon 53 skipping
and up to 8% are estimated to be amenable to exon 45 skipping. LGMDs as a class affect an estimated range of approximately one in every 14,500 to one in
every 123,000 individuals. CMT is a group of peripheral nerve disorders affecting approximately one in every 2,500 individuals. CMT type 1A affects
approximately 50,000 patients in the U.S. Our estimates of the size of these patient populations are based on limited number of published studies as well as
internal analyses. Various factors may decrease the market size of our products and product candidates, including the severity of the disease, patient
demographics and the response of patients’ immune systems to our products and product candidates. If the results of these studies or our analysis of them
do not accurately reflect the relevant patient population, our assessment of the market may be inaccurate, making it difficult or impossible for us to meet
our revenue goals, or to obtain and maintain profitability.
We face intense competition and rapid technological change, which may result in other companies discovering, developing or
commercializing competitive products.
The biotechnology and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. We are aware
of many pharmaceutical and biotechnology companies that are actively engaged in research and development in areas in which our products and product
candidates are aimed. Some of these competitors are developing or testing product candidates that now, or may in the future, compete directly with our
products or product candidates. For example, we face competition in the field of Duchenne by third parties who are developing or who had once developed:
(i) exon skipping product candidates, such as Wave (notably for exons 51 and 53), Nippon Shinyaku (notably for exon 44 and exon 53, for which it has
received FDA approval for its product Viltepso (viltolarsen)), Daiichi (notably for exon 45), Dyne Therapeutics pursuing antibody-oligonucleotide
conjugates for exons 44, 45, 51, and 53, Avidity Biosciences pursuing antibody-oligonucleotide conjugates for exons 44, 45 and 51, PepGen (notably for
exon 51) and BioMarin (BMN-351 for exon 51); (ii) gene therapies, such as Pfizer and Solid (in partnership with Ultragenyx), and Regenxbio; (iii) gene
editing, including CRISPR/Cas 9 approaches, such as Exonics Therapeutics (acquired by Vertex Pharmaceuticals), CRISPR Therapeutics, Editas Medicine,
Beam Therapeutics Inc. (in partnership with Pfizer) and Precision Biosciences (in partnership with Eli Lilly); (iv) other disease modifying approaches, such
as PTC Therapeutics, which has a small molecule candidate, ataluren, that targets nonsense mutations; and (v) other approaches that may be palliative in
nature or potentially complementary with our products and product candidates and that are or were once being developed by Santhera, Catabasis, Fibrogen,
ReveraGen, Capricor Therapeutics (in partnership with Nippon Shinyaku), BioPhytis, Mallinckrodt, Antisense Therapeutics, Italfarmco, Dystrogen and
Edgewise Therapeutics. Although BioMarin announced on May 31, 2016 its intent to discontinue clinical and regulatory development of drisapersen as
well as its other clinical stage candidates, BMN 044, BMN 045 and BMN 053, then-currently in Phase 2 studies for distinct forms of Duchenne, it further
announced its intent to continue to explore the development of next generation oligonucleotides for the treatment of Duchenne. Indeed, BioMarin has
announced it is pursuing IND enabling studies for BMN-351, an oligonucleotide therapy. In addition, while Wave announced its intention to discontinue
development of suvodirsen
-39-
and suspend development of WVE-N531, it has announced that it commenced clinical development for its exon 53 oligonucleotide, WVE-N531.
In addition, we are aware of many pharmaceutical and biotechnology companies that are actively engaged in research and development using
platform technologies that may be viewed as competing with ours beyond and including those companies mentioned immediately above, such as Alnylam
Pharmaceuticals, Inc., Arbutus (formerly Tekmira Pharmaceuticals Corp.), Deciphera Pharmaceuticals, Ionis Pharmaceuticals, Inc., Roche Innovation
Center Copenhagen (formerly Santaris Pharma A/S), Shire plc (now Takeda), Biogen, Moderna Therapeutics, Avidity, Dyne Therapeutics, Stoke
Therapeutics, Fulcrum Therapeutics, Ultragenyx, Sanofi and PepGen. Additionally, several companies and institutions have entered into collaborations or
other agreements for the development of product candidates, including mRNA, gene therapy and gene editing (CRIPSR and AAV, among others) and small
molecule therapies that are potential competitors for therapies being developed in the muscular dystrophy, neuromuscular and rare disease space, including,
but not limited to, Astellas Pharma, Biogen Inc., Arrowhead Pharmaceuticals, Ionis, Alexion Pharmaceuticals, Inc., Sanofi, Shire (now Takeda), Eli Lilly,
Alnylam Pharmaceuticals, Inc., Moderna Therapeutics, Inc., Akashi, Capricor Therapeutics (in partnership with Nippon Shinyaku), Oxford University,
Exonics Therapeutics (acquired by Vertex Pharmaceuticals), and Editas Medicine.
If any of our competitors are successful in obtaining regulatory approval for any of their product candidates, it may limit our ability to enter into
the market, gain market share or maintain market share in the Duchenne space or other diseases targeted by our platform technologies, products and product
candidate pipeline.
It is possible that our competitors will succeed in developing technologies that, in addition to limiting the market size for our products or product
candidates, impact the regulatory approval and post-marketing process for our products and product candidates, are more effective than our products or
product candidates or would render our technologies obsolete or noncompetitive. Our competitors may, among other things, relative to our products or
product candidates:
•
•
•
•
•
•
•
•
•
•
•
develop safer or more effective products;
implement more effective approaches to sales and marketing;
develop less costly products;
have lower cost of goods;
receive more favorable reimbursement coverage;
obtain preferred formulary status;
obtain regulatory approval more quickly;
have access to more manufacturing capacity;
develop products that are more convenient and easier to administer;
form more advantageous strategic alliances; or
establish superior intellectual property positions.
Further, development and commercialization of our gene therapy product candidates, such as SRP-9001, may compete with or supersede our
current approved products, which may impact future revenues from sales of our current approved products. Our gene therapy product candidates are being
developed for potential treatment of overlapping patient populations with our current approved products, and we have not determined if our gene therapy
product candidates will be used in patients in combination with our existing approved products or in separate treatment regiments.
Our revenue could face competitive pressures for any of the above reasons. Moreover, if competing products are marketed in a territory in which
we also have the authority to market our products, our sales may diminish, or our business could be otherwise materially adversely affected.
We have entered into multiple collaborations and strategic transactions, including our collaboration with Roche, and may seek or engage in
future strategic collaborations, alliances, acquisitions or licensing agreements or other relationships that complement or expand our business. We may
not be able to complete such transactions, and such transactions, if executed, may increase our capital requirements, dilute our stockholders, cause us
to incur debt or assume contingent liabilities and subject us to other risks.
In order to achieve our long-term business objectives, we actively evaluate various strategic opportunities on an ongoing basis, including
licensing or acquiring products, technologies or businesses. We may face competition from other companies in
-40-
pursuing such opportunities. This competition is most intense for approved drugs and late-stage drug candidates, which have the lowest risk in terms of
probability of success but would have a higher risk and more immediate effect on our financial performance. Our ability to complete transactions may also
be limited by applicable antitrust and trade regulation laws and regulations in the relevant U.S. and foreign jurisdictions in which we or the operations or
assets we seek to acquire carry on business.
We have entered into multiple collaborations, including with Roche, Nationwide, Duke University, Genethon, University of Florida, Genevant
Sciences, Dyno Therapeutics, Selecta Biosciences, and Hansa Biopharma. We may not realize the anticipated benefits of such collaborations, and the
anticipated benefits of any future collaborations or strategic relationships, each of which involves numerous risks, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;
collaborators may not pursue development and commercialization of our products or product candidates based on clinical trial results, changes in
their strategic focus due to the acquisition of competitive products, availability of funding, or other external factors, such as a business
combination that diverts resources or creates competing priorities;
collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a product candidate, repeat or
conduct new clinical trials, or require a new formulation of a product candidate for clinical testing;
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or
product candidates, or otherwise undermine or devalue the efforts of our collaboration;
collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information
in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or
expose us to potential liability;
disputes may arise between us and a collaborator that cause the delay or termination of the research, development or commercialization of our
products or product candidates, or that result in costly litigation or arbitration that diverts management attention and resources;
collaborations may be terminated and, if terminated, may eliminate our rights to commercialize certain product candidates or may result in a need
for additional capital;
failure to successfully develop the acquired or licensed drugs or technology or to achieve strategic objectives, including successfully developing
and commercializing the drugs, drug candidates or technologies that we acquire or license;
entry into markets in which we have no or limited direct prior experience or where competitors in such markets have stronger market positions;
disruption of our ongoing business, distraction of our management and employees from other opportunities and challenges and retention of key
employees;
potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired
company, or acquired or licensed product or technology, including but not limited to, problems, liabilities or other shortcomings or challenges
with respect to intellectual property, product quality, safety, accounting practices, employee, customer or third-party relations and other known
and unknown liabilities;
liability for activities of the acquired company or licensor before the acquisition or license, including intellectual property infringement claims,
violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities;
exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of an acquisition or license,
including but not limited to, claims from terminated employees, customers, former equity holders or other third-parties;
difficulty in integrating the products, product candidates, technologies, business operations and personnel of an acquired asset or company; and
difficulties in the integration of the acquired company’s departments, systems, including accounting, human resource and other administrative
systems, technologies, books and records, and procedures, as well as in maintaining uniform standards, controls, including internal control over
financial reporting required by the Sarbanes-Oxley Act of 2002 and related procedures and policies.
For example, we will have limited influence and control over the development and commercialization activities of Roche in the territories in
which it leads development and commercialization of SRP-9001, and if the exclusive option is exercised, in the territories in which it may lead
commercialization of certain other products or product candidates. Roche’s development and commercialization activities in the territories where it is the
lead party may adversely impact our own efforts in the U.S. Failure by
-41-
Roche to meet its obligations under the collaboration agreement, to apply sufficient efforts at developing and commercializing collaboration products, or to
comply with applicable legal or regulatory requirements, may materially adversely affect our business and our results of operations. In addition, to the
extent we rely on Roche to commercialize any products for which we obtain regulatory approval, we will receive less revenues than if we commercialized
these products ourselves.
Even if we achieve the long-term benefits associated with strategic transactions, our expenses and short-term costs may increase materially and
adversely affect our liquidity and short-term net income (loss). Future licenses or acquisitions could result in potentially dilutive issuances of our equity
securities, the incurrence of debt, the creation of contingent liabilities, impairment or expenses related to goodwill, and impairment or amortization
expenses related to other intangible assets, which could harm our financial condition. For example, in February 2020, we issued and sold 2,522,227 shares
of common stock to Roche Finance in connection with the entry into the collaboration agreement with Roche.
Risks Related to the Development of our Product Candidates
We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of our product candidates.
Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical
trials depends on the speed at which we can recruit eligible patients to participate in testing our product candidates. We have experienced delays in some of
our clinical trials, and we may experience similar delays in the future. These delays could result in increased costs, delays in advancing our product
development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether.
We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve
diversity in a study, to complete our clinical trials within the expected timeframe. Patient enrollment can be impacted by factors including, but not limited
to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
design and complexity and/or commitment of participation required in the study protocol;
size of the patient population;
diagnostic capabilities within patient population;
eligibility criteria for the study in question;
clinical supply availability;
delays in participating site identification, qualification and subsequent activation to enroll;
perceived risks and benefits of the product candidate under study, including as a result of adverse effects observed in similar or competing
therapies;
proximity and availability of clinical trial sites for prospective patients;
availability of competing therapies and clinical trials;
competition of site efforts to facilitate timely enrollment in clinical trials;
participating site motivation;
patient referral practices of physicians;
activities of patient advocacy groups;
ability to monitor patients adequately during and after treatment; and
severity of the disease under investigation.
In particular, each of the conditions for which we plan to evaluate our product candidates are rare genetic diseases with limited patient pools from
which to draw for clinical trials. Further, because newborn screening for these diseases is not widely adopted, and it can be difficult to diagnose these
diseases in the absence of a genetic screen, we may have difficulty finding patients who are eligible to participate in our studies. The eligibility criteria of
our clinical trials will further limit the pool of available study participants. Additionally, the process of finding and diagnosing patients may prove costly.
The treating physicians in our clinical trials may also use their medical discretion in advising patients enrolled in our clinical trials to withdraw from our
studies to try alternative therapies. In addition, the COVID-19 pandemic may impact patient ability and willingness to travel to clinical trial sites as a result
of quarantines and other restrictions, which may negatively impact enrollment in our clinical trials.
-42-
We may not be able to initiate or continue clinical trials if we cannot enroll the required eligible patients per protocol to participate in the clinical
trials required by the FDA or the EMA or other regulatory agencies. Our ability to successfully initiate, enroll and complete a clinical trial in any foreign
country is subject to numerous risks unique to conducting business in foreign countries, including:
•
•
•
•
•
•
difficulty in establishing or managing relationships with contract research organizations (“CROs”) and physicians;
different standards for the conduct of clinical trials;
our inability to locate qualified local consultants, physicians and partners;
the potential burden of complying with a variety of foreign laws, medical standards and regulatory requirements, including the regulation
of pharmaceutical and biotechnology products and treatment;
ability to procure and deliver necessary clinical trial materials needed to perform the study; and
inability to implement adequate training at participating sites remotely when in person training cannot be completed.
If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate
ongoing or planned clinical trials, any of which would have an adverse effect on our business.
Failures or delays in the commencement or completion of ongoing and planned clinical trials of our product candidates negatively impact
commercialization efforts; result in increased costs; and delay, prevent or limit our ability to gain regulatory approval of product candidates and to
generate revenues and continue our business.
Successful completion of clinical trials at each applicable stage of development is a prerequisite to submitting a marketing application to the
regulatory agencies and, consequently, the ultimate approval and commercial marketing of any of our product candidates for the indications in which we
develop them. We do not know whether any of our clinical trials will begin or be completed, and results announced, as planned or expected, if at all, as the
commencement and completion of clinical trials and announcement of results is often delayed or prevented for a number of reasons, including, among
others:
•
•
•
•
•
•
•
•
•
•
•
•
denial by the regulatory agencies of permission to proceed with our planned clinical trials or any other clinical trials we may initiate, or
placement of a clinical trial on hold;
delays in filing or receiving approvals of additional INDs that may be required;
negative and/or unanticipated results from our ongoing non-clinical trials or clinical trials;
challenges in identifying, recruiting, enrolling and retaining patients to participate in clinical trials;
challenges with subject compliance within clinical trials;
timely and effectively contract with (under reasonable terms), manage and work with investigators, institutions, hospitals and the CROs/ vendors
involved in the clinical trial;
negotiate contracts and other related documents with clinical trial parties and institutional review boards, such as informed consents, CRO
agreements and site agreements, which can be subject to extensive negotiations that could cause significant delays in the clinical trial process,
with terms possibly varying significantly among different trial sites and CROs and possibly subjecting the Company to various risks;
inadequate quantity or quality of supplies of a product candidate or other materials necessary to conduct clinical trials, for example as a result of
delays in defining and implementing the manufacturing process for materials used in pivotal trials or for the manufacture of larger quantities or
other delays or issues arising in the manufacturing of sufficient supply of finished drug product;
difficulties obtaining institutional review board (“IRB”) approval, and equivalent (Ethics Committees or ECs) approval for sites outside the U.S.,
to conduct a clinical trial at a prospective site or sites;
ensure adherence to trial designs and protocols agreed upon and approved by regulatory authorities and applicable legal and regulatory
guidelines;
delays or problems in analyzing data, or the need for additional analysis or data or the need to enroll additional patients;
the occurrence of serious adverse events or unexpected drug-related side effects experienced by patients in a clinical trial or unexpected results in
ongoing non-clinical trials;
-43-
•
•
•
•
•
•
•
delays in validating endpoints utilized in a clinical trial;
delays in validating outcome assessments needed in a clinical trial;
our inability to have formal meetings with the regulatory agencies or to interact with them on a regular basis;
our inability to satisfy the requirements of the regulatory agencies to commence clinical trials, such as developing potency assays and lot release
specifications that correlate with the activity or response of the product candidate or other CMC requirements;
the regulatory agencies disagreeing with our clinical trial design and our interpretation of data from clinical trials, or changing the requirements
for approval even after the regulatory authority has reviewed and commented on the design for our clinical trials;
reports from non-clinical or clinical testing of competing therapies that raise safety or efficacy concerns; and
the recruitment and retention of employees, consultants or contractors with the required level of expertise.
Any inability to complete successfully pre-clinical and clinical development could result in additional costs to us or impair our ability to generate
revenues from product sales, regulatory and commercialization milestones and royalties. In addition, manufacturing or formulation changes to our product
candidates often require additional studies to demonstrate comparability of the modified product candidates to earlier versions. Clinical study delays also
shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to
market before we do, which impairs our ability to successfully commercialize our product candidates and harms our business and results of operations.
Clinical development is lengthy and uncertain. Clinical trials of our novel gene therapy candidates may be delayed, including as a result of
the COVID-19 pandemic, and certain programs may never advance in the clinic or may be more costly to conduct than we anticipate, any of which
could have a material adverse impact on our business.
Clinical testing is expensive and complex and can take many years to complete, and its outcome is inherently uncertain. We may not be able to
initiate, may experience delays in, or may have to discontinue clinical trials for our product candidates as a result of numerous unforeseen events, including:
•
•
•
•
•
•
•
•
the FDA, other regulators, IRBs, or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical
trial at a prospective trial site for any number of reasons, including concerns regarding safety and aspects of the clinical trial design;
we may experience delays in reaching, or fail to reach, agreement on favorable terms with prospective trial sites and prospective CROs, the terms
of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
the outcome of our pre-clinical studies and our early clinical trials may not be predictive of the success of later clinical trials, and interim results
of a clinical trial do not necessarily predict final results;
we may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful;
clinical trials of any product candidates may fail to show safety or efficacy, or produce negative or inconclusive results, and we may decide, or
regulators may require us, to conduct additional nonclinical studies or clinical trials, or we may decide to abandon product development
programs;
differences in trial design between early-stage clinical trials and later-stage clinical trials make it difficult to extrapolate the results of earlier
clinical trials to later clinical trials;
pre-clinical and clinical data are often susceptible to varying interpretations and analyses, and many product candidates believed to have
performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain marketing approval; and
regulators may elect to impose a clinical hold, or we or our investigators, IRBs, or ethics committees may elect to suspend or terminate clinical
research or trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed
to unacceptable benefit risk ratio. For example, in the past we have received clinical holds from the FDA. Although these holds have generally
not materially affected our development timelines, there is no assurance that any future hold would not have a material adverse effect. A clinical
hold, or any of the above factors, may be out of our control and could materially impair our development timelines, expenses and results of
operations.
In addition, the impact of COVID-19 has caused disruptions and may cause future delays in some of our clinical trials. Responses to COVID-19
by healthcare providers and regulatory agencies could delay the commencement of clinical trials, site
-44-
initiation, protocol compliance, or the completion of clinical 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.
Results from pre-clinical and early‑stage clinical trials may not be indicative of safety or efficacy in late‑stage clinical trials, and pre-clinical
and clinical trials may fail to demonstrate acceptable levels of safety, efficacy, and quality of our product candidates, which could prevent or
significantly delay their regulatory approval.
To obtain the requisite regulatory approvals to market and sell any of our product candidates, we must demonstrate, through extensive pre-
clinical and clinical trials, that the product candidate is safe and effective in humans. Ongoing and future pre-clinical and clinical trials of our product
candidates may not show sufficient safety, efficacy or adequate quality to obtain or maintain regulatory approvals. For example, although we believe the
data for SRP-9001, SRP-9003 and SRP-5051 collected to date are positive, the additional data we collect may not be consistent with the pre-clinical and/or
early clinical data or show a safe benefit that warrants further development or pursuit of a regulatory approval for these product candidates.
Furthermore, success in pre-clinical and early clinical trials does not ensure that the subsequent trials will be successful, nor does it predict final
results of a confirmatory trial. Some of our clinical trials were conducted with small patient populations and were not blinded or placebo-controlled, making
it difficult to predict whether the favorable results that we observed in such trials will be repeated in larger and more advanced clinical trials. For example,
our most recent announcements for SRP-9001, SRP-9003 and SRP-5051 include: in July 2022, we announced additional data and analyses from Study 102
and Study 103 for SRP-9001; in May 2021, we announced results from the 30 mg/kg cohort of Part A of Study 5051-201 for SRP-5051; and in March
2022, we announced 24-month functional data from two clinical trial participants in the high-dose cohort, and 36-month functional data from three clinical
trial participants in the low-dose cohort for SRP-9003. These data are based on small patient samples, and, given the heterogeneity of Duchenne and
LGMD patients and potential lot-to-lot variability, the data may not be predictive of future results. In addition, we cannot assure that the results of
additional data or data from any future trial will yield results that are consistent with the data presented, that we will be able to demonstrate the safety and
efficacy of these product candidates, that later trial results will support further development, or even if such later results are favorable, that we will be able
to successfully complete the development of, obtain accelerated, conditional or standard regulatory approval for, or successfully commercialize any of such
product candidates. Similarly, we cannot provide assurances that data from our ongoing and planned studies with respect to our commercially approved
products and product candidates will be positive and consistent or that the interpretation by regulators, such as the FDA or EMA, of the data we collect for
our products or product candidates will be consistent with our interpretations.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent regulatory approval of
product candidates, limit the commercial potential or result in significant negative consequences following any potential marketing approval.
Our product candidates may cause undesirable side effects. In addition to side effects caused by our product candidates, the administration
process or related procedures also can cause adverse side effects. If any such adverse events occur in our trials, we may decide, or the FDA, the EMA or
other regulatory authorities could order us, to halt, delay or amend pre-clinical development or clinical development of our product candidates or we may
be unable to receive regulatory approval of our product candidates for any or all targeted indications. For example, FDA placed Study 5051-201 on clinical
hold in June 2022 following a serious adverse event of hypomagnesemia, which was lifted in August 2022. Even if we are able to demonstrate that all
future serious adverse events are not product-related, such occurrences could affect patient recruitment or the ability of enrolled patients to complete the
trial. Moreover, if we elect, or are required, to delay, suspend or terminate any clinical trial of any of our product candidates, the commercial prospects of
such product candidates may be harmed and our ability to generate product revenues from any of these product candidates may be delayed or eliminated.
Any of these occurrences may harm our ability to develop other product candidates and may harm our business, financial condition and prospects
significantly.
Our gene therapy product candidates may be perceived as unsafe or may result in unforeseen adverse events. Failure of other gene therapy
programs, negative public opinion and increased regulatory scrutiny of gene therapy may damage public perception of the safety of our gene therapy
product candidates and harm our ability to conduct our business or obtain regulatory approvals for our gene therapy product candidates.
Gene therapy remains a newly applied technology, with only a few gene therapy products approved to date in the U.S., the EU or elsewhere.
Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical
community. In particular, our success will depend upon physicians who specialize in the
-45-
treatment of genetic diseases targeted by our product candidates, prescribing treatments that involve the use of our product candidates in lieu of, or in
addition to, existing treatments with which they are familiar and for which greater clinical data may be available.
In addition, ethical, social and legal concerns about gene therapy, genetic testing and genetic research could result in additional regulations or
prohibiting the processes we may use. Federal and state agencies, congressional committees and foreign governments have expressed their intentions to
further regulate biotechnology. More restrictive regulations or claims that our product candidates are unsafe or pose a hazard could prevent us from
commercializing any products. New government requirements may be established that could delay or prevent regulatory approval of our product candidates
under development. It is impossible to predict whether legislative changes will be enacted, regulations, policies or guidance changed, or interpretations by
agencies or courts changed, or what the impact of such changes, if any, may be.
More restrictive government regulations or negative public opinion would harm our business, financial condition, results of operations and
prospects and may delay or impair the development and commercialization of our gene therapy product candidates or demand for any products we may
develop. For example, earlier gene therapy trials led to several well-publicized adverse events, including death. Lack of efficacy and/or serious adverse
events related to clinical trials we, our strategic partners or other companies conduct, even if such adverse events are not ultimately attributable to the
relevant product candidates or products, and/or failed commercialization of gene therapy products may result in increased government regulation,
unfavorable public perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for those
product candidates that are approved and a decrease in demand for any such product candidates.
If there are significant delays in obtaining or we are unable to obtain or maintain required regulatory approvals, we will not be able to
commercialize our product candidates in a timely manner or at all, which could impair our ability to generate sufficient revenue and have a successful
business.
The research, testing, manufacturing, labeling, approval, commercialization, marketing, selling and distribution of drug products are subject to
extensive regulation by applicable local, regional and national regulatory authorities and regulations may differ from jurisdiction to jurisdiction. In the U.S.,
approvals and oversight from federal (e.g., FDA), state and other regulatory authorities are required for these activities. Sale and marketing of our product
candidates in the U.S. or other countries is not permitted until we obtain the required approvals from the applicable regulatory authorities. Of the large
number of drugs in development in the biopharmaceutical industry, only a small percentage result in the submission of a marketing application to the FDA
or an MAA to the EMA and even fewer are approved for commercialization.
Our ability to obtain the government or regulatory approvals required to commercialize any of our product candidates in any jurisdiction,
including in the U.S. or the EU, cannot be assured, may be significantly delayed or may never be achieved for various reasons including the following:
•
•
Our non-clinical, clinical, chemistry, manufacturing and controls and other data and analyses from past, current and future studies for any
of our product candidates may not be sufficient to meet regulatory requirements for marketing application approvals. The regulatory
authorities could disagree with our interpretations and conclusions regarding data we provide in connection with NDA, BLA or MAA
submissions for one or more of our product candidates, and may delay, reject or refuse to accept for review, or approve any submission we
make or identify additional requirements for product approval to be submitted upon completion, if ever. In addition, in the U.S., an FDA
advisory committee could determine that our data are insufficient to provide a positive recommendation for approval of any NDA or BLA
we submit to the FDA. Even if we meet FDA requirements and an advisory committee votes to recommend approval of an NDA or BLA
submission, the FDA could still disagree with the advisory committee’s recommendation and deny approval of a product candidate based
on their review.
The regulatory approval process for product candidates targeting orphan diseases, such as Duchenne, that use new technologies and
processes, such as antisense oligonucleotide therapies, gene therapy and other alternative approaches or endpoints for the determination of
efficacy is uncertain due to, among other factors, evolving interpretations of a new therapeutic class, the broad discretion of regulatory
authorities, lack of precedent, small safety databases, varying levels of applicable expertise of regulators or their advisory committees,
scientific developments, changes in the competitor landscape, shifting political priorities and changes in applicable laws, rules or
regulations and interpretations of the same. As a result of uncertainty in the approval process for products intended to treat serious rare
diseases, we may not be able to anticipate, prepare for or satisfy requests or requirements from regulatory authorities, including
completing and submitting planned NDAs, BLAs and MAAs for our product candidates, in a timely manner, or at all. Examples of such
requests or requirements could include, but are not limited to, conducting additional or redesigned trials and procedures (e.g., additional
safety data, patient muscle biopsies, dystrophin analyses and the use of assays), repeating or completing additional analysis of our data, or
providing additional supportive data. In addition,
-46-
in the U.S., an FDA advisory committee or regulators may disagree with our data analysis, interpretations and conclusions at any point in
the approval process, which could negatively impact the approval of our NDA or BLA or result in a decision by the Company not to
proceed with an NDA or BLA submission for a product candidate based on feedback from regulators.
•
We may not have the resources required to meet regulatory requirements and successfully navigate what is generally a lengthy, expensive
and extensive approval process for commercialization of drug product candidates.
Any failure on our part to respond to these requirements in a timely and satisfactory manner could significantly delay or negatively impact
confirmatory study timelines and/or the development plans we have for PMO, PPMO, gene therapy-based product candidates or other product candidates.
Responding to requests from regulators and meeting requirements for clinical trials, submissions and approvals may require substantial personnel, financial
or other resources, which, as a small biopharmaceutical company, we may not be able to obtain in a timely manner or at all. In addition, our ability to
respond to requests from regulatory authorities that involve our agents, third party vendors and associates may be complicated by our own limitations and
those of the parties we work with. It may be difficult or impossible for us to conform to regulatory guidance or successfully execute our product
development plans in response to regulatory guidance, including guidance related to clinical trial design with respect to any NDA, BLA or MAA
submissions.
Even if our product candidates demonstrate safety and efficacy in clinical studies, the regulatory agencies may not complete their review
processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other
regulatory advisory group or authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based
upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product
development, clinical studies and the review process. Regulatory agencies also may approve a treatment candidate for fewer or more limited indications
than requested or may grant approval subject to the performance of post-marketing studies. Furthermore, regulatory agencies may not approve the labeling
claims that are necessary or desirable for the successful commercialization of our treatment candidates. Finally, some of our product candidates may require
diagnostic tests to ensure we appropriately select patients suitable for treatment. If we are unable to successfully develop diagnostic tests for these product
candidates, experience significant delays in doing so, or are unable to obtain required regulatory clearances or approvals for any diagnostic tests, the
commercialization of our product candidates may be delayed or prevented. Even if we receive the required regulatory clearance or approvals for certain
diagnostic tests, the commercial success of any of our product candidates that require such tests will be dependent upon the continued availability of such
tests.
We are investing significant resources in the development of novel gene therapy product candidates. Only a few gene therapy products have
been approved in the U.S. and EU. If we are unable to show the safety and efficacy of these product candidates, experience delays in doing so or are
unable to successfully commercialize at least one of these drugs, our business would be materially harmed.
We are investing significant resources in the development of our gene therapy product candidates. We believe that a significant portion of the
long-term value attributed to our company by investors is based on the commercial potential of these product candidates. There can be no assurance that
any development problems we experience in the future related to our gene therapy programs will not cause significant delays or unanticipated costs, or that
such development problems can be solved. Development problems and delays in one program may delay the development of other programs. Early results
from ongoing clinical trials may differ materially from final results from such clinical trials. The results from pre-clinical and early clinical studies do not
always accurately predict results in later, large-scale clinical trials. We may also experience delays in developing a sustainable, reproducible and
commercial-scale manufacturing process or transferring that process to commercial partners, which may prevent us from completing our clinical trials or
commercializing our products on a timely or profitable basis, if at all.
In addition, the clinical trial requirements of the FDA, the EMA, and other regulatory agencies and the criteria these regulators use to determine
the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential
products. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or
more extensively studied pharmaceutical or other product candidates. Currently, only a few gene therapy products have been approved in the Western
world. Given the few precedents of approved gene therapy products, it is difficult to determine how long it will take or how much it will cost to obtain
regulatory approvals for our gene therapy product candidates in the U.S., the EU or other jurisdictions. Approvals by the EMA and the EC may not be
indicative of what the FDA may require for approval.
Regulatory requirements governing gene therapy products have evolved and may continue to change in the future. Within the FDA, the Center
for Biologics Evaluation and Research (“CBER”) regulates gene therapy products. Within the CBER, the review of gene therapy and related products is
consolidated in the Office of Cellular, Tissue and Gene Therapies, and the FDA has established
-47-
the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its reviews. The CBER works closely with the National Institutes of
Health (the “NIH”). The FDA and the NIH have published guidance documents with respect to the development and submission of gene therapy protocols.
For example, on January 28, 2020, the FDA issued final guidance documents that updated draft guidance documents that were originally released in July
2018 to reflect recent advances in the field, and to set forth the framework for the development, review and approval of gene therapies. These final
guidance documents pertain to the development of gene therapies for the treatment of specific disease categories, including rare diseases, and to
manufacturing and long-term follow up issues relevant to gene therapy, among other topics. The FDA also issued a new guidance document in September
2021 describing the FDA’s approach for determining whether two gene therapy products were the same or different for the purpose of assessing orphan
drug exclusivity, as well as a draft guidance document in March 2022 on human gene therapy product incorporating human genome editing. In addition, the
FDA can put an IND on hold if the information in an IND is not sufficient to assess the risks in pediatric patients.
These regulatory review agencies, committees and advisory groups and the new requirements and guidelines they promulgate may lengthen the
regulatory review process, require us to perform additional or larger studies, increase our development costs, lead to changes in regulatory positions and
interpretations, delay or prevent approval and commercialization of these treatment candidates or lead to significant post-approval studies, limitations or
restrictions. As we advance our product candidates, we will be required to consult with these regulatory and advisory groups and comply with applicable
requirements and guidelines, failure of which may lead to delayed or discontinued development of our product candidates.
If the anticipated or actual timing of marketing approvals for our gene therapy product candidates, or the market acceptance of these product
candidates, if approved, including treatment reimbursement levels agreed to by third-party payors, do not meet the expectations of investors or public
market analysts, the market price of our common stock would likely decline.
Because we are developing product candidates for the treatment of certain diseases in which there is little clinical experience and we are
using new endpoints or methodologies, there is increased risk that the FDA, the EMA or other regulatory authorities may not consider the endpoints of
our clinical trials to provide clinically meaningful results and that these results may be difficult to analyze.
During the FDA review process, we will need to identify success criteria and endpoints such that the FDA will be able to determine the clinical
efficacy and safety profile of our product candidates. As we are developing novel treatments for diseases in which there is little clinical experience with
new endpoints and methodologies, such as gene therapy, there is heightened risk that the FDA, the EMA or other regulatory bodies may not consider the
clinical trial endpoints to provide clinically meaningful results (reflecting a tangible benefit to patients). In addition, the resulting clinical data and results
may be difficult to analyze. Even if the FDA does find our success criteria to be sufficiently validated and clinically meaningful, we may not achieve the
pre-specified endpoints to a degree of statistical significance. Achieving appropriate statistical power may be challenging for some of the ultra-rare
genetically defined diseases we are targeting in our programs, especially if the acceptance of descriptive data is not yet established. In addition, different
methodologies, assumptions and applications we utilize to assess particular safety or efficacy parameters may yield different statistical results. Even if we
believe the data collected from clinical trials of our product candidates are promising, these data may not be sufficient to support approval by the FDA or
foreign regulatory authorities. Pre-clinical and clinical data can be interpreted in different ways. Accordingly, the FDA or foreign regulatory authorities
could interpret these data in different ways from us or our partners, which could delay, limit or prevent full or accelerated regulatory approval.
If our study data do not consistently or sufficiently demonstrate the safety or efficacy of any of our product candidates, the regulatory approvals
for such product candidates could be significantly delayed as we work to meet approval requirements, or, if we are not able to meet these requirements,
such approvals could be withheld or withdrawn.
Fast track product, breakthrough therapy, priority review, or Regenerative Medicine Advanced Therapy (“RMAT”) designation by the FDA,
or access to the Priority Medicine scheme (“PRIME”) by the EMA, for our product candidates, if granted, may not lead to faster development or
regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.
We may seek fast track, breakthrough therapy designation, RMAT designation, PRIME scheme access or priority review designation for our
product candidates if supported by the results of clinical trials. A fast track product designation is designed to facilitate the clinical development and
expedite the review of drugs intended to treat a serious or life-threatening condition which demonstrate the potential to address an unmet medical need. A
breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening
disease or condition, where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one
or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. A RMAT designation is designed to
accelerate approval for regenerative advanced therapies such as our gene therapy product candidates. Priority review designation is intended to
-48-
speed the FDA marketing application review timeframe for drugs that treat a serious condition and, if approved, would provide a significant improvement
in safety or effectiveness. PRIME is a scheme provided by the EMA to enhance support for the development of medicines that target an unmet medical
need.
For drugs and biologics that have been designated as fast track products or breakthrough therapies, or granted access to the PRIME scheme,
interaction and communication between the regulatory agency and the sponsor of the trial can help to identify the most efficient path for clinical
development. Sponsors of drugs with fast track products or breakthrough therapies may also be able to submit marketing applications on a rolling basis,
meaning that the FDA may review portions of a marketing application before the sponsor submits the complete application to the FDA, if the sponsor pays
the user fee upon submission of the first portion of the marketing application. For products that receive a priority review designation, the FDA's marketing
application review goal is shortened to six months, as opposed to ten months under standard review. This review goal is based on the date the FDA accepts
the marketing application for review, this application validation period typically adds approximately two months to the timeline for review and decision
from the date of submission. RMAT designations will accelerate approval and will include all the benefits of fast track and breakthrough therapy
designations, including early interactions with the FDA, but the exact mechanisms have not yet been announced by FDA.
Designation as a fast track product, breakthrough therapy, RMAT, PRIME, or priority review product is within the discretion of the regulatory
agency. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a fast track product, breakthrough therapy,
RMAT, PRIME, or priority review product, the agency may disagree and instead determine not to make such designation. In any event, the receipt of such a
designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under
conventional regulatory procedures and does not assure ultimate marketing approval by the agency. In addition, regarding fast track products and
breakthrough therapies, the FDA may later decide that the products no longer meet the conditions for qualification as either a fast track product, RMAT, or
a breakthrough therapy or, for priority review products, decide that period for FDA review or approval will not be shortened.
We may not be able to advance all of our programs, and we may use our financial and human resources to pursue particular programs and
fail to capitalize on programs that may be more profitable or for which there is a greater likelihood of success.
Our pipeline includes more than 40 programs in various stages of development for a broad range of diseases and disorders. We plan to expand
our pipeline through internal research and development and through strategic transactions. Because we have limited resources, we may not be able to
advance all of our programs. We may also forego or delay pursuit of opportunities with certain programs or for indications that later prove to have greater
commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.
Our spending on current and future research and development programs for product candidates may not yield any commercially viable products. If we do
not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product
candidate through strategic collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain
sole development and commercialization rights to such product candidate, or we may allocate internal resources to a product candidate in a therapeutic area
in which it would have been more advantageous to enter into a partnering arrangement.
Risks Related to Third Parties
If we are unable to maintain our agreements with third parties to distribute our products to patients, our results of operations and business
could be adversely affected.
We rely on third parties to commercially distribute our products to patients in the U.S. We have contracted with a third-party logistics company to
warehouse our products and with distributors and specialty pharmacies to sell and distribute our products to patients. A specialty pharmacy is a pharmacy
that specializes in the dispensing of medications for complex or chronic conditions that require a high level of patient education and ongoing management.
This distribution network requires significant coordination with our sales and marketing and finance organizations. In addition, failure to
coordinate financial systems could negatively impact our ability to accurately report product revenue from our products. If we are unable to effectively
manage the distribution process, the sales of our products, as well as any future products we may commercialize, could be delayed or severely
compromised and our results of operations may be harmed.
-49-
In addition, the use of third parties involves certain risks, including, but not limited to, risks that these organizations will:
not provide us with accurate or timely information regarding their inventories, the number of patients who are using our products or serious
adverse events and/or product complaints regarding our products;
not effectively sell or support our products;
reduce or discontinue their efforts to sell or support our products;
not devote the resources necessary to sell our products in the volumes and within the time frame we expect;
be unable to satisfy financial obligations to us or others; or
cease operations.
•
•
•
•
•
•
Any such events may result in decreased product sales, lower product revenue, loss of revenue, and/or reputational damage, which would harm
our results of operations and business.
With respect to the pre-commercial distribution of our products to patients outside of the U.S., we have contracted with third party distributors
and service providers to distribute our products in certain countries through our EAP. We will need to continue building out our network for commercial
distribution in jurisdictions in which our products are approved, which will also require third party contracts. The use of distributors and service providers
involves certain risks, including, but not limited to, risks that these organizations will not comply with applicable laws and regulations, or not provide us
with accurate or timely information regarding serious adverse events and/or product complaints regarding our products. Any such events may result in
regulatory actions that may include suspension or termination of the distribution and sale of our products in a certain country, loss of revenue, and/or
reputational damage, which could harm our results of operations and business.
Furthermore, a significant outbreak of COVID-19 at one of our third-party logistics, distribution, or specialty pharmacy sites could lead to a
delay in the commercial or pre-commercial shipments of our products to patients and hospitals.
We rely on third parties to conduct some aspects of our early stage research and pre-clinical and clinical development. The inadequate
performance by or loss of any of these third parties could affect the development and commercialization of our product candidate development.
We have relied upon, and plan to continue to rely upon, third parties to conduct some aspects of our early stage research and pre-clinical and
clinical development with respect to certain of our product candidates, including our follow-on exon-skipping product candidates, PPMO, gene therapy and
gene editing product candidates. Our third-party collaborators may not commit sufficient resources or adequately develop our programs for these
candidates. If our third-party collaborators fail to commit sufficient resources to any of our product candidates or to carry out their contractual duties or
obligations, our programs related to any particular product candidate could be delayed, terminated, or unsuccessful. Furthermore, if we fail to make
required payments to these third-party collaborators, including up-front, milestone, reimbursement or royalty payments, or to observe other obligations in
our agreements with them, these third parties may not be required to perform their obligations under our respective agreements with them and may have the
right to terminate such agreements. In addition, if our strategic partners experience regulatory delays for the development of their clinical product
candidates, including clinical holds, our opportunities to commercialize products may be delayed.
We also have relied upon and plan to continue to rely upon third-party CROs to monitor and manage data completeness for our ongoing pre-
clinical and clinical programs. We rely on these parties for execution of our pre-clinical and clinical trials, and we control only certain aspects of their
activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol and legal,
regulatory and scientific standards, and our reliance on collaborators and CROs does not relieve us of our regulatory responsibilities.
The individuals at our third-party collaborators and CROs who conduct work on our behalf, including their sub-contractors, are not always our
employees, and although we participate in the planning of our early stage research and pre-clinical and clinical programs, we cannot control whether or not
they devote sufficient time and resources or exercise appropriate oversight of these programs, except for remedies available to us under our agreements
with such third parties. If our collaborators and CROs do not successfully carry out their contractual duties or obligations or if the quality or accuracy of the
data they obtain is compromised due to the failure to adhere to our pre-clinical and clinical protocols, regulatory requirements or for other reasons, our
clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product
candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and
our ability to generate revenues could be delayed.
-50-
Our reliance on third parties requires us to share our proprietary information, which increases the possibility that a competitor will discover
them or that our proprietary information will be misappropriated or inadvertently disclosed.
Our reliance on third-party collaborators requires us to disclose our proprietary information to these parties, which could increase the risk that a
competitor will discover this information or that this information will be misappropriated or disclosed without our intent to do so. If any of these events
were to occur, then our ability to obtain patent protection or other intellectual property rights could be irrevocably jeopardized, and costly, distracting
litigation could ensue. Furthermore, if these third parties cease to continue operations and we are not able to quickly find a replacement provider or we lose
information or items associated with our products or product candidates, our development programs may be delayed. Although we carefully manage our
relationships with our third-party collaborators and CROs, there can be no assurance that we will not encounter challenges or delays in the future or that
these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
Risks Related to Manufacturing
We currently rely on third parties to manufacture our products and to produce our product candidates; our dependence on these parties,
including failure on our part to accurately anticipate product demand and timely secure manufacturing capacity to meet commercial, EAP, clinical and
pre-clinical product demand may impair the availability of product for commercial supply or to successfully support various programs, including
research and development and the potential commercialization of additional product candidates in our pipeline.
We rely on, and expect to continue relying on for the foreseeable future, a limited number of third parties to manufacture and supply materials
(including raw materials and subunits), API and drug product and to provide labeling and packaging of vials and storage of our products and product
candidates. The limited number of third parties with facilities and capabilities suited for the manufacturing process of our products and product candidates
creates a risk that we may not be able to obtain materials and APIs in the quantity and purity that we require. As of the date of this Annual Report, we have
dual sourcing for the APIs and drug product for all three of our commercial products.
In addition, the process for adding new manufacturing capacity is lengthy and often causes delays in development efforts. Any interruption of the
development or operation of those facilities due to, among other reasons, events such as the ongoing COVID-19 pandemic, order delays for equipment or
materials, equipment malfunctions, quality control and quality assurance issues, regulatory delays and possible negative effects of such delays on supply
chains and expected timelines for product availability, production yield issues, shortages of qualified personnel, discontinuation of a facility or business or
failure or damage to a facility by natural disasters, such as earthquakes or fires, could result in the cancellation of shipments, loss of product in the
manufacturing process or a shortfall in supply of our products, product candidates or materials.
If these third parties cease providing quality manufacturing and related services to us, and we are not able to engage appropriate replacements in
a timely manner, our ability to manufacture our products or product candidates in sufficient quality and quantity required for our planned commercial, pre-
clinical and clinical or EAPs, our various product research, development and commercialization efforts would be adversely affected.
Furthermore, any problems in our manufacturing process or the facilities with which we contract make us a less attractive collaborator for
potential partners, including larger pharmaceutical companies and academic research institutions, which could limit our access to additional attractive
development programs.
We, through our third-party manufacturers, seek to produce or produce supply of our products and product candidates. In light of the limited
number of third parties with the expertise to produce our products and product candidates, the lead time needed to manufacture them, and the availability of
underlying materials, we may not be able to, in a timely manner or at all, establish or maintain sufficient commercial and other manufacturing arrangements
on the commercially reasonable terms necessary to provide adequate supply of our products and product candidates. Furthermore, we may not be able to
obtain the significant financial capital that may be required in connection with such arrangements. Even after successfully engaging third parties to execute
the manufacturing process for our products and product candidates, such parties may not comply with the terms and timelines they have agreed to for
various reasons, some of which may be out of their or our control, which impacts our ability to execute our business plans on expected or required timelines
in connection with the commercialization of our products and the continued development of our product candidates. When we enter into long-term
manufacturing agreements that contain exclusivity provisions and /or substantial termination penalties, we constrain our operational flexibility.
The operations at one of our partner sites could also be disturbed by man-made or natural disasters, public health pandemics or epidemics or
other business interrupts such as potential supply chain disruptions caused by the ongoing conflict between Russia and
-51-
Ukraine. 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.
The third parties we use in the manufacturing process for our products and product candidates may fail to comply with cGMP regulations.
Our contract manufacturers are required to produce our materials, APIs and drug products under cGMP. We and our contract manufacturers are
subject to periodic inspections by the FDA, EMA and corresponding state and foreign authorities to ensure strict compliance with cGMP and other
applicable government regulations. In addition, before we can begin to commercially manufacture our product candidates in third-party or our own
facilities, we must obtain regulatory approval from the FDA, which includes a review of the manufacturing process and facility. A manufacturing
authorization also must be obtained from the appropriate EU regulatory authorities and may be required by other foreign regulatory authorities. The
timeframe required to obtain such approval or authorization is uncertain. In order to obtain approval, we need to demonstrate that all of our processes,
methods and equipment are compliant with cGMP, and perform extensive audits of vendors, contract laboratories and suppliers. In complying with cGMP,
we are obligated to expend time, money and effort in production, record keeping and quality control to seek to assure that the product meets applicable
specifications and other requirements.
We do not have direct operational control over a third-party manufacturer’s compliance with regulations and requirements. In addition, changes
in cGMP could negatively impact the ability of our contract manufacturers to complete the manufacturing process of our products and product candidates in
a compliant manner on the schedule we require for commercial and clinical trial use, respectively. Failure to achieve and maintain compliance with cGMP
and other applicable government regulations, including failure to detect or control anticipated or unanticipated manufacturing errors, results in product
recalls, clinical holds, delayed or withheld approvals, patient injury or death.
Failure by our contract manufacturers to adhere to applicable cGMP and other applicable government regulations, or our contract manufacturers
experiencing manufacturing problems, may result in significant negative consequences, including product seizures or recalls, postponement or cancellation
of clinical trials, loss or delay of product approval, fines and sanctions, loss of revenue, termination of the development of a product candidate, reputational
damage, shipment delays, inventory shortages, inventory write-offs and other product-related charges and increased manufacturing costs. If we experience
any of these consequences, the success of our commercialization of our products and/or our development efforts for our product candidates could be
significantly delayed, fail or otherwise be negatively impacted.
We may not be able to successfully optimize manufacturing of our product candidates in sufficient quality and quantity or within targeted
timelines, or be able to secure ownership of intellectual property rights developed in this process, which could negatively impact the commercial success
of our products and/or the development of our product candidates.
Our focus remains on optimizing manufacturing for our follow-on exon skipping product candidates and other programs, including PPMO and
gene therapy. We may not be able to successfully increase manufacturing capacity for the production of materials, APIs and drug products, whether in
collaboration with third party manufacturers or on our own, in a manner that is safe, compliant with cGMP conditions or other applicable legal or
regulatory requirements, in a cost-effective manner, in a time frame required to meet our timeline for commercialization, clinical trials and other business
plans, or at all.
Challenges complying with cGMP requirements and other quality issues arise during efforts to increase manufacturing capacity and scale up
production. We experience such issues in connection with manufacturing, packaging and storage of our products and product candidates, and during
shipping and storage of the APIs or finished drug product. In addition, in order to release our products for commercial use and demonstrate stability of
product candidates for use in clinical trials (and any subsequent drug products for commercial use), our manufacturing processes and analytical methods
must be validated in accordance with regulatory guidelines. Failure to successfully validate, or maintain validation of, our manufacturing processes and
analytical methods or demonstrate adequate purity, stability or comparability of our products or product candidates in a timely or cost-effective manner, or
at all, may undermine our commercial efforts. Failure to successfully validate our manufacturing processes and analytical methods or to demonstrate
adequate purity, stability or comparability, will negatively impact the commercial availability of our products and the continued development and/or
regulatory approval of our product candidates, which could significantly harm our business.
During our work with our third-party manufacturers to increase and optimize manufacturing capacity, they may make proprietary improvements
in the manufacturing processes for our products or product candidates. We may not own or be able to secure ownership of such improvements or may have
to share the intellectual property rights to those improvements. Additionally, we may need additional processes, technologies and validation studies, which
could be costly and which we may not be able to develop or acquire from third parties. Failure to secure the intellectual property rights required for the
manufacturing process needed for large-scale clinical trials or the continued development of our product candidates could cause significant delays in our
business plans or otherwise negatively impact the continued development of our product candidates.
-52-
Products intended for use in gene therapies are novel, complex and difficult to manufacture. We could experience production problems that
result in delays in our development or commercialization of gene therapy programs, limit the supply of our product candidates or future approved
products or otherwise harm our business.
We currently have development, manufacturing and testing agreements with third parties to manufacture supplies of our gene therapy product
candidates. Several factors could cause production interruptions, including equipment malfunctions, facility contamination, raw material shortages or
contamination, natural disasters, disruption in utility services, human error or disruptions in the operations of suppliers.
The physical and chemical properties of biologics such as ours generally cannot be fully characterized. As a result, assays of the finished product
may not be sufficient to ensure that the product will perform in the intended manner. Accordingly, we employ multiple steps to control our manufacturing
process to assure that the process works and the product candidate is made strictly and consistently in compliance with the process. Problems with the
manufacturing process, even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures,
product recalls, product liability claims or insufficient inventory. We may encounter problems achieving adequate quantities and quality of clinical and/or
commercial-grade materials that meet FDA, EMA or other applicable foreign standards or specifications with consistent and acceptable production yields
and costs.
In addition, the FDA, the EMA and other foreign regulatory authorities may require us to submit samples of any lot of any approved product
together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA, the EMA or other foreign regulatory
authorities may require that we not distribute a lot until the competent authority authorizes its release. Slight deviations in the manufacturing process,
including those affecting quality attributes and stability and deviations among different sites, may result in unacceptable changes in the product that could
result in lot failures or product recalls. Lot failures or product recalls could cause us to delay clinical trials or product launches which could be costly to us
and otherwise harm our business, financial condition, results of operations and prospects.
As our product candidates advance to later stage clinical trials, it is customary that various aspects of the development program, such as
manufacturing, formulation and other processes, and methods of administration, may be altered to optimize the candidates and processes for scale-up
necessary for later stage clinical trials and potential approval and commercialization. These changes may not produce the intended optimization, including
production of drug substance and drug product of a quality and in a quantity sufficient for Phase 3 clinical stage development or for commercialization,
which may cause delays in the initiation or completion of clinical trials and greater costs. We may also need to conduct additional studies to demonstrate
comparability between newly manufactured drug substance and/or drug product for commercialization relative to previously manufactured drug substance
and/or drug product for clinical trials. Demonstrating comparability may require us to incur additional costs or delay initiation or completion of clinical
trials and, if unsuccessful, could require us to complete additional pre-clinical studies or clinical trials.
We also may encounter problems hiring and retaining the experienced scientific, quality control and manufacturing personnel needed to operate
our manufacturing process which could result in delays in our production or difficulties in maintaining compliance with applicable regulatory requirements.
Currently the capacity to produce our viral vectors or gene therapy product candidates at commercial levels is limited and the availability of
sufficient GMP compliance capacity may result in delays in our development plans or increased capital expenditures, and the development and sales of any
gene therapy products, if approved, may be materially harmed.
Risks Related to our Intellectual Property
Our success, competitive position and future revenue depend in part on our ability and the abilities of our licensors and other collaborators to
obtain, maintain and defend the patent protection for our products, product candidates, and platform technologies, to preserve our trade secrets, and to
prevent third parties from infringing on our proprietary rights.
We currently directly hold various issued patents and patent applications, or have exclusive license or option rights to issued patents and patent
applications, in each case in the U.S. as well as other countries that protect our products, product candidates and platform technologies. We anticipate filing
additional patent applications both in the U.S. and in other countries. Our success will depend, in significant part, on our ability to obtain, maintain and
defend our U.S. and foreign patents covering our products, product candidates and platform technologies as well as preserving our trade secrets for these
assets. The patent process is subject to numerous risks and uncertainties, and we can provide no assurance that we will be successful in obtaining,
maintaining, or defending our patents.
-53-
Even when our patent claims are allowed, the claims may not issue, or in the event of issuance, may not be sufficient to protect our products, product
candidates or platform technologies or may be challenged in post-grant proceedings by third parties.
The patent positions of pharmaceutical, biotechnology and other life sciences companies can be highly uncertain and involve complex legal and
factual questions for which important legal principles remain unresolved. This uncertainty is heightened for our PMO-based products and product
candidates and gene therapy-based product candidates for which there has not been a significant number of patent litigations involving such technologies.
No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date in the U.S. and tests used for determining the
patentability of patent claims in all technologies are in flux. The USPTO and patent offices in other jurisdictions have often required that patent applications
directed to pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only the specific innovations exemplified
in the patent application, thereby limiting the scope of protection against competitive challenges. Accordingly, even if we or our licensors are able to obtain
patents, the patents might be substantially narrower than anticipated. Thus, there is no assurance as to the degree and range of protections any of our
patents, if issued, may afford us or whether patents will be issued. Patents which may be issued to us may be subjected to further governmental review that
may ultimately result in the reduction of their scope of protection, and pending patent applications may have their requested breadth of protection
significantly limited before being issued, if issued at all. The pharmaceutical, biotechnology and other life sciences patent situation outside the U.S. can be
even more uncertain.
As a matter of public policy, there might be significant pressure on governmental bodies to limit the scope of patent protection or impose
compulsory licenses for disease treatments that prove successful, particularly as a tactic to impose a price control. Additionally, competitors may leverage
such pressure to enhance their ability to exploit these laws to create, develop and market competing products.
We may be able to assert that certain activities engaged in by our competitors infringe on our current or future patent rights. To the extent that we
enforce our patents, an alleged infringer may deny infringement and/or counter-claim that our patents are not valid or enforceable, and if successful, could
negatively impact our patent estate. We may not be able to successfully defend patents necessary to prevent competitors from developing, manufacturing,
or commercializing competing product candidates or products. To the extent we assert infringement of a patent that covers a competing product candidate
or product as well as our own product candidate(s) or product(s), or such a patent is otherwise challenged without our initiation, the patent protection for
our own product candidate(s) or product(s) could be materially adversely affected should an infringing competitor be successful in challenging the validity,
enforceability, or scope of our patent(s). Our patent rights might be challenged, invalidated, circumvented or otherwise not provide any competitive
advantage. Defending our patent positions may require significant financial resources and could negatively impact other Company objectives. Even if we
successfully enforce our patent rights against a competitor, we may not be able to recover adequate damages or obtain other desired relief.
Under the Hatch-Waxman Act, one or more motivated third parties may file an ANDA, seeking approval of a generic copy of an innovator
product approved under the NDA pathway such as our PMO products, or an NDA under Section 505(b)(2), for a new or improved version of the original
innovator products. In certain circumstances, motivated third parties may file such an ANDA or NDA under Section 505(b)(2) as early as the so-called
“NCE-1” date that is one year before the expiry of the five-year period of NCE exclusivity or more generally four years after NDA approval. The third
parties are allowed to rely on the safety and efficacy data of the innovator’s product, may not need to conduct clinical trials and can market a competing
version of a product after the expiration or loss of patent exclusivity or the expiration or loss of regulatory exclusivity and often charge significantly lower
prices. Upon the expiration or loss of patent protection or the expiration or loss of regulatory exclusivity for a product, the major portion of revenues for
that product may be dramatically reduced in a very short period of time. If we are not successful in defending our patents and regulatory exclusivities, we
will not derive the expected benefit from them. As such, a third party could be positioned to market an ANDA or Section 505(b)(2) product that competes
with one of our products prior to the expiry of our patents if the third party successfully challenges the validity, enforceability, or scope of our patents
protecting the product.
The patent landscape is continually evolving, and we may be able to assert that certain activities engaged in by third parties infringe our current
or future patent rights. There has been, and we believe that there will continue to be, significant litigation in the biopharmaceutical and pharmaceutical
industries regarding patent and other intellectual property rights. As such, the patents and patent applications that we own, license, have optioned, and rely
on for exclusivity for our product candidates may be challenged.
Uncertainty over intellectual property in the pharmaceutical and biotechnology industry has been the source of litigation and other disputes,
which is inherently costly and unpredictable.
Litigation, interferences, oppositions, inter partes reviews, administrative challenges or other similar types of proceedings are, have been and
may in the future be necessary in some instances to determine the validity and scope of certain of our proprietary rights, and in other instances to determine
the validity, enforceability, scope or non-infringement of certain patent rights claimed by third parties to be pertinent to the manufacture, use or sale of our
product candidates or products. We may also face challenges to our patent and regulatory exclusivities covering our products by third parties, including
manufacturers of generics and/or biosimilars who
-54-
may choose to launch or attempt to launch their products before the expiration of our patents or regulatory exclusivity. Litigation, interferences,
oppositions, inter partes reviews, administrative challenges or other similar types of proceedings are unpredictable and may be protracted, expensive and
distracting to management. The outcomes of such proceedings could adversely affect the validity, enforceability, and scope of our patents or other
proprietary rights, hinder our ability to manufacture and market our products, require us to seek a license for the infringed products or technology or result
in the assessment of significant monetary damages against us that may exceed amounts, if any, accrued in our financial statements. An adverse
determination in a judicial or administrative proceeding or a failure to obtain necessary licenses could prevent us from developing, manufacturing or selling
our products. Furthermore, payments under any licenses that we are able to obtain would reduce our profits derived from our products. Any of these
circumstances could result in financial, business or reputational harm to us or could cause a decline or volatility in our stock price.
On September 16, 2011, the Leahy-Smith America Invents Act (the “Leahy-Smith Act”), was signed into law. The Leahy-Smith Act includes a
number of significant changes to U.S. patent law, including provisions that affect the way patent applications will be prosecuted, and that may also affect
patent litigation. The USPTO has issued regulations and procedures to govern administration of the Leahy-Smith Act. In view of the long timelines for
interpreting legal provisions in the court system and the evolving nature of our laws, it is not clear what, if any, impact the Leahy-Smith Act will have on
the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution
of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and
financial condition. For instance, a third party may petition the Patent Trial and Appeal Board (“PTAB”) seeking to challenge some or all of the claims in
any of our patents through an inter partes review or other post-grant proceedings. Should the PTAB or the USPTO Director institute an inter partes review
or other proceedings and the PTAB decide that some or all of the claims in the challenged patent are unpatentable, unenforceable, or invalid, such a
decision, if upheld on appeal, could have a material adverse effect on our business and financial condition.
Our business prospects will be impaired if third parties successfully assert that our products, product candidates, or platform technologies
infringe proprietary rights of such third parties.
Similar to us, competitors continually seek intellectual property protection for their technology. Several of our development programs,
particularly gene therapy programs, focus on therapeutic areas that have been the subject of extensive research and development by third parties for many
years and have been protected with third party patent rights. Due to the amount of intellectual property in our various fields of technology, we cannot be
certain that we do not infringe intellectual property rights of competitors or other third parties or that we will not infringe intellectual property rights of
competitors or other third parties granted or created in the future. Moreover, activities we conduct or those conducted on our behalf in connection with the
development of our product candidates may not be protected from infringement under the so-called Safe Harbor provision of 35 U.S.C. § 271(e)(1) and
thus may be found to infringe the patent rights of third parties. Our competitors or other third parties might have obtained, or could obtain in the future,
patents that threaten, limit, interfere with or eliminate our ability to make, use and sell our products, product candidates or platform technologies in
important commercial markets.
Due to the nature of our various partnerships, collaborators, licensors, CROs, CMOs and the like, we may be subjected to claims of infringement
arising from activities conducted by these third parties in connection with our product candidates, whether or not such activities are authorized by us. In
addition, we may have contractual obligations to indemnify these partners from claims of infringement or declaratory relief. As a result, we may be subject
to substantial unforeseen costs, distraction, and financial liability if a third party making such a claim was successful in obtaining a final judgment of
infringement and validity.
In order to maintain or obtain freedom to operate for our products and product candidates, we may incur significant expenses, including those
associated with entering into agreements with third parties that require milestone and royalty payments. Additionally, if we were to challenge the patent
rights of our competitors or otherwise defend against allegations of infringement, misappropriation, breach of contract or related claims, we could incur
substantial costs and ultimately might not be successful.
If our products, product candidates, or platform technologies are alleged to infringe or are determined to infringe enforceable proprietary rights of
others, we could incur substantial costs and may have to:
•
•
•
•
•
obtain rights or licenses from others, which might not be available on commercially reasonable terms or at all;
abandon development of an infringing product candidate, or cease commercialization of an infringing product;
redesign our products, product candidates or processes to avoid infringement;
pay damages; and/or
defend litigation or administrative proceedings which might be costly whether we win or lose, and which could result in a substantial
diversion of financial and management resources.
-55-
Any of these events could result in product and product candidate development delays or cessation, and as such substantially harm our potential
earnings, financial condition and operations. The patent landscape of our product candidates and products is continually evolving and multiple parties,
including both commercial entities and academic institutions, may have rights to claims or may be pursuing additional claims that could provide these
parties a basis to assert that our products, product candidates or platform technologies infringe on the intellectual property rights of such parties. There has
been, and we believe that there will continue to be, significant litigation in the biopharmaceutical and pharmaceutical industries regarding patent and other
intellectual property rights.
Risks Related to our Business Operations
Failure to comply with healthcare and other regulations is subject to substantial penalties and our business, operations and financial
condition could be adversely affected.
As a manufacturer of pharmaceuticals, within the U.S., certain federal and state healthcare laws and regulations apply to or affect our business.
These laws may constrain the business or financial arrangements and relationships through which we conduct business, including how we conduct research
regarding, market, sell, and distribute our products. The laws and regulations include:
•
•
•
•
•
•
•
federal healthcare anti-kickback law, which prohibit, among other things, persons from soliciting, receiving or providing remuneration,
directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or
service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;
federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be
presented, information or claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent;
the Federal Food, Drug and Cosmetic Act, which among other things, strictly regulates drug product and medical device marketing,
prohibits manufacturers from marketing such products for off-label use and regulates the distribution of samples;
federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially
harm consumers;
federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain
discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare
programs;
the so-called “federal sunshine” law, which requires pharmaceutical and medical device companies to monitor and report certain financial
interactions with teaching hospitals, physicians and certain non-physician practitioners to the federal government for re-disclosure to the
public; and
state law equivalents of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services
reimbursed by any third party payor, including commercial insurers, state laws regulating interactions between pharmaceutical
manufactures and healthcare providers, and state laws governing the privacy and security of health information in certain circumstances,
many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance
efforts.
The number and complexity of both federal and state laws continues to increase, and additional governmental resources are being used to enforce
these laws and to prosecute companies and individuals who are believed to be violating them. We anticipate that government scrutiny of pharmaceutical
sales and marketing practices will continue for the foreseeable future and subject us to the risk of government investigations and enforcement actions.
We have implemented a compliance program, which is based on industry best practices and is designed to ensure that our activities comply with
all applicable laws, regulations and industry standards. While our compliance program is intended to detect and prevent potential non-compliance, we
cannot be certain that compliance will be assured. If our operations are found to be in violation of any of the laws described above or any other laws, rules
or regulations that apply to us, we will be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of
our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and
our financial results. Responding to government investigations, defending any claims raised, and any resulting fines, restitution, damages and penalties,
settlement payments or administrative actions, as well as any related actions brought by stockholders or other third parties, could have a material impact on
our reputation, business and financial condition and divert the attention of our management from operating our business. Even if we successfully defend
against an action against us for violation of a law, the action and our defense could nonetheless cause us to incur significant legal expenses and divert our
management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy,
security, fraud and reporting laws may prove costly.
-56-
If we, our collaborators, or any third-party manufacturers engaged by us or our collaborators fail to comply with environmental, health and
safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We, our collaborators, and any third-party manufacturers we engage are subject to numerous environmental, health and safety laws and
regulations, including those governing laboratory procedures and the generation, handling, use, storage, treatment, manufacture, transportation and disposal
of, and exposure to, hazardous materials and wastes, as well as laws and regulations relating to occupational health and safety, including those governing
laboratory procedures, exposure to blood-borne pathogens and the handling of bio-hazardous materials. Our operations involve the use of hazardous
materials, including organic and inorganic solvents and reagents. Although we believe that our activities conform in all material respects with such
environmental laws, there can be no assurance that violations of these laws will not occur in the future as a result of human error, accident, equipment
failure or other causes. Liability under environmental, health and safety laws can be joint and several and without regard to fault or negligence. The failure
to comply with past, present or future laws could result in the imposition of substantial fines and penalties, remediation costs, property damage and personal
injury claims, loss of permits or a cessation of operations, and any of these events could harm our business and financial condition. We expect that our
operations will be affected by other new environmental, health and workplace safety laws on an ongoing basis, and although we cannot predict the ultimate
impact of any such new laws, they may impose greater compliance costs or result in increased risks or penalties, which could harm our business.
Further, with respect to the operations of any current or future collaborators or third party contract manufacturers, it is possible that if they fail to
operate in compliance with applicable environmental, health and safety laws and regulations or properly dispose of wastes associated with our product or
product candidates, we could be held liable for any resulting damages, suffer reputational harm or experience a disruption in the manufacture and supply of
our product or product candidates.
Comprehensive tax reform in the U.S. and future guidance could adversely affect our business and financial condition.
The Tax Cuts and Jobs Act (the “TCJA”) was enacted on December 22, 2017 in the U.S. The TCJA contains significant changes to corporate
taxation, including reduction of the U.S. corporate tax rate from 35% to 21%, elimination of U.S. tax on foreign earnings (subject to certain important
exceptions), one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, limitation of the tax deduction for interest
expense, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many
business deductions and credits. On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security Act” or the
CARES Act, which included certain changes in tax law intended to stimulate the U.S. economy in light of the COVID-19 outbreak, including temporary
beneficial changes to the treatment of net operating losses, interest deductibility limitations and payroll tax matters.
We continue to monitor changes in tax laws in the U.S. and the impact of proposed and enacted legislation in the international jurisdictions in
which the company operates, which could materially impact our tax provision, cash tax liability and effective tax rate.
The COVID-19 pandemic has resulted, and may continue to result in disruptions to our commercialization, clinical trials, manufacturing
and other business operations, which could have a material adverse effect on our business, financial condition, operating results, cash flows and
prospects.
The COVID-19 pandemic has presented a substantial public health and economic challenge around the world. The rapid spread of COVID-19
has led to the implementation of various responses, including government-imposed quarantines, shelter-in-place mandates, sweeping restrictions on travel,
mandatory shutdowns for non-essential businesses, requirements regarding social distancing, and other public health safety measures, as well as reported
adverse impacts on healthcare resources, facilities and providers across the United States and in other countries. In response to the pandemic, healthcare
providers have, and may need to further, reallocate resources, such as physicians, staff, hospital beds, and intensive care unit facilities, as they prioritize
limited resources and personnel capacity to focus on the treatment of patients with COVID-19 and implement limitations on access to hospitals and other
medical institutions due to concerns about the spread of COVID-19 in such settings. These responses may be extended by the duration of the outbreak,
periodic spikes in infection rates due to new strains of the virus, new information that will emerge concerning the severity of the coronavirus and the
actions to contain the coronavirus or treat its impact. These actions have and may continue to negatively impact commercialization, clinical trials,
manufacturing and other business operations, including:
•
Commercial: 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. In some cases, at home infusions have been delayed due to outbreaks of COVID-19 among trained personnel and staffing
shortages at times during periodic spikes in infection rates. 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
-57-
•
•
•
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. 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) were
implemented in many countries during the pandemic, 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.
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.
Operations: Remote working increases our vulnerability to cyber security breaches. 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.
Any of the foregoing factors could have a material adverse impact on our business, financial condition, operating results, cash flows and
prospects. The extent to which COVID-19 impacts our operations and those of our third-party partners will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, additional or modified government actions, new
information which emerges concerning the severity of COVID-19 and the actions taken to contain the virus or treat its impact, among others. In particular,
the speed of the continued spread of COVID-19 globally, and the magnitude of interventions to contain the spread of the virus, will determine the impact of
the pandemic on our operations.
Our ability to use net operating loss carryforwards and other tax attributes to offset future taxable income may be limited by provisions of
the Internal Revenue Code, and it is possible that certain transactions or a combination of certain transactions may result in material additional
limitations on our ability to use our net operating losses.
We have incurred substantial losses during our history and expect to incur more as we pursue our business strategy. To the extent that we
continue to generate taxable losses, unused losses will carry forward to offset a portion of future taxable income, if any, subject to expiration of such
carryforwards in the case of carryforwards generated prior to January 1, 2018. In general, under Section 382 of the Internal Revenue Code, a corporation
that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses and certain other tax assets
(including R&D tax credits) to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain
stockholders increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period, which is
generally three years. An ownership change could limit our ability to utilize our net operating loss and tax credit carryforwards for taxable years including
or following such “ownership change.” Such limitations may result in expiration of a portion of the net operating loss carryforwards incurred prior to 2018
before utilization and may be substantial. If such change has occurred or does occur, the tax benefits related to the net operating loss carryforwards and
certain other tax assets may be limited or lost. Moreover, proposed U.S. Treasury Regulations promulgated under Section 382 of the Code could, if
finalized, significantly impact a corporation’s ability to use its pre-change net operating loss carryforwards or other attributes following an ownership
change. Limitations imposed on the ability to use net operating losses and tax credits to offset future taxable income could require us to pay U.S. federal
income taxes earlier than we estimated or than would have otherwise been required if such limitations were not in effect and could cause such net operating
losses and tax credits to expire unused, in each case reducing or eliminating the benefit of such net operating losses and tax credits and potentially adversely
affecting our financial position. Similar rules and limitations may apply for state income tax purposes. At the state level, there may also be periods during
which the use of net operating loss carryforwards or other attributes is suspended or otherwise limited, which could accelerate or permanently increase state
taxes owed. These net operating losses have been fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax
benefits.
On August 16, 2022, the Inflation Reduction Act of 2022, which includes changes to the U.S. federal taxation of corporations, was enacted into
law. The Inflation Reduction Act among other things implements a corporate book minimum tax (“BMT”) 15% rate that could apply to consolidated groups
of companies with adjusted financial statement income in excess of $1.0 billion over a three-year period. The BMT has various limitations, including a
more restrictive limit on availability of net operating loss carryforwards, which if applied to us, could impact its cash tax liability and ability to utilize tax
attributes.
-58-
In addition, many of the jurisdictions in which we operate have or are expected to adopt changes to tax laws as a result of the Base Erosion and
Profit Shifting final proposals from the Organization for Economic Co-operation and Development and specific country anti-avoidance initiatives. In
addition, the current proposal of the BMT may result in increases in tax imposed by non-U.S. jurisdictions. Such tax law changes and anti-avoidance
initiatives increase uncertainty and may adversely affect our tax provision, cash tax liability and effective tax rate.
We are winding down our expired U.S. government contracts, and the U.S. government may deny payment of some or all of the currently
outstanding amounts owed to us. In addition, further development of our infectious disease programs may be limited by the intellectual property and
other rights retained by the U.S. government.
We have historically relied on U.S. government contracts and awards to fund and support certain infectious disease development programs.
These contracts expired and we are currently involved in contract close-out activities. The U.S. government has the right to perform additional audits prior
to making final payment of costs and fees. If we are not able to adequately support costs incurred or other government requirements, the government may
deny payment of some or all of the currently outstanding amounts owed to us. In addition, the U.S. government may have the right to develop all or some
parts of product candidates that we have developed under a U.S. government contract after such contract has terminated or expired.
Our employees, principal investigators, consultants and strategic partners may engage in misconduct or other improper activities, including
non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and strategic partners. Misconduct
by these parties could include intentional failures to comply with the regulations of the FDA and non-U.S. regulators, provide accurate information to the
FDA and non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the U.S. and abroad, report financial information or data
accurately or disclose unauthorized activities to us. We adopted a code of conduct applicable to all of our employees, but it is not always possible to
identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or
unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these
laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could
have a significant impact on our business, including the imposition of significant fines or other sanctions.
Failure to retain our key personnel or an inability to attract and retain additional qualified personnel would cause our future growth and our
ability to compete to suffer.
We are highly dependent on the efforts and abilities of the principal members of our senior management. Additionally, we have scientific
personnel with significant and unique expertise in RNA-targeted therapeutics and gene therapy technologies. The loss of the services of any one of the
principal members of our managerial team or staff may prevent us from achieving our business objectives.
The competition for qualified personnel in the biotechnology field is intense, and our future success depends upon our ability to attract, retain,
motivate and support such personnel. The COVID-19 pandemic has exacerbated workforce competition and workforce shortages. In order to develop and
commercialize our products successfully, we will be required to retain key management and scientific employees. In certain instances, we may also need to
expand or replace our workforce and our management ranks. In addition, we rely on certain consultants and advisors, including scientific and clinical
advisors, to assist us in the formulation and advancement of our research and development programs. Our consultants and advisors may be employed by
other entities or have commitments under consulting or advisory contracts with third parties that limit their availability to us, or both. If we are unable to
attract, assimilate or retain such key personnel, our ability to advance our programs would be adversely affected.
Turnover rates of key employees has varied substantially in recent years. Over the last few years, we have had several executive management
changes. Leadership transitions can be inherently difficult to manage and may cause uncertainty or a disruption to our business or may increase the
likelihood of turnover in other key officers and employees. If we lose the services of one or more of our senior management or key employees, or if one or
more of them decides to join a competitor or otherwise to compete with us, our business could be harmed.
-59-
Risks Related to our Financial Condition and Capital Requirements
We have incurred operating losses since our inception and we may not achieve or sustain profitability.
We incurred an operating loss of $536.2 million for the year ended December 31, 2022. Our accumulated deficit was $3.9 billion as of December
31, 2022. Although we currently have three commercially approved products in the U.S., we believe that it will take us some time to attain profitability and
positive cash flow from operations. Since our products and product candidates target small patient populations, the per-patient drug pricing must be high in
order to recover our development and manufacturing costs, fund adequate patient support programs, fund additional research and achieve profitability. We
may be unable to maintain or obtain sufficient sales volumes at a price high enough to justify our product development efforts and our sales, marketing and
manufacturing expenses.
We have generally incurred expenses related to research and development of our technologies and product candidates and from general and
administrative expenses that we have incurred while building our business infrastructure. We anticipate that our expenses will increase substantially if
and/or as we:
•
•
•
•
•
•
•
•
•
•
•
•
continue the commercialization of our products in the U.S.;
expand the global footprint of our products outside of the U.S.;
establish our sales, marketing and distribution capabilities;
continue our research, pre-clinical and clinical development of our product candidates;
respond to and satisfy requests and requirements from regulatory authorities in connection with development and potential approval of our
product candidates;
initiate additional clinical trials for our product candidates;
seek marketing approvals for our product candidates that successfully complete clinical trials;
acquire or in-license other product candidates;
maintain, expand and protect our intellectual property portfolio;
increase manufacturing capabilities, including capital expenditures related to our real estate facilities and entering into manufacturing
agreements;
hire additional clinical, quality control and scientific personnel; and
add operational, financial and management information systems and personnel, including personnel to support our product development
and planned future commercialization efforts.
As a result, we expect to continue to incur significant operating losses at least through 2023. Because of the numerous risks and uncertainties
associated with developing biopharmaceutical products, we are unable to predict the extent of any future losses or when, or if, we will become profitable.
We may need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital
when needed may force us to delay, limit or terminate our product development efforts or other operations.
We may require additional capital from time to time in the future in order to meet FDA post-marketing approval requirements and market and
sell our products as well as to continue the development of product candidates in our pipeline, to prepare for potential commercialization of additional
product candidates in our pipeline, to expand our product portfolio and to continue or enhance our business development efforts. The actual amount of
funds that we may need and the sufficiency of the capital we have or are able to raise will be determined by many factors, some of which are in our control
and others that are beyond our control.
While we are currently well capitalized, we may use available capital resources sooner than we expect under our current operating plan. In
addition, our operating plan may change. We may need or choose to seek additional funds sooner than planned, through equity or debt financings,
government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances, funded research and
development arrangements and licensing arrangements or a combination of these approaches. In any event, we expect to require additional capital to
expand future development efforts, obtain regulatory approval for, and to commercialize, our product candidates. Raising funds in the current economic
environment may present additional challenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek
additional capital if market conditions are favorable or in light of specific strategic considerations.
-60-
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop
and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms
acceptable to us, if at all. In the event we receive negative data from our key clinical programs or encounter other major setbacks in our development,
manufacturing or regulatory activities or in our commercialization efforts, our stock price is likely to decline, which would make a future financing more
difficult. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders. The issuance of additional securities,
whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or
convertible securities may dilute all of our stockholders. The incurrence of indebtedness may result in increased fixed payment obligations and we may be
required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or
license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be
required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be
required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a
material adverse effect on our business, operating results and prospects.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research
or development programs or the commercialization of any product, if approved, or be unable to expand our operations or otherwise capitalize on our
business opportunities, as desired, which could materially affect our business, financial condition and results of operations.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.
We may seek additional capital through a combination of private and public equity offerings, debt financings, collaborations and strategic and
licensing arrangements. To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into
common stock, the ownership interest of our stockholders in our company may be diluted. In addition, the terms of any such securities may include
liquidation or other preferences that materially adversely affect the rights of our stockholders. Debt financing, if available, may increase our fixed payment
obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt,
making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic partnerships and licensing arrangements
with third parties, we may have to relinquish valuable rights to our product candidates, our intellectual property, future revenue streams or grant licenses on
terms that are not favorable to us.
The estimates and judgments we make, or the assumptions on which we rely, in preparing our consolidated financial statements could prove
inaccurate.
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. The
preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities,
revenues and expenses, the amounts of charges accrued by us and related disclosure of contingent assets and liabilities. Such estimates and judgments
include revenue recognition, inventory, valuation of stock-based awards, research and development expenses and income tax. We base our estimates on
historical experience, facts and circumstances known to us and on various other assumptions that we believe to be reasonable under the circumstances. We
cannot provide assurances, however, that our estimates, or the assumptions underlying them, will not change over time or otherwise prove inaccurate. If this
is the case, we may be required to restate our consolidated financial statements, which could, in turn, subject us to securities class action litigation.
Defending against such potential litigation relating to a restatement of our consolidated financial statements would be expensive and would require
significant attention and resources of our management. Moreover, our insurance to cover our obligations with respect to the ultimate resolution of any such
litigation may be inadequate. As a result of these factors, any such potential litigation could have a material adverse effect on our financial results and cause
our stock price to decline, which could in turn subject us to securities class action litigation.
Risks Related to Our Common Stock
Our stock price is volatile and may fluctuate due to factors beyond our control.
The market prices for and trading volumes of securities of biotechnology companies, including our securities, has historically been volatile. Our
stock has had significant swings in trading prices, in particular in connection with our public communications regarding feedback received from regulatory
authorities. For example, over the last twelve months, as of the date of this report, our stock has increased as much as 16% in a single day or decreased as
much as 13% in a single day. The market has from time to time
-61-
experienced significant price and volume fluctuations unrelated to the operating performance of particular companies. The market price of our common
stock may fluctuate significantly due to a variety of factors, including but not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the commercial performance of our products in the U.S.;
the timing of our submissions to regulatory authorities and regulatory decisions and developments;
positive or negative clinical trial results or regulatory interpretations of data collected in clinical trials conducted by us, our strategic
partners, our competitors or other companies with investigational drugs targeting the same, similar or related diseases to those targeted by
us;
delays in beginning and completing pre-clinical and clinical trials for potential product candidates;
delays in entering or failing to enter into strategic relationships with respect to development and/or commercialization of our products or
product candidates or entry into strategic relationships on terms that are not deemed to be favorable to us;
technological innovations, product development or additional commercial product introductions by ourselves or competitors;
changes in applicable government regulations or regulatory requirements in the approval process;
developments concerning proprietary rights, including patents and patent litigation matters, such as developments in the interferences
declared by the USPTO, including in the near term any outcomes of ongoing interference proceedings and over the longer term the
outcomes from any related appeals;
public concern relating to the commercial value, efficacy or safety of any of our products;
our ability to obtain funds, through the issuance of equity or equity linked securities or incurrence of debt, or other corporate transactions;
comments by securities analysts;
developments in litigation against us;
changes in senior management; or
general market conditions in our industry or in the economy as a whole.
Broad market and industry factors may seriously affect the market price of a company’s stock, including ours, regardless of actual operating
performance. For example, the trading prices of biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic, inflation
and increased interest rates and overall market volatility. In addition, our operations and performance may be affected by political or civil unrest or military
action, including the ongoing conflict between Russia and Ukraine. Additionally, in the past, following periods of volatility in the overall market and the
market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. Such litigation could
result in substantial costs and a diversion of our management’s attention and resources.
Our revenues and operating results could fluctuate significantly, which may adversely affect our stock price.
Our revenues and operating results may vary significantly from year-to-year and quarter-to-quarter as well as in comparison to the corresponding
quarter of the preceding year. Variations my result from one or more factors, including, without limitation:
•
•
•
•
•
timing of purchase orders;
changes in coverage and reimbursement policies of health plans and other health insurers, especially in relation to those products that are
currently manufactured, under development or identified for future development by us;
re-authorizations processes that may be required for patients who initially obtained coverage by third parties, including government
payors, managed care organizations and private health insurers;
transition from temporary billing codes established by the CMS to permanent medical codes;
timing of approval of applications filed with the FDA;
-62-
•
•
•
•
•
•
•
•
•
•
•
•
•
timing of product launches and market acceptance of products launched;
changes in the amounts spent to research, develop, acquire, license or promote new and existing products;
results of clinical trial programs;
serious or unexpected health or safety concerns with our product or product candidates and any resulting clinical holds;
introduction of new products by others that render one or more of our products obsolete or noncompetitive;
the ability to maintain selling prices and gross margins on our products;
increases in the cost of raw materials contained within our products and product candidates;
manufacturing and supply interruptions, including product rejections or recalls due to failure to comply with manufacturing specifications;
timing of revenue recognition relating to our distribution agreements;
the ability to protect our intellectual property from being acquired by other entities;
the ability to avoid infringing the intellectual property of others;
the continued impact of the ongoing COVID-19 pandemic; and
the addition or loss of customers.
In addition, in one or more future periods, our results of operations may fall below the expectations of securities analysts and investors. In that
event, the market price of our common stock could decline.
Provisions of our certificate of incorporation, bylaws and Delaware law might deter acquisition bids for us that might be considered favorable
and prevent or frustrate any attempt to replace or remove the then-current management and board of directors.
Certain provisions of our certificate of incorporation and bylaws may make it more difficult for a third party to acquire control of us or effect a
change in our board of directors and management. These provisions include:
•
•
•
•
•
•
•
•
•
when the board is comprised of six or more directors, classification of our board of directors into two classes, with one class elected each
year;
directors may only be removed for cause by the affirmative vote of a majority of the voting power of all the then-outstanding shares of
voting stock;
prohibition of cumulative voting of shares in the election of directors;
right of the board of directors to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation,
death, disqualification or removal of a director;
express authorization of the board of directors to make, alter or repeal our bylaws;
prohibition on stockholder action by written consent;
advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at
stockholder meetings;
the ability of our board of directors to authorize the issuance of undesignated preferred stock, the terms and rights of which may be
established and shares of which may be issued without stockholder approval, including rights superior to the rights of the holders of
common stock; and
a super-majority (66 2/3%) of the voting power of all of the then-outstanding shares of capital stock are required to amend, rescind, alter
or repeal our bylaws and certain provisions of our certificate of incorporation.
In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business
combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our certificate of incorporation and our
bylaws and in the Delaware General Corporation Law could make it more difficult for stockholders or potential acquirers to obtain control of our board of
directors or initiate actions that are opposed by the then-current board of directors.
-63-
A significant number of shares of our common stock are issuable pursuant to outstanding stock awards, and we expect to issue additional
stock awards and shares of common stock to attract and retain employees, directors and consultants. We may also issue shares of common stock to
finance our operations and in connection with our strategic goals. Exercise of these awards and sales of shares will dilute the interests of existing
security holders and may depress the price of our common stock.
Currently, our Amended and Restated Certificate of Incorporation authorizes the issuance of up to 198.0 million shares of common stock. As of
December 31, 2022, there were approximately 88.0 million shares of common stock outstanding and outstanding awards to purchase 11.0 million shares of
common stock under various incentive stock plans. Additionally, as of December 31, 2022, there were approximately 4.9 million shares of common stock
available for future issuance under our 2018 Equity Incentive Plan, approximately 0.2 million shares of common stock available for issuance under our
Amended and Restated 2013 Employee Stock Purchase Plan, and approximately 0.8 million shares of common stock available for issuance under our 2014
Employment Commencement Incentive Plan.
We may issue additional shares to grant equity awards to our employees, officers, directors and consultants under our 2018 Equity Incentive Plan,
our 2013 Employee Stock Purchase Plan or our 2014 Employment Commencement Incentive Plan. We may also issue additional common stock and
warrants from time to time to finance our operations and in connection with strategic transactions, such as acquisitions and licensing. For example, in
February 2020, we issued and sold 2,522,227 shares of common stock to Roche Finance in connection with the entry into the collaboration agreement with
Roche.
The issuance of additional shares of common stock or warrants to purchase common stock and the perception that such issuances may occur or
exercise of outstanding warrants or stock options may have a dilutive impact on other stockholders and could have a material negative effect on the market
price of our common stock.
Future sales of our common stock in the public market could cause our share price to fall.
Sales of a substantial number of our common stock in the public market, including sales by members of our management or board of directors, or
the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the
sale of additional equity or equity-related securities.
Risks Related to Our Convertible Senior Notes
Servicing our 1.50% notes due 2024 (the “2024 Notes”) and 1.25% notes due 2027 (the “2027 Notes”, and together with the 2024 Notes, the
“Notes”) requires a significant amount of cash, and we may not have sufficient cash flow to pay our debt.
In 2017, we issued $570.0 million aggregate principal amount of Notes, pursuant to that certain indenture, dated as of November 14, 2019,
between us, as issuer, and U.S. Bank National Association, as trustee. In September 2022, we issued $1,150.0 million aggregate principal amount of 2027
Notes, pursuant to that certain indenture dated as of September 16, 2022, between us, as issuer, and U.S. Bank National Association, as trustee, including
$20.0 million of 2027 Notes issued to the Michael A. Chambers Living Trust in a private placement. Our ability to make scheduled payments of the
principal of, to pay interest on, or to refinance our indebtedness, including the Notes, depends on our future performance, which is subject to many factors,
including, economic, financial, competitive and other, beyond our control. We do not expect our business to be able to generate cash flow from operations
in the foreseeable future, sufficient to service our debt and make necessary capital expenditures and we may therefore be required to adopt one or more
alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to
refinance the 2024 Notes, which are non-callable and mature in 2024, and the 2027 Notes, which mature in 2027, will depend on the capital markets and
our financial condition at such times. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could
result in a default on our debt obligations, and limit our flexibility in planning for and reacting to changes in our business.
-64-
We may not have the ability to raise the funds necessary to repurchase the Notes as required upon a fundamental change, and our future debt
may contain limitations on our ability to repurchase the Notes.
Holders of the Notes will have the right to require us to repurchase their Notes for cash upon the occurrence of a fundamental change at a
fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any. A
fundamental change may also constitute an event of default or prepayment under, and result in the acceleration of the maturity of, our then-existing
indebtedness. We cannot assure you that we will have sufficient financial resources, or will be able to arrange financing, to pay the fundamental change
repurchase price in cash with respect to any Notes surrendered by holders for repurchase upon a fundamental change. In addition, restrictions under our
then existing credit facilities or other indebtedness, if any, may not allow us to repurchase the Notes upon a fundamental change. Our failure to repurchase
the Notes upon a fundamental change when required would result in an event of default with respect to the Notes which could, in turn, constitute a default
under the terms of our other indebtedness, if any. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace
periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes.
Capped call transactions entered into in connection with the Notes may impact the value of our common stock.
In connection with the Notes, we entered into capped call transactions (the “Capped Call Transactions”) with certain financial institutions. The
Capped Call Transactions are expected to generally reduce the potential dilution upon conversion of the Notes into shares of our common stock.
In connection with establishing their initial hedges of the Capped Call Transactions, these financial institutions or their respective affiliates may
have entered into various derivative transactions with respect to our common stock and/or purchased our common stock. The financial institutions, or their
respective affiliates, may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or
purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes. This activity may
have an impact on the value of our common stock.
General Risks
Unfavorable global economic conditions could harm our business, financial condition or results of operations.
Our results of operations could be harmed by general conditions in the global economy and in the global financial markets. A severe or
prolonged economic downturn, including the impact of increased interest rates and inflation (such as the recent rise in inflation in the United States), could
result in a variety of risks to our business, including weakened demand for our product candidates and our ability to raise additional capital when needed on
acceptable terms, if at all. A weak or declining economy could strain our manufacturers, possibly resulting in manufacturing disruption, or cause delays in
payments for our services by third-party payors or our future collaborators. Any of the foregoing could harm our business and we cannot anticipate all of
the ways in which the current economic climate and financial market conditions could harm our business.
We may be subject to product liability claims and our insurance may not be adequate to cover damages.
The current and future use of our product candidates by us and our collaborators in clinical trials, expanded access programs, the sale of our
products, or the use of our products under emergency use vehicles may expose us to liability claims inherent to the manufacture, clinical testing, marketing
and sale of medical products. These claims might be made directly by consumers or healthcare providers or indirectly by pharmaceutical companies, our
collaborators or others selling such products. Regardless of merit or eventual outcome, we may experience financial losses in the future due to such product
liability claims. We have obtained commercial general liability insurance coverage for our clinical trials and the sale of commercial products. However, we
may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against all losses. If a successful product liability
claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such
claims and our business operations could be impaired.
If we succeed in obtaining regulatory approval for SRP-9001, sale of this gene therapy product candidate may decrease sales growth, or
reduce sales, of our currently approved products, which could negatively impact our operating results, including through potential inventory write-offs.
Substantial overlap may exist between the addressable patient population for SRP-9001, if approved, and the patient populations eligible for
treatment with our existing commercialized products. SRP-9001, if approved, may be used in combination with our existing approved products or may be
adopted as a separate treatment regimen. Accordingly, SRP-9001 and our other gene therapy product candidates, if approved, may compete with our current
approved products. As a result, successful commercialization of our gene therapy product candidates, such as SRP-9001, may reduce sales of our currently
approved products, potentially resulting in significant accounting charges relating to write-off of inventory if such inventory becomes obsolete or unusable.
-65-
Violation of the General Data Protection Regulation could subject us to significant fines.
The GDPR increases our obligations with respect to clinical trials conducted in the member states of the EEA by expanding the definition of
personal data to include coded data and requiring changes to informed consent practices and more detailed notices for clinical trial subjects and
investigators. In addition, the GDPR increases the scrutiny that clinical trial sites located in the EEA should apply to transfers of personal data from such
sites to countries that are considered to lack an adequate level of data protection, such as the U.S. The GDPR imposes substantial fines for breaches of data
protection requirements, which can be up to four percent of global revenue or 20 million Euros, whichever is greater, and it also confers a private right of
action on data subjects for breaches of data protection requirements. Compliance with these directives will be a rigorous and time-intensive process that
may increase our cost of doing business, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation and reputational
harm in connection with our European activities.
We have expanded, and may continue to expand, our organization and may experience difficulties in managing this growth, which could
disrupt our operations.
To support the expansion of our business activities, we have expanded, and may continue to expand, our full-time employee base, as well as our
consultant and contractor base. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and
devote a substantial amount of time to managing these growth activities. Our ability to manage our growth properly and maintain compliance with all
applicable rules and regulations will require us to continue to improve our operational, legal, financial and management controls, as well as our reporting
systems and procedures. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure,
operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our growth could require
significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. If our
management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could
be reduced, and we may not be able to implement our business strategy.
Our sales and operations are subject to the risks of doing business internationally.
We are increasing our presence in international markets, including emerging markets, subjecting us to many risks that could adversely affect our
business and revenues, such as:
•
•
•
•
•
•
•
•
•
•
•
the inability to obtain necessary foreign regulatory or pricing approvals of products in a timely manner;
uncertainties regarding the collectability of accounts receivable;
fluctuations in foreign currency exchange rates that may adversely impact our revenues, net income and value of certain of our
investments;
difficulties in staffing and managing international operations;
the imposition of governmental controls;
less favorable intellectual property or other applicable laws;
increasingly complex standards for complying with foreign laws and regulations that may differ substantially from country to country and
may conflict with corresponding U.S. laws and regulations;
the far-reaching anti-bribery and anti-corruption legislation in the U.K., including the U.K. Bribery Act 2010, and elsewhere and
escalation of investigations and prosecutions pursuant to such laws;
compliance with complex import and export control laws;
restrictions on direct investments by foreign entities and trade restrictions; and
changes in tax laws and tariffs.
In addition, our international operations are subject to regulation under U.S. law. For example, the Foreign Corrupt Practices Act (“FCPA”)
prohibits U.S. companies and their representatives from paying, offering to pay, promising to pay or authorizing the payment of anything of value to any
foreign government official, government staff member, political party or political candidate for the purpose of obtaining or retaining business or to
otherwise obtain favorable treatment or influence a person working in an official capacity. In many countries, the healthcare professionals we regularly
interact with may meet the FCPA's definition of a foreign government official. Failure to comply with domestic or foreign laws could result in various
adverse consequences, including: possible delay in approval or refusal to approve a product, recalls, seizures or withdrawal of an approved product from
the market, disruption in the supply or availability of our products or suspension of export or import privileges, the imposition of civil or criminal
-66-
sanctions, the prosecution of executives overseeing our international operations and damage to our reputation. Any significant impairment of our ability to
sell products outside of the U.S. could adversely impact our business and financial results.
We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any
cyber security incidents, could harm our ability to operate our business effectively.
In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information
and that of our suppliers, as well as personally identifiable information of the patients using our commercially approved products, clinical trial participants
and employees. Similarly, our third-party providers possess certain of our sensitive data. The secure maintenance of this information is critical to our
operations and business strategy. Our ongoing operating activities also depend on functioning computer systems. Despite our security measures, our
information technology and infrastructure are subject to attacks or breaches. Any such breach could result in a material compromise of our networks, and
the information stored there could be accessed, publicly disclosed, lost, stolen, or rendered, permanently or temporarily, inaccessible. Furthermore, we may
not promptly discover a system intrusion. Attacks could have a material impact on our business, operations or financial results. Any such access, disclosure
or other loss of information, including our data being breached at third party providers, could result in legal claims or proceedings, liability under laws that
protect the privacy of personal information, disrupt our operations and damage our reputation, which could adversely affect our business. We also may need
to pay “ransomware” to re-access our systems.
In addition, privacy and data protection laws may be interpreted and applied differently from country to country and may create inconsistent or
conflicting requirements, which increase the costs incurred by us in complying with such laws. The European Union’s GDPR, which greatly increases the
jurisdictional reach of European Union law and became effective in May 2018, adds a broad array of requirements for handling personal data including the
public disclosure of significant data breaches, and imposes substantial penalties for non-compliance of up to the greater of €20 million or 4% of global
annual revenue for the preceding financial year. Our efforts to comply with GDPR and other privacy and data protection laws imposes significant costs and
challenges that are likely to increase over time, and we are exposed to substantial penalties or litigation related to violations of existing or future data
privacy laws and regulations.
Additionally, the CCPA, which became effective January 1, 2020, substantially expands privacy obligations of many businesses. The CCPA
requires new disclosures to California consumers, imposes new rules for collecting or using information about minors, and affords consumers new abilities,
such as the right to know whether the data is sold or disclosed and to whom, the right to request that a company delete personal information collected, the
right to opt-out of the sale of personal information and the right to non-discrimination in terms of price or service when a consumer exercises a privacy
right. Failure to comply with these regulations is subject to civil sanctions, including fines and penalties. The CCPA provides for civil penalties for
violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Moreover, a newly passed ballot initiative,
the California Privacy Rights Act (“CPRA”), which took effect on January 1, 2023, expands on the CCPA, creating new consumer rights and protections,
including the right to correct personal information, the right to opt out of the use of personal information in automated decision making, the right to opt out
of “sharing” consumer’s personal information for cross-context behavioral advertising, and the right to restrict use of and disclosure of sensitive personal
information, including geolocation data to third parties. We will need to evaluate and potentially update our privacy program to seek to comply with the
CPRA and will incur additional costs and expenses in our effort to comply.
We may incur substantial costs in connection with litigation and other disputes.
In the ordinary course of business we may, and in some cases have, become involved in lawsuits and other disputes such as securities claims,
intellectual property challenges, including interferences declared by the USPTO, and employee matters. It is possible that we may not prevail in claims
made against us in such disputes even after expending significant amounts of money and company resources in defending our positions in such lawsuits
and disputes. The outcome of such lawsuits and disputes is inherently uncertain and may have a negative impact on our business, financial condition and
results of operations.
The increasing use of social media platforms presents new risks and challenges.
Social media is increasingly being used to communicate about our products, technologies and programs, and the diseases our product and product
candidates are designed to treat. Social media practices in the biopharmaceutical industry continue to evolve and regulations relating to such use are not
always clear. This evolution creates uncertainty and risk of noncompliance with regulations applicable to our business. For example, patients may use social
media channels to comment on the effectiveness of a product or to report an alleged adverse event. When such disclosures occur, there is a risk that we fail
to monitor and comply with applicable adverse event reporting obligations or we may not be able to defend ourselves or the public's legitimate interests in
the face of the political and market pressures generated by social media due to restrictions on what we may say about our product and/or product
-67-
candidates. There is also a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or comments about us on any social
networking website. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face overly
restrictive regulatory actions or incur other harm to our business.
We or the third parties upon whom we depend may be adversely affected by natural disasters and/or terrorism attacks, and our business
continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial
condition and prospects. If a natural disaster, power outage, terrorism attack or other event occurred that prevented us from using all or a significant portion
of our office, manufacturing and/or lab spaces, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract
manufacturers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial
period of time.
The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We
may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse
effect on our business.
Item 1B. Unresolved Staff Comments.
None.
-68-
Item 2. Properties.
A description of the facilities we own and/or occupy is included in the following table. We believe that our current facilities in Cambridge,
Andover and Burlington, Massachusetts, Dublin and Columbus, Ohio and Durham, North Carolina are suitable and will provide sufficient capacity to meet
the projected needs of our business for the next 12 months. Except as noted below, all of our properties are currently being used in the operation of our
business.
Location of Property
215 First Street, Cambridge, MA
100 Federal Street, Andover, MA
300 Federal Street, Andover, MA
55 Network Drive, Burlington, MA
5200 Blazer Parkway, Dublin, OH 3rd
Floor
3435 Stelzer Road, Columbus, OH
701 West Main Street, Suite 102, Durham,
NC
Item 3. Legal Proceedings.
Square
Footage
Lease Expiration
Date
Purpose
149,589
65,589
23,102
44,740
22,600
September 2025
Laboratory and office space
N/A- facility is owned Laboratory and office space
December 2024
December 2024
December 2023
Office space
Laboratory and office space
Laboratory and office space
Other Information
Corporate headquarters
Primarily laboratory space
Office space
Primarily laboratory space
Primarily laboratory space
131,926
December 2036
4,346 March 2024
Laboratory and office space
Laboratory and office space
Primarily laboratory space
Primarily laboratory space
For material legal proceedings, please read Note 21, Commitments and Contingencies - Litigation to our consolidated financial statements
included in this Annual Report.
Item 4. Mine Safety Disclosures.
Not applicable.
-69-
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is quoted on the Nasdaq Global Select Market under the same symbol “SRPT”.
PART II
Holders
As of February 23, 2023, we had 161 stockholders of record of our common stock.
Dividends
We did not declare or pay cash dividends on our common stock in 2022, 2021 or 2020. We currently expect to retain future earnings, if any, to
finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination
related to our dividend policy will be made at the discretion of our board of directors.
Performance Graph
The following graph compares the performance of our Common Stock for the periods indicated with the performance of the NASDAQ
Composite Index, NASDAQ Biotechnology Index and the NYSE ARCA Biotechnology Index. This graph assumes an investment of $100 after the market
closed December 29, 2017 in each of our common stock, the NASDAQ Composite Index, NASDAQ Biotechnology Index and the NYSE ARCA
Biotechnology Index, and assumes reinvestment of dividends, if any. The stock price performance shown on the graph below is not necessarily indicative of
future stock price performance. This graph is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into
any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date
hereof and irrespective of any general incorporation language in any such filing.
Recent Sales of Unregistered Securities.
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
None.
Item 6. Reserved
-70-
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The purpose of Management's Discussion and Analysis of Financial Condition and Results of Operations is to provide an understanding of the
financial condition, changes in financial condition and results of operations of Sarepta Therapeutics, Inc. The following discussion and analysis of our
financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere
in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Please review our legend
titled “Forward-Looking Information” at the beginning of this Annual Report on Form 10-K which is incorporated herein by reference. Our actual results
could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified
below, and those discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K. Throughout this discussion, unless
the context specifies or implies otherwise, the terms “Sarepta”, “we”, “us” and “our” refer to Sarepta Therapeutics, Inc. and its subsidiaries.
This section discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year
comparisons between 2021 and 2020 have been excluded from this Form 10-K and can be found in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Overview
We are 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 our proprietary, highly-
differentiated and innovative technologies, and through collaborations with our strategic partners, we have developed multiple approved products for the
treatment of Duchenne and are developing potential therapeutic candidates for a broad range of diseases and disorders, including Duchenne, LGMDs, and
other CNS related disorders.
We commercialized three products, all of which were granted accelerated approval by the FDA:
•
•
•
EXONDYS 51 (eteplirsen) Injection (“EXONDYS 51”) is indicated for the treatment of Duchenne in patients who have a confirmed
mutation of the dystrophin gene that is amenable to exon 51 skipping. EXONDYS 51 uses our PMO chemistry and exon-skipping
technology to skip exon 51 of the dystrophin gene.
VYONDYS 53 (golodirsen) Injection (“VYONDYS 53”) is indicated for the treatment of Duchenne in patients who have a confirmed
mutation of the dystrophin gene that is amenable to exon 53 skipping. VYONDYS 53 uses our PMO chemistry and exon-skipping
technology to skip exon 53 of the dystrophin gene.
AMONDYS 45 (casimersen) Injection (“AMONDYS 45”) is indicated for the treatment of Duchenne in patients who have a confirmed
mutation of the dystrophin gene that is amenable to exon 45 skipping. AMONDYS 45 uses our PMO chemistry and exon-skipping
technology to skip exon 45 of the dystrophin gene.
We are in the process of conducting various EXONDYS 51, VYONDYS 53 and AMONDYS 45 clinical trials, including studies that are required
to comply with our post-marketing FDA requirements/commitments to verify and describe the clinical benefit of these products.
A summary description of our key product candidates, including those in collaboration with our strategic partners, is as follows:
•
•
SRP-5051 uses our next-generation chemistry platform, cell-penetrating peptide-conjugated PPMO, and our exon-skipping technology to
skip exon 51 of the dystrophin gene. SRP-5051, a peptide conjugated PMO, is designed to bind to exon 51 of dystrophin pre-mRNA,
resulting in exclusion of this exon during mRNA processing in patients with genetic mutations that are amenable to exon 51 skipping.
Exon skipping is intended to promote the production of an internally truncated but functional dystrophin protein. In the fourth quarter of
2017, we commenced a first-in-human, single ascending dose, study for the treatment of Duchenne in patients who are amenable to exon
51 skipping. In 2019, we commenced Study 5051-201. In December 2020, we announced an interim analysis on clinical results from the
10 mg/kg and 20 mg/kg dose cohorts of Part A of Study 5051-201. In May 2021, we announced results from the 30 mg/kg cohort of Part
A of Study 5051-201. We initiated Part B of Study 5051-201 in the fourth quarter of 2021. In July 2022, the FDA placed Study 5051-201
on clinical hold following a serious adverse event of hypomagnesemia. The clinical hold was lifted in August 2022. We are currently
enrolling Part B of Study 5051-201.
SRP-9001 (Duchenne gene therapy program) aims to express a smaller but still functional version of dystrophin. A unique, engineered
dystrophin is used because naturally-occurring dystrophin is too large to fit in an adeno-associated virus (“AAV”) vector. In the fourth
quarter of 2017, an investigational new drug (“IND”) application for SRP-9001 was cleared by the FDA, and a Phase 1/2a clinical trial in
individuals with Duchenne was initiated (Study 101). In October 2018, Nationwide Children’s Hospital (“Nationwide”) presented results
from the Phase 1/2a clinical trial in
-71-
four individuals with Duchenne enrolled in the trial. In March 2019, we presented nine-month functional and creatine kinase (“CK”) data
from baseline from these four individuals, and twelve-month CK data from baseline from one of these individuals. In June 2020, we
announced that functional, safety and tolerability data at twelve-months from baseline from these four individuals had been published in
JAMA Neurology. In September 2020, we presented functional, safety and tolerability data at 24 months from these four individuals. In
the fourth quarter of 2018, we commenced a randomized, double-blind, placebo-controlled trial of SRP-9001 with the goal to establish the
functional benefits of SRP-9001 protein expression (Study 102). In January 2021, we released top-line results for Part 1 of Study 102 (the
48-week assessment of 41 participants) and interim expression results from Part 2 of Study 102 (the crossover phase). We announced
topline results for Part 2 of Study 102 in January 2022. We have completed 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. In October 2021, we announced functional data from the
first 11 patients and tolerability data for all 32 patients enrolled in Study 103. We also initiated our pivotal trial (Study 301) in October
2021 and expect a data read out in the fourth quarter of 2023. In July 2022, we announced additional data from our Studies 102 and 103.
In September 2022, we announced that we submitted a biologics license application (“BLA”) seeking accelerated approval of SRP-9001
for the treatment of ambulant individuals with Duchenne. In November 2022, the FDA accepted for filing and granted priority review for
the BLA for SRP-9001 with an anticipated regulatory action date of May 29, 2023.
SRP-9003 (LGMD, gene therapy program). We are developing gene therapy programs for various forms of LGMDs. The most advanced
of our LGMD product candidates, SRP-9003, is designed to transfer a gene that codes for and restores beta-sarcoglycan protein with the
goal of restoring the dystrophin associated protein complex. It utilizes the AAVrh.74 vector system, the same vector used in our SRP-9001
gene therapy program. A Phase 1/2a trial of SRP-9003 was commenced in the fourth quarter of 2018. In February 2019, we announced
positive two-month biopsy data from the first three-patient low-dose cohort dosed in the SRP-9003 trial, and in October 2019, we
announced positive nine-month functional data from these three patients. We have dosed one additional cohort of three patients at a higher
dose per the study protocol. In June 2020, we announced safety and expression results from three clinical trial participants in the high-
dose cohort measured at 60 days, and one-year functional data from three clinical trial participants in the low-dose cohort. 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. In March 2022, we announced 36-month functional data from three clinical trial participants in the low-dose cohort
and 24-month functional data from two clinical trial participants in the high-dose cohort. We expect to engage with the FDA to discuss our
next steps for our potentially pivotal trial in 2023.
•
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.
We have developed proprietary state-of-the-art CMC and manufacturing capabilities that allow synthesis and purification of our products and
product candidates to support both clinical development as well as commercialization. Our current main focus in manufacturing is to sustain large-scale
production of our PMO-based therapies and optimizing manufacturing for PPMO and gene therapy-based product candidates. We have entered into certain
manufacturing and supply arrangements with third-party suppliers and will utilize these capabilities to support production of certain of our products and
product candidates and their components. In 2017, we opened a facility in Andover, Massachusetts, which significantly enhanced our research and
development manufacturing capabilities. However, we currently do not have internal large scale GMP manufacturing capabilities to produce our products
and product candidates for commercial and/or clinical use.
The likelihood of our long-term success must be considered in light of the expenses, difficulties and delays frequently encountered in the
development and commercialization of new pharmaceutical products, competitive factors in the marketplace and the complex regulatory environment in
which we operate. We may never achieve significant revenue or profitable operations.
COVID-19 Pandemic
Despite careful tracking and planning, we are unable to accurately predict the extent of the impact of the COVID-19 pandemic on our business,
results of operations and financial condition due to the uncertainty of future developments. The full extent to which the COVID-19 pandemic will directly
or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be
accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic
impact on local, regional, national and international markets. For additional information on the various risks posed by the COVID-19 pandemic, refer to
Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K.
-72-
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements included
elsewhere in this Annual Report on Form 10-K. The preparation of our consolidated financial statements in accordance with accounting principles
generally accepted in the U.S. requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities for the periods presented. Some of these judgments can be subjective and complex, and, consequently,
actual results may differ from these estimates. We believe that the estimates and judgments upon which we rely are reasonable based upon historical
experience and information available to us at the time that we make these estimates and judgments. To the extent there are material differences between
these estimates and actual results, our consolidated financial statements will be affected. Although we believe that our judgments and estimates are
appropriate, actual results may differ from these estimates. We believe the following accounting policies to be most critical to the judgments and estimates
used in the preparation of our consolidated financial statements:
•
•
•
inventory;
income tax; and
stock-based compensation.
Inventory Valuation
Inventories are stated at the lower of cost and net realizable value with cost determined on a first-in, first-out basis. We capitalize inventory costs
associated with products following regulatory approval when future commercialization is considered probable and the future economic benefit is expected
to be realized. EXONDYS 51, VYONDYS 53 and AMONDYS 45 inventory that may be used in clinical development programs is charged to research and
development expense when the product enters the research and development process and no longer can be used for commercial purposes.
We periodically analyze our inventories for excess amounts or obsolescence and write down obsolete or otherwise unmarketable inventory to its
estimated net realizable value based on assumptions about expected future demand and market conditions. Additionally, though our products are subject to
strict quality control and monitoring, which we perform throughout the manufacturing processes, certain batches or units of product may not meet quality
specifications. Expense incurred related to excess inventory, obsolete inventory, or inventories that do not meet our quality specifications are recorded as a
component of cost of sales in the consolidated statements of operations.
Income Tax
We recognize the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination. The
calculation of our tax liabilities (or amount of reduction in our deferred tax assets from net operating loss carryover and research credit carryover) resulting
from uncertain tax positions can involve significant judgment. Further, the calculation may involve the application of complex tax regulations in a foreign
jurisdiction. Any significant impact as a result of changes in underlying facts, law, tax rates, tax audit, or review could lead to adjustments to our deferred
tax asset, income tax expense, our effective tax rate, and/or our cash flow. Although we believe that we have adequately provided for tax liabilities resulting
from uncertain tax positions, the actual amounts paid, if any, could have a material impact on our results of operations. Interest and penalties associated
with uncertain tax positions are classified as a component of income tax expense.
Stock-Based Compensation for Awards with Market Conditions
We use the fair value method to determine stock-based compensation expense. The fair value for stock-based awards with market conditions is
based on a lattice model with Monte Carlo simulations. The lattice model requires the use of subjective assumptions which include the award’s expected
term and the price volatility of the underlying stock. The assumptions used in calculating the fair value of stock-based compensation expense for awards
with market conditions represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management
judgment. As a result, the use of different assumptions could result in materially different stock-based compensation expense.
Please read Note 2, Summary of Significant Accounting Policies to the consolidated financial statements included elsewhere in this Annual
Report on Form 10-K for a further discussion of our critical accounting policies and estimates.
-73-
The following table sets forth selected consolidated statements of operations data for each of the periods indicated:
For the Year Ended December 31,
2022
2021
(in thousands, except per
share amounts)
Change
Change
$
%
$
$
843,769
89,244
933,013
$
612,401
89,486
701,887
231,368
(242 )
231,126
38 %
(— )%
33 %
139,989
877,090
451,421
—
714
1,469,214
(536,201 )
(125,441 )
6,700
—
(35,021 )
(153,762 )
97,049
771,182
282,660
10,000
706
1,161,597
(459,710 )
—
7,200
102,000
(68,438 )
40,762
42,940
105,908
168,761
(10,000 )
8
307,617
(76,491 )
(125,441 )
(500 )
(102,000 )
33,417
(194,524 )
(689,963 )
13,525
(703,488 )
$
(418,948 )
(168 )
(418,780 )
$
(271,015 )
13,693
(284,708 )
44 %
14 %
60 %
(100 )%
1 %
26 %
17 %
NM*
(7 )%
(100 )%
(49 )%
NM*
65 %
NM*
68 %
(8.03 )
$
(5.15 )
$
(2.88 )
56 %
$
$
Revenues:
Products, net
Collaboration and other
Total revenues
Cost and expenses:
Cost of sales (excluding amortization of in-licensed rights)
Research and development
Selling, general and administrative
Settlement and license charges
Amortization of in-licensed rights
Total cost and expenses
Operating loss
Other (loss) income, net:
Loss on debt extinguishment
Gain on contingent consideration, net
Gain from sale of Priority Review Voucher
Other expense, net
Total other (loss) income, net
Loss before income tax expense (benefit)
Income tax expense (benefit)
Net loss
Net loss per share — basic and diluted
* NM: not meaningful
Revenues
The following table summarizes the components of our net product revenues, by product, for the periods indicated:
EXONDYS 51
AMONDYS 45
VYONDYS 53
Products, net
For the Year Ended December 31,
2022
2021
$
$
(in thousands)
511,749
214,582
117,438
843,769
$
$
454,361
68,529
89,511
612,401
$
$
Change
Change
$
57,388
146,053
27,927
231,368
%
13 %
213 %
31 %
38 %
Net product revenues for our products for 2022 increased by $231.4 million compared with 2021. The increase primarily reflects increasing
demand for our products in the U.S. and a full period of AMONDYS 45 sales in 2022, given its commercial launch in February 2021.
-74-
Collaboration and other revenues primarily relate to our collaboration arrangement with Roche. For the years ended December 31, 2022 and
December 31, 2021, we recognized $89.2 million and $89.5 million of collaboration and other revenues, respectively. For more information, please read
Note 3, License and Collaboration Agreements.
Cost of sales (excluding amortization of in-licensed rights)
Our cost of sales (excluding amortization of in-licensed rights) consists of royalty payments primarily to BioMarin and UWA and inventory costs
that relate to sales of our products and the related overhead costs. 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 2021, 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 product. For AMONDYS 45 sold in 2022 and
EXONDYS 51 and VYONDYS 53 sold in 2021, 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 FDA approval, the
incremental inventory costs related to our products sold in 2022 and 2021 would have been approximately $12.3 million and $22.0 million, respectively.
The following table summarizes the components of our cost of sales for the periods indicated:
Inventory costs related to products sold
Royalty payments
Total cost of sales
$
$
(in thousands)
95,765
44,224
139,989
$
$
Change
Change
$
%
56,720
40,329
97,049
$
$
39,045
3,895
42,940
69 %
10 %
44 %
For the Year Ended December 31,
2022
2021
The cost of sales (excluding amortization of in-licensed rights) for 2022 increased $42.9 million, or 44%, compared with 2021. The change
primarily reflects increasing demand for our products and an increase in write-offs of certain batches of our products not meeting our quality specifications
for the year ended December 31, 2022, as compared to the same period of 2021.
Research and development expenses
Research and development expenses consist of costs associated with research activities as well as costs associated with our product development
efforts, conducting pre-clinical trials, clinical trials and manufacturing activities. Direct research and development expenses associated with our programs
include clinical trial site costs, clinical manufacturing costs, costs incurred for consultants, up-front fees and milestones paid to third parties in connection
with technologies that have not reached technological feasibility and do not have an alternative future use, and other external services, such as data
management and statistical analysis support, and materials and supplies used in support of clinical programs. Indirect costs of our clinical programs include
salaries, stock-based compensation and allocation of our facility- and technology-related costs.
Research and development expenses represent a substantial percentage of our total operating expenses. We do not maintain or evaluate and,
therefore, do not allocate internal research and development costs on a project-by-project basis. 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.
-75-
The following table summarizes our research and development expenses by project for each of the periods indicated:
$
SRP-9001
Other gene therapies
PPMO platform
Eteplirsen (exon 51)
Up-front, milestone, and other expenses
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 Year Ended December 31,
2022
2021
(in thousands)
424,210
81,783
50,026
46,100
35,102
31,850
14,707
4,242
12,321
294,021
(117,272 )
877,090
$
$
320,214
102,036
35,652
36,464
40,267
34,443
28,898
12,425
17,302
233,704
(90,223 )
771,182
$
$
Change
$
103,996
(20,253 )
14,374
9,636
(5,165 )
(2,593 )
(14,191 )
(8,183 )
(4,981 )
60,317
(27,049 )
105,908
%
32 %
(20 )%
40 %
26 %
(13 )%
(8 )%
(49 )%
(66 )%
(29 )%
26 %
30 %
14 %
Change
The following table summarizes our research and development expenses by category for each of the periods indicated:
$
Manufacturing expenses
Compensation and other personnel expenses
Clinical trial expenses
Facility- and technology-related expenses
Stock-based compensation
Up-front, milestone, and other expenses
Professional services
Pre-clinical expenses
Collaboration cost-sharing
Research and other
Roche collaboration reimbursement
Total research and development expenses
$
For the Year Ended December 31,
2022
2021
(in thousands)
Change
Change
$
%
445,758
148,385
135,838
85,093
61,293
35,102
19,264
8,704
4,242
50,683
(117,272 )
877,090
$
$
384,700
115,394
104,732
70,597
50,526
40,267
13,900
21,410
12,425
47,454
(90,223 )
771,182
$
$
61,058
32,991
31,106
14,496
10,767
(5,165 )
5,364
(12,706 )
(8,183 )
3,229
(27,049 )
105,908
16 %
29 %
30 %
21 %
21 %
(13 )%
39 %
(59 )%
(66 )%
7 %
30 %
14 %
Research and development expenses for 2022 increased by $105.9 million, or 14%, compared with 2021. The increase was primarily driven by
the following:
•
•
•
•
•
•
$61.1 million increase in manufacturing expenses incurred related to the gene therapy manufacturing and supply agreement with Thermo,
including charges of $54.0 million related to recognition of minimum purchase requirements, and a continuing ramp-up of SRP-9001
manufacturing;
$33.0 million increase in compensation and other personnel expenses primarily due to changes in headcount;
$31.1 million increase in clinical trial expenses primarily due to a continuing ramp-up of our SRP-9001 gene therapy programs including
our EMBARK program;
$14.5 million increase in facility- and technology-related expenses primarily due to our continuing expansion efforts;
$10.8 million increase in stock-based compensation expense primarily due to changes in headcount and the value of stock awards;
$5.2 million decrease in up-front, milestone and other expenses, primarily due to a $28.7 million increase of an accrued sublicense fee to
Nationwide and $11.6 million of expense incurred as a result of up-front and milestone payments related to certain research and license
agreements during 2021. This was offset primarily by $26.1 million of up-front payments as a result of the execution of certain research
and license agreements, $4.5 million of expense incurred as a result of milestone achievements in certain research and license agreements
and $4.5 million of option and termination expenses during 2022;
-76-
•
•
•
•
•
$5.4 million increase in professional service expenses primarily due to an increase in reliance on third-party research and development
contractors;
$12.7 million decrease in pre-clinical expenses primarily due to a decrease in toxicology study activity in our PPMO platforms;
$8.2 million decrease in collaboration cost-sharing expenses primarily due to the termination of the Lysogene S.A. license and
collaboration agreement and timing of expense incurred related to Genethon's micro-dystrophin drug candidate;
$3.2 million increase in research and other expenses primarily driven by increases in lab-related expenses, partially offset by a decrease in
sponsored research with academic institutions during 2022; and
$27.0 million increase in the offset to expense associated with a collaboration reimbursement from Roche primarily due to continuing
development of our SRP-9001 gene therapy programs.
Selling, general and administrative expenses
Selling, general and administrative expenses consist of salaries, benefits, stock-based compensation and related costs for personnel in our
executive, finance, legal, information technology, business development, human resources, commercial and other general and administrative functions.
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 table summarizes our selling, general and administrative expenses by category for each of the periods indicated:
Stock-based compensation
Compensation and other personnel expenses
Professional services
Facility- and technology-related expenses
Other
Roche collaboration reimbursement
Total selling, general and administrative expenses
For the Year Ended December 31,
2022
2021
$
$
(in thousands)
171,725
122,127
97,330
33,156
27,618
(535 )
451,421
$
$
63,417
103,528
73,605
31,113
11,251
(254 )
282,660
$
$
Change
Change
$
108,308
18,599
23,725
2,043
16,367
(281 )
168,761
%
171 %
18 %
32 %
7 %
145 %
111 %
60 %
Selling, general and administrative expenses for 2022 increased by $168.8 million, or 60%, compared with 2021. This was primarily driven by
the following:
•
•
•
•
•
$108.3 million increase in stock-based compensation expense primarily due to the Chief Executive Officer grant modification executed
during 2022;
$18.6 million increase in compensation and other personnel expenses primarily due to changes in headcount;
$23.7 million increase in professional service expenses primarily due to an increase in reliance on third-party selling, general and
administrative contractors;
$2.0 million increase in facility- and technology-related expenses primarily due to our continuing expansion efforts; and
$16.4 million increase in other expenses primarily related to charitable contributions made during 2022.
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 in the U.S. This was a result of a settlement and license agreement with BioMarin executed in July 2017. This amount, which
was expensed to operations as incurred, is separately presented as settlement and license charges in the Company's consolidated statements of operations
and comprehensive loss for the year ended December 31, 2021. There was no such expense recognized during the same period of 2022.
-77-
Amortization of in-licensed rights
Amortization of in-licensed rights relates to the agreements we entered into with BioMarin and UWA in July 2017 and April 2013, respectively.
Each in-licensed right is being amortized on a straight-line basis over the remaining life of the patent from the first commercial sale of each product. For
both the years ended December 31, 2022 and 2021, we recorded amortization of in-licensed rights of approximately $0.7 million.
Loss on debt extinguishment
On September 14, 2022, the Company entered into separate, privately negotiated transactions to repurchase a portion of the outstanding senior
convertible notes due on November 15, 2024 (the “2024 Notes”) (see Note 13, Indebtedness). The holders exchanged $150.6 million in aggregate principal
value of 2024 Notes held by them plus accrued interest of $0.8 million for an aggregate payment of $248.6 million. The Company accounted for the
repurchase of the 2024 Notes as a debt extinguishment by recognizing the difference between the repurchase price of the debt and the net carrying amount
of the extinguished debt as loss on debt extinguishment. The loss incurred on the extinguishment was $98.5 million.
On September 16, 2022, the Company repaid in full all of its amounts outstanding with respect to the December 13, 2019, term loan with
Biopharma Credit PLC and Biopharma Credit Investments V (Master) LP (the "December 2019 Term Loan") and repaid in full all obligations to the lenders
(see Note 13, Indebtedness). The aggregate payoff amount was approximately $585.5 million, which included $550.0 million of principal amounts,
additional loan consideration and premiums of $25.4 million, and accrued interest of $10.1 million through the repayment date. The loss incurred on the
extinguishment was $26.9 million and represents the difference between the aggregate payoff amount and the net carrying amount of the December 2019
Term Loan.
Gain on contingent consideration, net
The gain on contingent consideration, net, relates to the fair value adjustment of the Company’s contingent consideration derivative liability
related to regulatory-related contingent payments to Myonexus selling shareholders as well as to two academic institutions under separate license
agreements that meet the definition of a derivative. For the years ended December 31, 2022 and 2021, we recognized net gains of $6.7 million and $7.2
million, respectively, to adjust the fair value of the contingent consideration liabilities. For further information on our contingent considerations, please read
Note 5, Fair Value Measurements.
Gain from sale of Priority Review Voucher
In February 2021, we entered into an agreement to sell the PRV we received from the FDA in connection with the approval of AMONDYS 45
(the "AMONDYS 45 PRV"). 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 AMONDYS 45 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.
Other expense, net
Other expense, net primarily consists of interest expense on our debt facilities, interest income on our cash, cash equivalents and investments,
amortization of investment premium or accretion of investment discount, and unrealized gain or loss from our investment in our strategic investments.
Interest expense includes interest accrued on our convertible notes and term loan. Our cash equivalents and investments consist of money market funds,
corporate bonds, commercial paper, government and government agency debt securities and certificates of deposit.
Other expense, net for 2022 decreased by approximately $33.4 million compared with 2021. The decreases are primarily due to a $16.1 million
increase in interest income and $11.1 million increase in accretion of investment discount due to the investment mix of our investment portfolio, as well as
a $10.3 million reduction of interest expense incurred as a result of the repayment of our December 2019 Term Loan, partially offset by an increase of $4.9
million in losses on disposal of assets.
Income tax expense (benefit)
Income tax expense for 2022 was approximately $13.5 million and income tax benefit for 2021 was $0.2 million. Income tax expense (benefit)
for all periods presented relates to state and foreign income taxes.
Liquidity and Capital Resources
On September 16, 2022, we issued $1,150.0 million aggregate principal amount of convertible senior notes due on September 15, 2027 (the
“2027 Notes”). The 2027 Notes are senior unsecured obligations of the Company and bear interest at a rate of 1.25% per annum, payable semi-annually in
cash on each March 15 and September 15, commencing on March 15, 2023. The net proceeds were $1,126.7 million after deducting the discounts and
offering expenses of $23.3 million. The debt discount is amortized under the effective interest method and recorded as interest expense over the life of the
2027 Notes.
-78-
We used the net proceeds from the 2027 Notes offering as follows:
•
•
•
approximately $585.5 million to repay borrowings, to pay accrued and unpaid interest and prepayment fees, and terminate the December
2019 Term Loan;
approximately $248.6 million to repurchase a portion of the 2024 Notes, inclusive of any applicable premium and accrued interest; and
approximately $127.3 million to pay the cost of new capped call transactions related to the 2027 Notes.
We intend to use the remaining net proceeds to fund general corporate purposes.
Refer to Note 13, Indebtedness and Note 19, Leases for additional discussion of our outstanding indebtedness and material changes to our leasing
obligations, respectively.
The following table summarizes our financial condition for each of the periods indicated:
Financial assets:
Cash and cash equivalents
Short-term investments
Restricted cash and investments
Total cash, cash equivalents and
investments
Borrowings:
Convertible debt
Term loan
Total borrowings
Working capital
Current assets
Current liabilities
Total working capital
* NM: not meaningful
For the Year Ended December 31,
2022
2021
(in thousands)
Change
$
Change
%
$
$
966,777
1,022,597
19,024
$
2,115,869
—
9,904
(1,149,092 )
1,022,597
9,120
$
2,008,398
$
2,125,773
$
(117,375 )
$
$
$
$
1,544,292
—
1,544,292
2,557,861
619,604
1,938,257
$
$
$
$
563,673
533,203
1,096,876
2,604,099
452,733
2,151,366
$
$
$
$
980,619
(533,203 )
447,416
(46,238 )
166,871
(213,109 )
(54 )%
NM*
92 %
(6 )%
174 %
(100 )%
41 %
(2 )%
37 %
(10 )%
For the year ended December 31, 2022, our principal sources of liquidity were primarily derived from sales of our products, net proceeds from
our 2027 Notes offering, and our collaboration arrangement with Roche. For the year ended December 31, 2021, our principal sources of liquidity were
primarily derived from sales of our products, our collaboration arrangement with Roche, net proceeds from sale of the AMONDYS 45 PRV and net
proceeds from our common stock offering in October 2021. Our principal uses of cash are research and development expenses, selling, general and
administrative expenses, investments, capital expenditures, business development transactions, repayment of our term loan and a portion of our convertible
debt and other working capital requirements. The changes in our working capital primarily reflect use of cash in operating activities. While our contractual
obligations, commitments and debt service requirements over the next several years are significant, we intend to continue to fund our short-term financing
needs and working capital requirements from cash flows of operating activities as well as cash on hand, and such sources are anticipated to be adequate to
fund working capital requirements for at least twelve months from the date these consolidated financial statements were issued.
Beyond 2023, our cash requirements will depend extensively on our ability to advance our research, development and commercialization of
programs. We expect to seek additional financings primarily from, but not limited to, the sale and issuance of equity and debt securities, the licensing or
sale of our technologies, additional government contracts and/or funded research and development agreements. Our future expenditures and long-term
capital requirements may be substantial and will depend on many factors, including but not limited to the following:
•
•
•
our ability to continue to generate revenues from sales of EXONDYS 51, VYONDYS 53, AMONDYS 45 and potential future products;
the timing and costs associated with our expansion efforts;
the timing and costs of building out our manufacturing capabilities;
-79-
•
•
•
•
•
•
the timing of advanced payments related to our future inventory commitments and manufacturing obligations;
the timing and costs associated with our existing lease obligations and new obligations expected to be entered into during the following
year;
the timing and costs associated with our clinical trials and pre-clinical trials;
the attainment of milestones and our obligations to make milestone payments to Myonexus's selling shareholders, BioMarin, Nationwide,
UWA and other institutions;
obligations to holders of our convertible notes; and
the costs of filing, prosecuting, defending and enforcing patent claims and our other intellectual property rights.
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. If we are unable to obtain additional financing when and if we require, this would have a material adverse effect on our business and
results of operations. To the extent we issue additional equity securities, our existing stockholders could experience substantial dilution.
We have entered into long-term contractual arrangements from time to time for our facilities, the provision of goods and services, and issuance of
debt securities, among others. As of December 31, 2022, total obligations under debt, lease, and manufacturing arrangements were $1,653.8 million, $62.9
million, and $1,385.8 million, respectively, with $20.6 million, $14.6 million and $649.6 million due in less than one year, and approximately $1,633.2
million, $48.3 million and $736.1 million due in greater than one year. Interest payments are included within the future debt obligations stated in the
previous sentence. Lease obligations only include real estate leases that had commenced prior to December 31, 2022. The leases embedded in certain
supply agreements are included in manufacturing obligations. Additional information regarding our obligations under debt, lease, and manufacturing
arrangements is provided in Note 13, Indebtedness, Note 19, Leases and Note 21, Commitments and Contingencies, respectively, to the consolidated
financial statements.
For products and product candidates that are currently in various research and development stages, we may be obligated to make up to $3.2
billion of future development, regulatory, up-front royalty and sales milestone payments associated with our collaboration and license agreements.
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 December 31, 2022, such contingencies have not been
recorded in our 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 commercial milestones.
Cash Flows
The following table summarizes our cash flow activity for each of the periods indicated:
Cash (used in) provided by
Operating activities
Investing activities
Financing activities
(Decrease) increase in cash and cash equivalents
* NM: not meaningful
Operating Activities
For the Year Ended December 31,
2022
2021
(in thousands)
Change
$
Change
%
$
$
(325,346 )
(1,046,883 )
232,507
(1,139,722 )
$
$
(443,172 )
495,413
561,569
613,810
$
$
117,826
(1,542,296 )
(329,062 )
(1,753,532 )
(27 )%
NM*
(59 )%
NM*
Cash used in operating activities, which consists of our net loss adjusted for non-cash items and changes in net operating assets and liabilities,
totaled $325.3 million in 2022. Operating activities used $443.2 million of cash in 2021. Cash used in operating activities in 2022 was primarily driven by
the net loss of $703.5 million, adjusted for following:
•
•
•
•
$233.0 million in stock-based compensation expense;
$125.4 million in loss on debt extinguishment of the 2024 Notes and 2019 Term Loan;
$41.9 million in depreciation and amortization expense; and
$33.6 million in other non-cash items.
-80-
These amounts were partially offset by the gain on contingent consideration of $6.7 million and $9.6 million in other non-cash items.
The net cash outflow from changes in our operating assets and liabilities was primarily driven by the following:
•
•
•
$89.2 million decrease in deferred revenue related to the collaboration with Roche;
$61.6 million increase in accounts receivable due to an increase in demand for our products; and
$50.8 million increase in inventory due to our continuing build-up of inventory purchased in 2022 as the demand for our products
increased.
These amounts were partially offset by the following:
•
•
$147.6 million increase in accounts payable, accrued expenses, lease liabilities and other liabilities due to the timing and invoicing of
payments; and
$14.6 million decrease in other assets primarily due to the release of manufacturing deposits and amortization of prepaids primarily
related to SRP-9001 batch production.
Cash used in operating activities in 2021 was primarily driven by the net loss of $418.8 million, adjusted for:
•
•
•
$113.9 million in stock-based compensation expense;
$38.0 million in depreciation and amortization expense; and
$31.0 million in other non-cash items.
These amounts were partially offset by the gain of $102.0 million recorded from the sale of the AMONDYS 45 PRV and the gain on contingent
consideration of $7.2 million.
The net cash outflow from changes in our operating assets and liabilities was primarily driven by the following:
•
•
•
$89.2 million decrease in deferred revenue related to the collaboration with Roche;
$83.8 million increase in inventory due to our continuing build-up of inventory purchased in 2021 as the demand for our products
increased; and
$51.7 million increase in accounts receivable due to the launch of AMONDYS 45 in 2021 and an increase in demand for our products.
These amounts were partially offset by the following:
•
•
$103.2 million decrease in other assets primarily due to lower manufacturing-related deposits as a result of the accelerated amortization of
nonrefundable advance payments due to capacity changes associated with the execution of the Third Amendment to our manufacturing
and supply agreement with Thermo; and
$23.3 million increase in accounts payable, accrued expenses, lease liabilities and other liabilities due to the timing and invoicing of
payments.
Investing Activities
Cash used in investing activities was $1,046.9 million in 2022 compared to $495.4 million of cash provided by investing activities in 2021. Cash
used in investing activities in 2022 primarily consisted of the following:
•
•
$1,936.9 million of purchases of available-for-sale securities; and
$30.8 million of purchases of property and equipment due to the continued build-out of our facilities.
These amounts were partially offset by $923.2 million of maturity and sales of available-for-sale securities.
Cash provided by investing activities in 2021 primarily consisted of the following:
•
•
$466.0 million of maturity and sales of available-for-sale securities; and
$102.0 million of net proceeds related to the sale of the AMONDYS 45 PRV.
These amounts were partially offset by the following:
•
•
$38.5 million of purchases of property and equipment due to the continued build-out of our facilities; and
$30.0 million of purchases of available-for-sale securities.
Financing Activities
-81-
Cash provided by financing activities was $232.5 million in 2022 compared to $561.6 million in 2021. Cash provided by financing activities in
2022 consisted primarily of the following:
•
•
•
$1,127.4 million in proceeds from the 2027 Notes offering, net of commissions;
$30.0 million in proceeds from exercise of options and purchase of stock under our Employee Stock Purchase Program; and
$26.3 million in partial settlement of capped call share options for the 2024 Notes.
These amounts were partially offset by the following items:
•
•
•
•
$550.0 million for the repayment of the 2019 Term Loan;
$247.9 million in the repurchase of a portion of the 2024 Notes;
$127.3 million purchase of capped call share options for the 2027 Notes; and
$25.4 million for payment on the debt extinguishment of the 2019 Term Loan.
Cash provided by financing activities in 2021 primarily consisted of the following:
•
•
$548.5 million in proceeds from the issuance of common stock; and
$20.8 million in proceeds from exercise of options and purchase of stock under our Employee Stock Purchase Program.
These amounts were partially offset by $7.8 million of taxes paid related to net share settlement of equity awards.
Other Funding Commitments
We have several on-going clinical trials in various stages. Our most significant clinical trial expenditures are to CROs. The CRO contracts are
generally cancellable at our option. As of December 31, 2022, we had approximately $480.8 million in cancellable future commitments based on existing
CRO contracts.
Recent Accounting Pronouncements
Please read Note 2, Summary of Significant Accounting Policies and Recent Accounting Pronouncements to the consolidated financial statements
included elsewhere in this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our current investment policy is to maintain a diversified investment portfolio consisting of money market investments, commercial paper,
government and government agency bonds and high-grade corporate bonds with maturities of 36 months or less. Our cash is primarily deposited in and
invested through highly rated financial institutions in the U.S. As of December 31, 2022, we had $2,008.4 million of cash, cash equivalents and
investments, comprised of $1,022.6 million of short-term investments, $966.8 million of cash and cash equivalents and $19.0 million of long-term
restricted cash. The Company only holds debt securities classified as available-for-sale. The fair value of cash equivalents and short-term investments is
subject to change as a result of potential changes in market interest rates. The potential change in fair value for interest rate sensitive instruments has been
assessed on a hypothetical 10 basis point adverse movement across all maturities. For the year ended December 31, 2022, we estimate that such
hypothetical adverse 10 basis point movement would result in a hypothetical loss in fair value of approximately $0.4 million to our interest rate sensitive
instruments. The Company did not hold any investments in interest rate sensitive instruments as of December 31, 2021.
Our $1,150.0 million aggregate principal amount of our 2027 Notes has a fixed interest rate of 1.25% per annum, payable semi-annually in cash
on each March 15 and September 15 and our $419.4 million aggregate principal amount of our 2024 Notes has a fixed interest rate of 1.5% per annum,
payable semi-annually in cash on each May 15 and November 15, and therefore are not subject to fluctuations in market interest rates.
Item 8. Financial Statements and Supplementary Data.
The information required by this Item 8 begins on page F-1 in Item 15 of Part IV of this Annual Report on Form 10-K and is incorporated into
this item by reference.
-82-
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
We carried out an evaluation as of the end of the period covered by this Annual Report on Form 10-K, under the supervision and with the
participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and
procedures pursuant to paragraph (b) of Rule 13a-15 and 15d-15 under the Exchange Act. Based on that review, the principal executive officer and
principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us
in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized, and reported within the time periods specified in the SEC
rules and forms, and (2) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control procedure, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent
limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within
our Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can
occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the control. We considered these limitations during the development of our disclosure controls and procedures, and
will continually reevaluate them to ensure they provide reasonable assurance that such controls and procedures are effective.
Internal Control over Financial Reporting
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for our Company, as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies
and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of
our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of
December 31, 2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in its 2013 Internal Control Integrated Framework.
Based on this assessment, management has concluded that, as of December 31, 2022, our internal control over financial reporting was effective
based on those criteria.
The effectiveness of our internal control over financial reporting as of December 31, 2022, has been audited by KPMG LLP, an independent
registered public accounting firm, as stated in their report which appears in this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There have not been material changes in our internal control over financial reporting as defined in Rules 13a–15(f) and 15d–15(f) under the
Exchange Act for the quarter ended December 31, 2022 that our certifying officers concluded materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
-83-
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
-84-
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information regarding our directors and executive officers required by this item will be included in either an amendment to this Annual
Report on Form 10-K or in our definitive proxy statement for our 2023 annual meeting of stockholders to be filed with the Commission not later than 120
days after the end of the fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference.
Item 11. Executive Compensation.
The information required by this item will be included in either an amendment to this Annual Report on Form 10-K or in our definitive proxy
statement for our 2023 annual meeting of stockholders to be filed with the Commission not later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item will be included in either an amendment to this Annual Report on Form 10-K or in our definitive proxy
statement for our 2023 annual meeting of stockholders to be filed with the Commission not later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item will be included in either an amendment to this Annual Report on Form 10-K or in our definitive proxy
statement for our 2023 annual meeting of stockholders to be filed with the Commission not later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
The information required by this item will be included in either an amendment to this Annual Report on Form 10-K or in our definitive proxy
statement for our 2023 annual meeting of stockholders to be filed with the Commission not later than 120 days after the end of the fiscal year covered by
this Annual Report on Form 10-K and is incorporated herein by reference.
-85-
Item 15. Exhibits, Financial Statement Schedules.
(a) The following documents are filed as part of this Annual Report on Form 10-K:
PART IV
(1) Financial Statements
The following consolidated financial statements of the Company and the Report of KPMG LLP, Independent Registered Public Accounting Firm,
are included in Part IV of this Annual Report on Form 10-K on the pages indicated:
Report of Independent Registered Public Accounting Firm (KPMG LLP, Boston, MA, Auditor Firm ID: 185)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-2
F-4
F-5
F-6
F-7
F-8
(2) Financial Statement Schedules
All schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or the
notes thereto.
(3) Exhibits
The exhibits required by Item 601 of Regulation S-K are listed in paragraph (b) below.
(b) Exhibits.
The following exhibits are filed herewith or are incorporated by reference to exhibits filed with the SEC:
Exhibit
Number
2.1
2.2*
Description
Form
Incorporated by Reference to Filings Indicated
Filing
Date
File No.
Exhibit
Provided
Herewith
Agreement and Plan of Merger dated June 6, 2013 between
Sarepta Therapeutics, Inc., a Delaware corporation, and
Sarepta Therapeutics, Inc., an Oregon corporation.
Warrant to Purchase Common Stock of Myonexus
Therapeutics, Inc., issued by Myonexus Therapeutics, Inc. to
Sarepta Therapeutics, Inc., dated as of May 3, 2018.
8-K12B
001-14895
2.1
6/6/13
10-Q
001-14895
2.1
8/8/18
3.1
Amended and Restated Certificate of Incorporation.
8-K12B
001-14895
3.2
3.3
4.1
4.2
4.3
4.4
Amendment to the Amended and Restated Certificate of
Incorporation.
Second Amended and Restated ByLaws of Sarepta
Therapeutics, Inc.
Form of Specimen Certificate for Common Stock.
Indenture, dated as of November 14, 2017, by and between
Sarepta Therapeutics, Inc. and U. S. Bank National
Association (including the form of the 1.50% Convertible
Senior Note due 2024).
Form of 2024 Note (included in Exhibit 4.2)
Indenture, dated as of September 16, 2022, by and between
Sarepta Therapeutics, Inc. and U. S. Bank
001-14895
001-14895
001-14895
001-14895
001-14895
001-14895
8-K
8-K
10-Q
8-K
8-K
8-K
-86-
3.1
3.1
3.1
4.1
4.1
4.2
4.1
6/6/13
6/30/15
12/13/22
8/8/13
11/14/17
11/14/17
9/19/22
4.5
4.6
10.1†
10.2†
10.3†
10.4†
10.5†
10.6†
10.7†
10.8†
10.9*
Trust Company, National Association (including the form of
the 1.250% Convertible Senior Note due 2027).
Form of 2027 Note (included in Exhibit 4.4)
Description of Registered Securities
Sarepta Therapeutics, Inc. Amended and Restated 2011
Equity Incentive Plan.
Form of Stock Option Award Agreement under the Amended
and Restated 2011 Equity Incentive Plan.
Form of Restricted Stock Agreement under the Amended and
Restated 2011 Equity Incentive Plan.
Form of Restricted Stock Unit Award Agreement under 2011
Equity Incentive Plan.
Form of Stock Appreciation Right Award Agreement under
the 2011 Equity Incentive Plan.
Sarepta Therapeutics, Inc. Amended and Restated 2013
Employee Stock Purchase Plan.
Sarepta Therapeutics, Inc. 2014 Employment Commencement
Incentive Plan, as amended.
Form of Stock Option Award Agreement under 2014
Employment Commencement Incentive Plan
Amended and Restated Exclusive License Agreement by and
among The University of Western Australia, Sarepta
Therapeutics, Inc., and Sarepta International CV dated April
10, 2013.
8-K
10-K
8-K
001-14895
001-14895
4.2
4.4
9/19/22
2/26/20
001-14895
10.1
7/1/16
10-K
001-14895
10.13
2/28/17
10-K
001-14895
10.14
2/28/17
10-K
001-14895
10.17
2/28/17
10-K
001-14895
10.18
2/28/17
8-K
S-8
001-14895
001-14895
10.2
4.4
7/1/16
2/25/16
10-K
001-14895
10.28
3/3/14
10-Q
001-14895
10.1
5/9/13
10.10*
10.11
First Amendment to License Agreement by and among The
University of Western Australia, Sarepta Therapeutics, Inc.,
and Sarepta International CV dated June 19, 2016.
Lease Agreement dated June 25, 2013 by and between Sarepta
Therapeutics, Inc. and ARE-MA Region No. 38, LLC.
10.12†
Amendment No. 1 to the Sarepta Therapeutics, Inc. Amended
and Restated 2011 Equity Incentive Plan
10-Q
001-14895
10.1
8/9/16
8-K
8-K
001-14895
10.1
7/1/13
001-14895
10.1
6/30/15
10.13
Asset Purchase Agreement dated February 20, 2017 by and
between Sarepta Therapeutics Inc. and Gilead Sciences, Inc.
10-Q
001-14895
10.1
5/4/17
10.14†
Employment Agreement, dated as of June 26, 2017, between
Sarepta Therapeutics, Inc. and Douglas S. Ingram
10.15†
Change in Control and Severance Agreement by and between
Douglas S. Ingram and Sarepta Therapeutics, Inc., effective
June 26, 2017
10.16†
Amendment No. 1 to the Sarepta Therapeutics, Inc. 2014
Employment Commencement Incentive Plan
10.17†
Restricted Stock Agreement under the 2014 Employment
Commencement Incentive Plan
10.18†
Performance Stock Option Award Agreement under the 2014
Employment Commencement Incentive Plan
8-K
8-K
8-K
8-K
8-K
-87-
001-14895
10.1
6/28/17
001-14895
10.2
6/28/17
001-14895
10.3
6/28/17
001-14895
10.4
6/28/17
001-14895
10.5
6/28/17
10.19*
Settlement Agreement between Sarepta Therapeutics, Inc.,
Sarepta International C.V. and The University of Western
Australia on the one hand, and BioMarin Leiden Holding BV,
BioMarin Nederlands BV and BioMarin Technologies BV on
the other hand dated July 17, 2017
10.20*
License Agreement between Sarepta Therapeutics, Inc. and
Sarepta International C.V. on the one hand and BioMarin
Leiden Holding BV, BioMarin Nederlands BV and BioMarin
Technologies BV on the other hand dated July 17, 2017
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
Base Call Option Transaction Confirmation, dated as of
November 8, 2017, between Sarepta Therapeutics, Inc. and
JPMorgan Chase Bank, National Association, London Branch.
Base Call Option Transaction Confirmation, dated as of
November 8, 2017, between Sarepta Therapeutics, Inc. and
Goldman Sachs & Co. LLC.
Additional Call Option Transaction Confirmation, dated as of
November 9, 2017, between Sarepta Therapeutics, Inc. and
JPMorgan Chase Bank, National Association, London Branch
Additional Call Option Transaction Confirmation, dated as of
November 9, 2017, between Sarepta Therapeutics, Inc. and
Goldman Sachs & Co. LLC
Base Call Option Transaction Confirmation, dated as of
September 13, 2022, between Sarepta Therapeutics, Inc. and
Barclays Bank PLC.
Base Call Option Transaction Confirmation, dated as of
September 13, 2022, between Sarepta Therapeutics, Inc. and
Goldman Sachs & Co. LLC.
Base Call Option Transaction Confirmation, dated as of
September 13, 2022, between Sarepta Therapeutics, Inc. and
Mizuho Markets Americas LLC.
Base Call Option Transaction Confirmation, dated as of
September 13, 2022, between Sarepta Therapeutics, Inc. and
Morgan Stanley & Co. LLC.
10.29
Base Call Option Transaction Confirmation, dated as of
September 13, 2022, between Sarepta Therapeutics, Inc. and
RBC Capital Markets, LLC.
10.30
10.31
10.32
Additional Call Option Transaction Confirmation, dated as of
September 14, 2022 between Sarepta Therapeutics, Inc. and
Barclays Bank PLC.
Additional Call Option Transaction Confirmation, dated as of
September 14, 2022 between Sarepta Therapeutics, Inc. and
Goldman Sachs & Co. LLC.
Additional Call Option Transaction Confirmation, dated as of
September 14, 2022 between Sarepta Therapeutics, Inc. and
Mizuho Markets Americas LLC.
10-Q
001-14895
10.7
8/3/17
10-Q
001-14895
10.8
8/3/17
8-K
001-14895
10.1
11/14/17
8-K
001-14895
10.2
11/14/17
8-K
001-14895
10.3
11/14/17
8-K
001-14895
10.4
11/14/17
8-K
001-14895
10.3
9/19/22
8-K
001-14895
10.4
9/19/22
8-K
001-14895
10.5
9/19/22
8-K
001-14895
10.6
9/19/22
8-K
001-14895
10.7
9/19/22
8-K
001-14895
10.8
9/19/22
8-K
001-14895
10.9
9/19/22
8-K
001-14895
10.10
9/19/22
-88-
10.33
10.34
10.35
Additional Call Option Transaction Confirmation, dated as of
September 14, 2022 between Sarepta Therapeutics, Inc. and
Morgan Stanley & Co. LLC.
Additional Call Option Transaction Confirmation, dated as of
September 14, 2022 between Sarepta Therapeutics, Inc. and
RBC Capital markets, LLC.
Seventh Amendment to a Lease Agreement between the
Company and ARE-MA Region No. 38, LLC dated April 27,
2018
10.36†
Sarepta Therapeutics, Inc. 2018 Equity Incentive Plan
10.37†
Letter Agreement between Douglas S. Ingram and Sarepta
Therapeutics, Inc. dated June 26, 2018
10.38†
Form of Restricted Stock Unit Award Agreement under
Sarepta Therapeutics, Inc. 2014 Employment Commencement
Incentive Plan
10.39†
Amendment No. 2 to the Sarepta Therapeutics, Inc. 2014
Employment Commencement Incentive Plan
10.40†
Form of Stock Option Award Agreement under Sarepta
Therapeutics, Inc. 2018 Equity Incentive Plan
10.41†
Form of Restricted Stock Award Agreement under Sarepta
Therapeutics, Inc. 2018 Equity Incentive Plan
10.42†
Form of Restricted Stock Unit Award Agreement under
Sarepta Therapeutics, Inc. 2018 Equity Incentive Plan
8-K
001-14895
10.11
9/19/22
8-K
001-14895
10.12
9/19/22
10-Q
001-14895
10.4
5/3/18
10-Q
10-Q
001-14895
001-14895
10.1
10.4
8/8/18
8/8/18
10-Q
001-14895
10.5
8/8/18
10-Q
001-14895
10.6
8/8/18
10-Q
001-14895
10.1
10/31/18
10-Q
001-14895
10.2
10/31/18
10-Q
001-14895
10.3
10/31/18
10.43†
Form of Stock Appreciation Right Award Agreement under
Sarepta Therapeutics, Inc. 2018 Equity Incentive Plan
10-Q
001-14895
10.4
10/31/18
10.44†
10.45†
10.46^
Form of Performance-Based Restricted Stock Unit Award
Agreement under Sarepta Therapeutics, Inc. 2018 Equity
Incentive Plan
Amendment to Restricted Stock Award Agreement between
Douglas S. Ingram and Sarepta Therapeutics, Inc. dated
December 17, 2018
Amendment No. 1 to License Agreement between Sarepta
Therapeutics, Inc. and ST International Holdings Two, Inc. on
the one hand and BioMarin Leiden Holding BV, BioMarin
Nederlands BV and BioMarin Technologies BV on the other
hand
10.47†
Amendment No. 1 to the Sarepta Therapeutics, Inc. Amended
and Restated 2013 Employment Stock Purchase Plan (as
Amended and Restated on June 27, 2016)
10-Q
001-14895
10.1
05/4/22
10-K
001-14895
10.75
2/28/19
10-Q
001-14895
10.1
8/7/19
10-Q
001-14895
10.4
8/7/19
10.48
Letter Agreement between Sarepta Therapeutics, Inc. and
Myonexus Therapeutics, Inc. dated February 26, 2019
10-Q
001-14895
10.1
5/8/19
10.49†
Form of Executive Vice President Severance Letter
Agreement
10-Q
001-14895
10.2
5/8/19
10.50†
Form of Executive Vice President Change in Control and
Severance Agreement
10-Q
001-14895
10.3
5/8/19
-89-
10.51^
License, Collaboration, and Option Agreement between
Sarepta Therapeutics Three, LLC and F. Hoffman-La Roche
Ltd dated December 21, 2019
10.52
Stock Purchase Agreement between Sarepta Therapeutics,
Inc. and Roche Finance Ltd dated December 21, 2019
10.53†
Director Compensation Policy
10.54†
Amendment No. 2 to the Sarepta Therapeutics, Inc. 2014
Employment Commencement Incentive Plan
10.55†
Amendment No. 1 to the Sarepta Therapeutics, Inc. 2018
Equity Incentive Plan
10-K
001-14895
10.51
2/26/20
10-K
001-14895
10.52
2/26/20
10-K
8-K
001-14895
10.55
2/26/20
001-14895
10.1
2/21/20
8-K
001-14895
10.1
6/8/2020
10.56†
Amendment No. 2 to the Sarepta Therapeutics, Inc. 2018
Equity Incentive Plan
10-Q
001-14895
10.1
8/2/2022
10.57†
Promotion Letter dated December 14, 2020 by and between
Sarepta Therapeutics, Inc. and Louise Rodino-Klapac
10-K
001-14895
10.59
3/1/21
10.58†
Offer Letter dated April 19, 2018 by and between Sarepta
Therapeutics, Inc. and Louise Rodino-Klapac
10-K
001-14895
10.60
3/1/21
10.59†
Promotion Letter dated December 14, 2020 by and between
Sarepta Therapeutics, Inc. and Ian M. Estepan
10-K
001-14895
10.61
3/1/21
10.60†
Offer Letter dated by December 18, 2014 and between
Sarepta Therapeutics, Inc. and Ian M. Estepan
10-K
001-14895
10.62
3/1/21
10.61
10.62
10.63
10.64
10.65
Amendment no. 1 dated October 23, 2020 to the License,
Collaboration, and Option Agreement between Sarepta
Therapeutics Three, LLC and F. Hoffman-La Roche Ltd dated
December 21, 2019
Amendment no. 2 dated October 28, 2020 to the License,
Collaboration, and Option Agreement between Sarepta
Therapeutics Three, LLC and F. Hoffman-La Roche Ltd,
dated December 21, 2019
Amendment no. 3 dated February 4, 2021 to the License,
Collaboration, and Option Agreement between Sarepta
Therapeutics Three, LLC and F. Hoffman-La Roche Ltd,
dated December 21, 2019
Amendment no. 4 dated June 23, 2021 to the License,
Collaboration, and Option Agreement between Sarepta
Therapeutics Three, LLC and F. Hoffman-La Roche Ltd,
dated December 21, 2019
Amendment no. 5 dated August 31, 2021 to the License,
Collaboration, and Option Agreement between Sarepta
Therapeutics Three, LLC and F. Hoffman-La Roche Ltd,
dated December 21, 2019.
10-Q
001-14895
10.1
8/4/21
10-Q
001-14895
10.2
8/4/21
10-Q
001-14895
10.3
8/4/21
10-Q
001-14895
10.4
8/4/21
10-Q
001-14895
10.1
11/3/21
10.66
Amendment no. 6 dated November 30, 2021 to the License,
10-K
001-14895
10.62
3/1/22
Collaboration, and Option Agreement
-90-
10-K
001-14895
10.63
3/1/22
10-K
001-14895
10.64
3/1/22
10-Q
001-14895
10.2
8/2/2022
10-K
001-14895
10.66
3/1/22
between Sarepta Therapeutics Three, LLC and F. Hoffman-La
Roche Ltd, dated December 21, 2019
10.67
10.68
Amendment no. 7 dated January 5, 2022 to the License,
Collaboration, and Option Agreement between Sarepta
Therapeutics Three, LLC and F. Hoffman-La Roche Ltd,
dated December 21, 2019
Amendment no. 8 dated January 28, 2022 to the License,
Collaboration, and Option Agreement between Sarepta
Therapeutics Three, LLC and F. Hoffman-La Roche Ltd,
dated December 21, 2019
10.69
Amendment no. 9 dated March 23, 2022 to the License,
Collaboration, and Option Agreement between Sarepta
Therapeutics Three, LLC and F. Hoffman-La Roche Ltd,
dated December 21, 2019
10.70
10.71^
Amendment no. 10 dated May 31, 2022 to the License,
Collaboration, and Option Agreement between Sarepta
Therapeutics Three, LLC and F. Hoffman-La Roche Ltd,
dated December 21, 2019
Amendment No. 2, dated November 17, 2021 to License
Agreement between Sarepta Therapeutics, Inc. and ST
International Holdings Two, Inc. on the one hand and
BioMarin Leiden Holding BV, BioMarin Nederlands BV and
BioMarin Technologies BV on the other hand
10.72†
Letter Agreement, dated November 18, 2022, between Sarepta
Therapeutics, Inc. and Douglas S. Ingram
10.73†
Separation and Consulting Agreement and General Release,
signed November 2, 2022, between Sarepta Therapeutics, Inc.
and William C. Ciambrone
21.1
Subsidiaries of the Registrant.
23.1
Consent of Independent Registered Public Accounting Firm.
24.1
Power of Attorney (contained on signature page).
31.1
31.2
32.1**
32.2**
Certification of the Company’s President and Chief Executive
Officer, Douglas S. Ingram, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Company’s Executive Vice President,
Chief Financial Officer, Ian Estepan, pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
Certification of the Company’s President and Chief Executive
Officer, Douglas S. Ingram, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of the Company’s Executive Vice President,
Chief Financial Officer, Ian Estepan, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
-91-
X
X
X
X
X
X
X
X
X
X
101
The following financial statements from the Annual Report on
Form 10-K of Sarepta Therapeutics, Inc. for the year ended
December 31, 2022, formatted in Inline XBRL: (i)
Consolidated Balance Sheets; (ii) Consolidated Statements of
Operations and Comprehensive Loss; (iii) Consolidated
Statements of Stockholders’ Equity; (iv) Consolidated
Statements of Cash Flows; and (v) Notes to Consolidated
Financial Statements, tagged as blocks of text and including
detailed tags.
104
The Cover page from the Annual Report on Form 10-K of
Sarepta Therapeutics, Inc for the year ended December 31,
2022, formatted in Inline XBRL.
X
X
† Indicates management contract or compensatory plan, contract or arrangement.
^ Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly
disclosed.
* Confidential treatment has been granted for portions of this exhibit.
** Furnished herewith. This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to
the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934.
Item 16. Form 10-K Summary.
Not applicable.
-92-
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: February 28, 2023
SAREPTA THERAPEUTICS, INC.
SIGNATURES
By:
/s/ Douglas S. Ingram
Douglas S. Ingram
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Douglas S. Ingram
and Ian M. Estepan, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful
attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each
capacity stated below, and to file, any and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that
said attorneys-in-fact and agents or any of them or their and his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on February 28, 2023:
Signature
/s/ Douglas S. Ingram
Douglas S. Ingram
/s/ Ian M. Estepan
Ian M. Estepan
/s/ M. Kathleen Behrens
M. Kathleen Behrens, Ph.D.
/s/ Richard Barry
Richard Barry
/s/ Kathryn Boor
Kathryn J. Boor, Ph.D.
/s/ Michael A. Chambers
Michael A. Chambers
/s/ Stephen L. Mayo
Stephen L. Mayo, Ph.D.
/s/ Claude Nicaise
Claude Nicaise, MD
/s/ Hans Wigzell
Hans Wigzell, M.D., Ph.D.
President, Chief Executive Officer and Director (Principal Executive Officer)
Title
Executive Vice President, Chief Financial Officer (Principal Financial and Accounting
Officer)
Chairwoman of the Board
Director
Director
Director
Director
Director
Director
-93-
SAREPTA THERAPEUTICS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (KPMG LLP, Boston, MA, Auditor Firm ID: 185)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-1
Page
Number
F-2
F-4
F-5
F-6
F-7
F-8
To the Stockholders and Board of Directors
Sarepta Therapeutics, Inc.:
Report of Independent Registered Public Accounting Firm
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Sarepta Therapeutics, Inc. and subsidiaries (the Company) as of December 31, 2022 and
2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year
period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal
control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in
conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for convertible debt as of January 1,
2021 due to the adoption of Accounting Standards Update (ASU) No. 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.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion
on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective
internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in
F-2
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated
financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of lower of cost or net realizable value of raw materials inventory
As described in Note 2 and Note 8 to the consolidated financial statements, approximately 16%, or $59.2 million, of the Company’s total
inventory balance is comprised of raw materials. As discussed in Note 2, the Company periodically analyzes its raw materials inventories, and
writes down obsolete or otherwise unmarketable inventory to its estimated net realizable value.
We identified the evaluation of lower of cost or net realizable value of raw materials inventory as a critical audit matter. The estimate of expected
future demand for raw materials inventory is difficult to assess and results in the application of greater auditor judgment. Specifically,
challenging auditor judgment was required to assess the potential impact the Company’s gene therapy technologies and competitor RNA-targeted
therapeutic or gene therapy products could have on existing raw materials inventory.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating
effectiveness of certain internal controls over the Company’s inventory valuation process, including controls related to the estimate of expected
future demand for raw materials. We compared the Company’s prior period forecasted demand for raw materials to actual results to assess their
ability to accurately estimate expected future demand. We evaluated clinical progress associated with the Company’s gene therapy technologies
by inspecting internal meeting minutes and interviewing research and development personnel of the Company and assessed the potential impact
of those technologies on expected future demand for raw materials inventory. We also read publicly available information to identify information
regarding other competitor entities with RNA-targeted therapeutic or gene therapy products that could impact the Company’s estimates of
expected future demand.
/s/ KPMG LLP
We have served as the Company’s auditor since 2002.
Boston, Massachusetts
February 28, 2023
F-3
Sarepta Therapeutics, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable
Inventory
Other current assets
Total current assets
Property and equipment, net
Intangible assets, net
Right of use assets
Other non-current assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue, current portion
Other current liabilities
Total current liabilities
Long-term debt
Lease liabilities, net of current portion
Deferred revenue, net of current portion
Contingent consideration
Other non-current liabilities
Total liabilities
Commitments and contingencies (Note 21)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 3,333,333 shares authorized; none issued and
outstanding
Common stock, $0.0001 par value, 198,000,000 shares authorized; 87,950,117
and 87,126,974 issued and outstanding at December 31, 2022 and 2021, respectively
Additional paid-in capital
Accumulated other comprehensive loss, net of tax
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
As of December 31,
2022
2021
$
$
$
966,777
1,022,597
214,628
203,968
149,891
2,557,861
180,037
7,578
64,954
317,936
3,128,366
95,875
418,996
89,244
15,489
619,604
1,544,292
57,578
485,000
36,900
42
2,743,416
2,115,869
—
152,990
186,212
149,028
2,604,099
191,156
14,239
45,531
292,949
3,147,974
76,741
271,697
89,244
15,051
452,733
1,096,876
41,512
574,244
43,600
11,000
2,219,965
—
—
9
4,296,841
(1,664 )
(3,910,236 )
384,950
3,128,366
$
9
4,134,768
(20 )
(3,206,748 )
928,009
3,147,974
$
$
$
$
See accompanying notes to consolidated financial statements.
F-4
Sarepta Therapeutics, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
For the Year Ended December 31,
2022
2021
2020
$
$
843,769
89,244
933,013
Revenues:
Products, net
Collaboration and other
Total revenues
Cost and expenses:
Cost of sales (excluding amortization of in-licensed rights)
Research and development
Selling, general and administrative
Settlement and license charges
Amortization of in-licensed rights
Total cost and expenses
Operating loss
Other (loss) income, net:
Loss on debt extinguishment
Gain (loss) on contingent consideration, net
Gain from sale of Priority Review Voucher
Other expense, net
Total other (loss) income, net
Loss before income tax expense (benefit)
Income tax expense (benefit)
Net loss
Other comprehensive loss:
Unrealized losses on investments, net of tax
Total other comprehensive loss
Comprehensive loss
Net loss per share — basic and diluted
$
612,401
89,486
701,887
97,049
771,182
282,660
10,000
706
1,161,597
(459,710 )
—
7,200
102,000
(68,438 )
40,762
(418,948 )
(168 )
(418,780 )
(23 )
(23 )
(418,803 ) $
455,865
84,234
540,099
63,382
722,343
317,875
—
662
1,104,262
(564,163 )
—
(45,000 )
108,069
(51,971 )
11,098
(553,065 )
1,063
(554,128 )
(47 )
(47 )
(554,175 )
139,989
877,090
451,421
—
714
1,469,214
(536,201 )
(125,441 )
6,700
—
(35,021 )
(153,762 )
(689,963 )
13,525
(703,488 )
(1,644 )
(1,644 )
(705,132 ) $
$
$
(8.03 ) $
(5.15 ) $
(7.11 )
Weighted average number of shares of common stock used
in computing basic and diluted net loss per share
87,559
81,262
77,956
See accompanying notes to consolidated financial statements.
F-5
Sarepta Therapeutics, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands)
Accumulated
Additional
Common Stock
Paid-In
Other
Comprehensiv
e
Shares
Amount
Capital
Gain (Loss)
75,185
1,443
$
8
—
$ 3,112,130
76,492
$
Accumulated Stockholders'
Total
Deficit
(2,294,001 ) $
$
—
(6,333 )
312,053
7,465
108,070
—
—
3,609,877
(156,953 )
12,963
—
(1,432 )
548,531
7,839
113,943
—
—
4,134,768
22,573
—
7,470
233,018
(127,305 )
26,317
159
(37 )
2,522
102
—
—
—
79,374
—
283
277
(18 )
7,099
112
—
—
—
87,127
318
389
116
—
—
—
—
—
87,950
$
—
—
—
—
—
—
—
8
—
—
—
—
1
—
—
—
—
9
—
—
—
—
—
—
—
—
9
50
—
—
—
—
—
—
(47 )
—
3
—
—
—
—
—
—
—
(23 )
—
(20 )
—
—
—
—
—
—
Equity
818,187
76,492
—
(6,333 )
312,053
7,465
108,070
(47 )
(554,128 )
761,759
(96,792 )
12,963
—
(1,432 )
548,532
7,839
113,943
(23 )
(418,780 )
928,009
22,573
—
7,470
233,018
(127,305 )
26,317
(1,644 )
(703,488 )
384,950
—
—
—
—
—
—
—
(554,128 )
(2,848,129 )
60,161
—
—
—
—
—
—
—
(418,780 )
(3,206,748 )
—
—
—
—
—
—
—
(703,488 )
(3,910,236 ) $
—
—
$ 4,296,841
$
(1,644 )
—
(1,664 ) $
See accompanying notes to consolidated financial statements.
F-6
BALANCE AT DECEMBER 31, 2019
Exercise of options for common stock
Vest of restricted stock units/awards, net of
forfeitures
Shares withheld for taxes
Issuance of common stock to Roche, net of
issuance costs
Issuance of common stock under employee
stock purchase plan
Stock-based compensation
Unrealized losses from available-for-sale
securities, net of tax
Net loss
BALANCE AT DECEMBER 31, 2020
Cumulative effect of accounting change to
adopt ASU 2020-06
Exercise of options for common stock
Vest of restricted stock units/awards
Shares withheld for taxes
Issuance of common stock for cash,
net of offering costs
Issuance of common stock under employee
stock purchase plan
Stock-based compensation
Unrealized losses from available-for-sale
securities, net of tax
Net loss
BALANCE AT DECEMBER 31, 2021
Exercise of options for common stock
Vest of restricted stock units
Issuance of common stock under employee
stock purchase plan
Stock-based compensation
Purchase of capped call share options
for 2027 Notes
Partial settlement of capped call share
options for 2024 Notes
Unrealized losses from available-for-sale
securities, net of tax
Net loss
BALANCE AT DECEMBER 31, 2022
Sarepta Therapeutics, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to cash flows in operating activities:
(Gain) loss on contingent consideration, net
Loss on debt extinguishment
Gain from sale of Priority Review Voucher, net of commission
Depreciation and amortization
Reduction in the carrying amounts of the right of use assets
Non-cash interest expense
Stock-based compensation
Loss on disposal of assets
Impairment of equity investment
Other
Changes in operating assets and liabilities, net:
Net increase in accounts receivable
Net increase in inventory
Net decrease (increase) in other assets
Net (decrease) increase in deferred revenue
Net increase in accounts payable, accrued expenses,
lease liabilities and other liabilities
Net cash (used in) provided by operating activities
Cash flows from investing activities:
Purchase of property and equipment
Purchase of available-for-sale securities
Maturity and sales of available-for-sale securities
Proceeds from sale of Priority Review Voucher, net of commission
Other
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Proceeds from 2027 Notes offering, net of commissions
Debt issuance costs for 2027 Notes
Purchase of capped call share options for 2027 Notes
Repurchase of 2024 Notes
Partial settlement of capped call share options for 2024 Notes
Repayment of principal amount due under 2019 Term Loan
Payment on debt extinguishment of 2019 Term Loan
Proceeds from 2019 Term Loan
Debt issuance costs for 2019 Term Loan
Proceeds from exercise of stock options and purchase of stock under the
Employee Stock Purchase Program
Taxes paid related to net share settlement of equity awards
Proceeds from sales of common stock, net of offering costs
Proceeds from issuance of common stock to Roche, net of offering costs
Net cash provided by financing activities
(Decrease) increase in cash and cash equivalents
Cash, cash equivalents and restricted cash:
Beginning of year
End of year
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash in other assets
Total cash, cash equivalents and restricted cash
Supplemental disclosure of cash flow information:
Cash paid during the period for interest
Cash paid during the period for income taxes
Supplemental schedule of non-cash activities:
Lease liabilities arising from obtaining right of use assets
Lease liabilities terminated
Intangible assets and property and equipment included in accounts payable and accrued
expenses
Shares withheld for tax included in accrued expenses
Accrued debt issuance costs
2022
For the Year Ended December 31,
2021
2020
$
(703,488 )
$
(418,780 )
$
(6,700 )
125,441
—
41,864
12,735
7,552
233,018
10,770
2,575
(9,643 )
(61,638 )
(50,780 )
14,620
(89,244 )
147,572
(325,346 )
(30,824 )
(1,936,856 )
923,224
—
(2,427 )
(1,046,883 )
1,127,400
(716 )
(127,305 )
(247,868 )
26,317
(550,000 )
(25,364 )
—
—
30,043
—
—
—
232,507
(1,139,722 )
2,125,523
985,801
966,777
19,024
985,801
44,418
1,695
40,006
3,807
6,765
—
—
$
$
$
$
$
$
$
$
$
$
(7,200 )
—
(102,000 )
38,017
11,325
7,581
113,943
456
4,488
7,164
(51,650 )
(83,772 )
103,203
(89,244 )
23,297
(443,172 )
(38,490 )
(29,988 )
466,000
102,000
(4,109 )
495,413
—
—
—
—
—
—
—
—
—
20,802
(7,765 )
548,532
—
561,569
613,810
1,511,713
2,125,523
2,115,869
9,654
2,125,523
55,949
583
13,225
40,133
4,162
—
—
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(554,128 )
45,000
—
(108,069 )
26,911
12,828
25,454
108,070
85
—
(2,741 )
(10,461 )
(60,582 )
(166,328 )
749,429
41,998
107,466
(82,202 )
(1,333,568 )
1,189,480
108,069
(3,500 )
(121,721 )
—
—
—
—
—
—
—
291,150
(39 )
83,957
(4,798 )
—
312,053
682,323
668,068
843,645
1,511,713
1,502,648
9,065
1,511,713
34,418
2,510
59,327
—
5,151
6,333
11,000
See accompanying notes to consolidated financial statements.
F-7
Sarepta Therapeutics, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
Sarepta Therapeutics, Inc. (together with its wholly-owned subsidiaries, “Sarepta” or the “Company”) is a commercial-stage biopharmaceutical
company focused on helping patients through the discovery and development of unique RNA-targeted therapeutics, gene therapy and other genetic
therapeutic modalities for the treatment of rare diseases. Applying its proprietary, highly-differentiated and innovative technologies, and through
collaborations with its strategic partners, the Company has developed multiple approved products for the treatment of Duchenne muscular dystrophy
(“Duchenne”) and is developing potential therapeutic candidates for a broad range of diseases and disorders, including Duchenne, Limb-girdle muscular
dystrophies (“LGMDs”) and other neuromuscular and central nervous system (“CNS”) disorders.
The Company's 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. Indicated for the treatment of Duchenne in
patients who have a confirmed mutation of the dystrophin 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 December 31, 2022, the Company had approximately $2,008.4 million of cash, cash equivalents and investments, consisting of $1,022.6
million of short-term investments, $966.8 million of cash and cash equivalents and $19.0 million of long-term restricted cash. The Company believes that
its balance of cash, cash equivalents and investments as of December 31, 2022 is sufficient to fund its current operational plan for at least the next twelve
months, though it may pursue additional cash resources through public or private debt and equity financings, seek funded research and development
arrangements and additional government contracts and establish collaborations with or license its technology to other companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
Basis of Presentation
The accompanying consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in
the U.S. (“U.S. GAAP”), reflect the accounts of Sarepta Therapeutics, Inc. and its wholly-owned subsidiaries. All intercompany transactions between and
among its consolidated subsidiaries have been eliminated. Management has determined that the Company operates in one segment: discovering,
developing, manufacturing and delivering therapies to patients with rare diseases. The Company’s Chief Executive Officer, as the chief operating decision-
maker, manages and allocates resources to the operations of the Company on a total company basis. The Company’s research and development organization
is responsible for the research and discovery of new product candidates and supports development and registration efforts for potential future products. The
Company’s supply chain organization manages the development of the manufacturing processes, clinical trial supply and commercial product supply. The
Company’s commercial organization is responsible for commercialization of EXONDYS 51, VYONDYS 53 and AMONDYS 45 in the U.S. and
internationally. The Company is supported by other back-office general and administration functions. Consistent with this decision-making process, the
Company’s Chief Executive Officer uses consolidated, single-segment financial information for purposes of evaluating performance, forecasting future
period financial results, allocating resources and setting incentive targets. In the opinion of the Company’s management, all adjustments of a normal
recurring nature necessary for a fair presentation have been reflected.
Estimates and Uncertainties
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, equity, revenue, expenses and the disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
F-8
Fair Value Measurements
The Company has certain financial assets and liabilities that are recorded at fair value which have been classified as Level 1, 2 or 3 within the
fair value hierarchy as described in the accounting standards for fair value measurements:
•
•
•
Level 1—quoted prices for identical instruments in active markets;
Level 2—quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not
active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3—valuations derived from valuation techniques in which one or more significant value drivers are unobservable.
The fair value of the majority of the Company’s financial assets are categorized as Level 2 within the fair value hierarchy. These assets include
commercial paper, government and government agency bonds, corporate bonds and certificates of deposit. For additional information related to fair value
measurements, please read Note 5, Fair Value Measurements to the consolidated financial statements.
Cash Equivalents
Only investments that are highly liquid and readily convertible to cash and have original maturities of three months or less are considered cash
equivalents.
Investments
Available-For-Sale Debt Securities
Available-for-sale debt securities are recorded at fair value and unrealized gains and losses are included in accumulated other comprehensive
income in stockholder’s equity. Interest income and realized gains and losses are reported in other expense, net, on a specific identification basis.
Equity Investments
The Company’s equity investments include its investments in a publicly traded biotechnology company and several privately held biotechnology
companies and are included in other non-current assets in the Company’s consolidated balance sheets. The equity investment in the publicly traded
biotechnology company has a readily determinable fair value and is carried at fair value. The equity investments in the privately held biotechnology
companies do not have readily determinable fair values and are measured at cost less any impairment, plus or minus changes resulting from observable
price changes for the identical or a similar investment of the same issuer. Any change in the valuation of equity investments is recorded as a gain or loss on
the Company’s consolidated statements of operations and comprehensive loss.
Accounts Receivable
The Company’s accounts receivable primarily arise from product sales. They are generally stated at the invoiced amount and do not bear interest.
Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves
are established and which result from Medicaid rebates, governmental chargebacks including Public Health Services (“PHS”) chargebacks, prompt pay
discounts, co-pay assistance and distribution fees. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as
reductions of accounts receivable (if no payments are required of the Company) for PHS chargebacks, prompt pay discounts and certain distribution fees, or
a current liability (if a payment is required of the Company) for Medicaid rebates, co-pay assistance and certain distribution fees.
The accounts receivable from product sales represents receivables due from the Company’s specialty distributor and specialty pharmacies in the
U.S. as well as certain distributors in the European Union (“EU”), Brazil, Israel and the Middle East. The Company has had no historical write-offs of its
accounts receivable and its payment terms range from 60 to 91 days for sales within the U.S. and 45 and 150 days for the majority of product sales outside
the U.S. The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in the
customers’ credit profiles or any specific issues. The Company provides reserves against trade receivables for expected credit losses that may result from a
customer’s inability to pay. Amounts determined to be uncollectible are written-off against the established reserve. As of December 31, 2022, the credit
profiles for the Company’s customers are deemed to be in good standing and an allowance for credit losses is not considered necessary.
F-9
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable from
customers. As of December 31, 2022, the Company’s cash was concentrated at three financial institutions, 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. Please refer to Note 7, Product
Revenues, Net, Accounts Receivable and Reserves for Product Revenues for discussion of the credit risk associated with accounts receivable from
customers.
Inventories
Inventories are stated at the lower of cost and net realizable value with cost determined on a first-in, first-out basis. The Company capitalizes
inventory costs associated with products following regulatory approval when future commercialization is considered probable and the future economic
benefit is expected to be realized. EXONDYS 51, VYONDYS 53 and AMONDYS 45 inventory used in clinical development programs is charged to
research and development expense when the product enters the research and development process and no longer can be used for commercial purposes.
The Company periodically analyzes its inventories for excess amounts or obsolescence and writes down obsolete or otherwise unmarketable
inventory to its estimated net realizable value. Additionally, though the Company’s products are subject to strict quality control and monitoring which the
Company performs throughout the manufacturing processes, certain batches or units of product may not meet quality specifications. Expense incurred
related to excess inventory, obsolete inventory, or inventories that do not meet the Company's quality specifications are recorded as a component of cost of
sales in the Company's consolidated statements of operations and comprehensive loss.
For products which are under development and have not yet been approved by regulatory authorities, purchased drug product is charged to
research and development expense upon delivery. Delivery occurs when the inventory passes quality inspection and ownership transfers to the Company.
Nonrefundable advance payments for research and development activities, including production of purchased drug product, are deferred and capitalized
until the goods are delivered. If the Company does not expect the goods to be delivered or services to be rendered, the advanced payment capitalized will be
charged to expense.
Property and Equipment
Property and equipment are initially recorded at cost, including the acquisition cost and all costs necessarily incurred to bring the asset to the
location and working condition necessary for their intended use. The cost of normal, recurring or periodic repairs and maintenance activities related to
property and equipment are expensed as incurred. The cost for planned major maintenance activities, including the related acquisition or construction of
assets, is capitalized if the repair will result in future economic benefits. Interest costs incurred during the construction period of major capital projects are
periodically reviewed, and if determined to be material, capitalized until the asset is ready for its intended use, at which point the interest costs are
amortized as depreciation expense over the life of the underlying asset.
The Company generally depreciates the cost of its property and equipment using the straight-line method over the estimated useful lives of the
respective assets, which are summarized as follows:
Asset Category
Lab and manufacturing equipment
Office equipment
Software and computer equipment
Furniture and fixtures
5 years
5 years
3 - 5 years
7 years
Useful lives
Leasehold improvements
Land improvements
Land
Building and improvements
Construction in progress
Lesser of the useful life or the term of
the respective lease
25 years
Not depreciated
30 years
Not depreciated until put into service
F-10
Intangible assets
The Company’s intangible assets consist of in-licensed rights, patent costs and software licenses, which are stated in the Company’s consolidated
balance sheets, net of accumulated amortization and impairments, if applicable.
The in-licensed rights primarily relate to agreements with BioMarin Pharmaceutical, Inc. (“BioMarin”) and the University of Western Australia
(“UWA”). The in-licensed rights are being amortized on a straight-line basis over the remaining life of the related patents because the life of the related
patents reflects the expected time period that the Company will benefit from the in-licensed rights.
Patent costs consist primarily of external legal costs, filing fees incurred to file patent applications and renewal fees on proprietary technology
developed or licensed by the Company. Patent costs associated with applying for a patent, being issued a patent and annual renewal fees are capitalized.
Costs to defend a patent and costs to invalidate a competitor’s patent or patent application are expensed as incurred. Patent costs are amortized on a
straight-line basis over the shorter of the estimated economic lives or the initial term of the patents, which is generally 20 years.
Impairment of Long-Lived Assets
Long-lived assets held and used by the Company, intangible assets with definite lives and right of use (“ROU”) assets are reviewed for
impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable. The Company evaluates recoverability of
assets to be held and used by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the asset. If the asset is
considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Such reviews assess the fair value of the assets based upon estimates of future cash flows that the assets are expected to generate.
Convertible Debt
As a result of adopting 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”, the Company
accounts for the liability and equity components of convertible debt instruments that can be settled in cash as a single liability measured at its amortized
cost, as long as no other features require bifurcation and recognition as derivatives under ASC Topic 815, Derivatives and Hedging (“ASC 815”).
Simultaneously with the issuance of the Company's convertible senior notes due on November 15, 2024 (the "2024 Notes") and convertible senior notes
due on September 15, 2027 (the "2027 Notes") in November 2017 and September 2022, respectively, the Company bought capped call options from certain
counterparties to minimize the impact of potential dilution upon conversion. The premium for the capped call options was recorded as additional paid-in
capital. For additional information related to the convertible debt transactions, please read Note 13, Indebtedness to the consolidated financial statements.
Revenue Recognition
The Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration
which the Company expects to receive in exchange for the goods or services provided. To determine revenue recognition for arrangements within the scope
of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company performs the following five steps: (1) identify the contract with the
customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance
obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation. The Company only applies the five-step
model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers or
provides to the customer. At contract inception, the Company assesses the goods or services promised within each contract and determines those that are
performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the
transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied. The only performance
obligation in the Company’s contracts with customers is to timely deliver drug products to the customer’s designated location.
Product revenues
The Company distributes its products principally through its customers. The customers subsequently resell the products to patients and health
care providers. The Company provides no right of return to the customers except in cases of shipping error or product defect. Product revenues are
recognized when the customers take control of the products, which typically occurs upon
F-11
delivery to the customers. For the years ended December 31, 2022, 2021 and 2020, the majority of the product revenues recognized were generated by the
specialty distributor and specialty pharmacies in the U.S.
Variable Consideration
Product revenues are recorded at the net sales price (transaction price) which includes estimated reserves for variable consideration, such as
Medicaid rebates, governmental chargebacks, including PHS chargebacks, prompt payment discounts, co-pay assistance and distribution fees. These
reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contracts. Additional details
relating to variable consideration follows:
•
•
•
•
•
Medicaid rebates relate to the Company’s estimated obligations to states under established reimbursement arrangements. Medicaid rebate
reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the
establishment of a liability which is included in accrued expenses.
Governmental chargebacks, including PHS chargebacks, relate to the Company’s estimated obligations resulting from contractual
commitments to sell products to qualified healthcare providers at prices lower than the list prices that the Company charges to
wholesalers. The wholesaler charges the Company for the difference between what the wholesaler pays for the products and the ultimate
selling price to the qualified healthcare providers. Chargeback reserves are recorded in the same period the related revenue is recognized,
resulting in a reduction of product revenue and accounts receivable. Chargeback amounts are generally determined at the time of resale to
the qualified healthcare provider from the wholesaler, and the Company generally issues credits for such amounts within a few weeks of
receiving notification of resale from the wholesaler.
Prompt payment discounts relate to the Company’s estimated obligations for credits to be granted to specialty pharmacies for remitting
payment on their purchases within established incentive periods. Reserves for prompt payment discounts are recorded in the same period
the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable.
Co-pay assistance relates to financial assistance provided to qualified patients, whereby the Company may assist them with prescription
drug co-payments required by the patient’s insurance provider. Reserves for co-pay assistance are recorded in the same period the related
revenue is recognized, resulting in a reduction of product revenue and the establishment of a liability which is included in accrued
expenses.
Distribution fees relate to fees paid to customers in the distribution channel that provide the Company with inventory management, data
and distribution services and are generally accounted for as a reduction of revenue. To the extent that the services received are distinct
from the Company’s sale of products to the customers, these payments are accounted for as selling, general and administrative expenses.
Reserves for distribution fees result in an increase in a liability if payments are required of the Company or a reduction of accounts
receivable if no payments are required of the Company.
Collaboration revenue
The Company’s collaboration revenue is primarily generated from its collaboration arrangement with F. Hoffman-La Roche Ltd. (“Roche”). For
more information, please read Note 3, License and Collaboration Agreements. At the inception of a collaboration arrangement, the Company first assesses
whether the contractual arrangement is within the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”) to determine whether the
arrangement involves a joint operating activity and involves two (or more) parties that are both active participants in the activity and exposed to significant
risks and rewards dependent on the commercial success of such activity. Then the Company determines whether the collaboration arrangement in its
entirety represents a contract with a customer as defined by ASC 606. If only a portion of the collaboration arrangement is potentially with a customer, the
Company applies the distinct good or service unit-of-account guidance in ASC 606 to determine whether there is a unit of account that should be accounted
for under ASC 606. For the units of account in the collaboration arrangement that do not represent a vendor-customer relationship, the Company will (i)
consider applying other GAAP, including by analogy, or (ii) if there is no appropriate analogy, consistently apply a reasonable and rational accounting
policy election.
In general, by analogy to ASC 606, the Company identifies the performance obligations within the collaboration arrangement and identifies and
allocates the transaction price the Company expects to receive on a relative standalone selling price basis to each performance obligation. Variable
consideration, consisting of development and regulatory milestones, will be included in the transaction price only if the Company expects to receive such
consideration and if it is probable that the inclusion of the variable consideration will not result in a significant reversal in the cumulative amount of
revenue recognized under the arrangement. Sales-based royalty and milestone payments are excluded from the transaction price the Company expects to
receive until the underlying sales occur because the license to the Company’s intellectual property is deemed to be the predominant item to which the
royalties or milestones relate as it is the primary driver of value in its collaboration arrangement.
F-12
For the recognition of revenue associated with each performance obligation, if the Company determines ASC 606 is not appropriate to apply by
analogy, the Company will apply a reasonable, rational and consistently applied accounting policy election to faithfully depict the transfer of services to the
collaboration partner over the estimated performance period. Up-front payments from a collaboration partner are recognized as deferred revenue when
received and recognized as revenue over the estimated performance period. Reimbursement payments from a collaboration partner associated with cost-
sharing provisions in a collaboration arrangement are recognized as the related expense is incurred and classified as an offset to operating expenses.
Valuation of Product Options
The Company's collaboration arrangements may contain options which provide the collaboration partner with the right to obtain additional
licenses. If an arrangement contains product options, by analogy to ASC 606, the Company evaluates the product options to determine whether they
represent material rights, which may include options to acquire additional goods or services for free or at a discount. If the customer options are determined
to represent material rights, they are recognized as a separate performance obligation at inception of the arrangement. The Company allocates a portion of
the transaction price of the collaboration arrangement to material rights based on the relative standalone selling price. Amounts allocated to material rights
are not recognized as revenue until related options are exercised or expire. Key assumptions to determine the standalone selling price of product options in
a collaboration arrangement include, but are not limited to, forecasted revenues, development timelines, incremental costs related to the arrangement,
discount rates and likelihood of technical and regulatory success.
Research and Development
Research and development expenses consist of costs associated with research activities as well as those with the Company’s product
development efforts, conducting pre-clinical trials, clinical trials and manufacturing activities. Research and development expenses are expensed as
incurred. Up-front fees and milestones paid to third parties in connection with technologies which have not reached technological feasibility and do not
have an alternative future use are expensed when incurred.
Direct research and development expenses associated with the Company’s programs include clinical trial site costs, clinical manufacturing costs,
costs incurred for consultants and other external services, such as data management and statistical analysis support and materials and supplies used in
support of clinical programs. Indirect costs of the Company’s clinical programs include salaries, stock-based compensation and an allocation of its facility
and technology costs.
When third-party service providers’ billing terms do not coincide with the Company’s period-end, the Company is required to make estimates of
its obligations to those third parties, including clinical trial and pharmaceutical development costs, contractual services costs and costs for supply of its drug
candidates, incurred in a given accounting period and record accruals at the end of the period. The Company bases its estimates on its knowledge of the
research and development programs, services performed for the period, past history for related activities and the expected duration of the third-party service
contract, where applicable.
Stock-Based Compensation
The Company’s stock-based compensation programs include stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and
an employee stock purchase program (“ESPP”). The Company accounts for stock-based compensation using the fair value method.
The fair value of stock options are estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The fair values of RSAs
and RSUs are based on the fair market value of the Company’s common stock on the date of the grant. The fair value of stock awards, with consideration
given to estimated forfeitures, is recognized as stock-based compensation expense on a straight-line basis over the vesting period of the grants. For stock
awards with performance-vesting conditions, the Company does not recognize compensation expense until it is probable that the performance-vesting
condition will be achieved.
Additionally, the Company granted its Chief Executive Officer options with service and market conditions. A market condition relates to the
achievement of a specified price of the Company’s common stock, a specified amount of intrinsic value indexed to the Company’s common stock or a
specified price of the Company’s common stock in terms of other similar equity shares. The grant date fair value for the options with service and market
conditions is determined by a lattice model with Monte Carlo simulations and is recognized as stock-based compensation expense on a straight-line basis
over the service period.
Under the Company’s ESPP, participating employees purchase common stock through payroll deductions. The purchase price is equal to 85% of
the lower of the closing price of the Company’s common stock on the first business day and the last business day of the relevant purchase period. The fair
value of stock purchase rights is estimated using the Black-Scholes-Merton option-pricing model. The fair value of the look-back provision with the 15%
discount is recognized on a graded-vesting basis as stock-based compensation expense over the purchase period.
F-13
Income Taxes
The Company follows the asset and liability method of accounting for income taxes, which requires the recognition of deferred tax assets and
liabilities for expected future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the
differences are expected to reverse. A valuation allowance is recorded to reduce the net deferred tax asset to zero when it is more likely than not that the net
deferred tax asset will not be realized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained upon an
examination. The amount of the benefit that may be recognized in the financial statements is the largest amount that has a greater than 50% likelihood of
being realized. The Company recognizes interest and penalties related to uncertain tax positions within income tax expense.
It is the intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations and not to repatriate the earnings to the
U.S. Accordingly, the Company does not provide for deferred taxes on the excess of the financial reporting over the tax basis in its investments in foreign
subsidiaries as they are considered permanent in duration.
Leases
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and
circumstances present in the arrangement. Leases with a term greater than 12 months are recognized on the consolidated balance sheets as right-of-use
(“ROU”) assets and short-term and long-term lease liabilities, as applicable. The Company has elected not to recognize leases with terms of 12 months or
less on the consolidated balance sheets. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to
renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew. The Company monitors its
plans to renew its leases no less than on a quarterly basis. In addition, the Company’s lease agreements generally do not contain any residual value
guarantees or restrictive covenants.
Operating lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected
remaining lease term at lease commencement. The initial measurement of the lease liability is determined based on the future lease payments, which may
include lease payments that depend on an index or a rate (such as the consumer price index or other market index). The Company initially measures
payments based on an index or rate by using the applicable rate at lease commencement and subsequent changes in such rates are recognized as variable
lease costs. Variable payments that do not depend on a rate or index are not included in the lease liability and are recognized as they are incurred. Lease
costs for operating leases are recognized on a straight-line basis over the lease term as an operating expense with unrecognized variable lease payments
recognized as incurred. Certain adjustments to the ROU asset may be required for items such as lease prepayments or incentives received. The interest rate
implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed
rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar
economic environment. Components of a lease are bifurcated between lease components and non-lease components. The fixed and in-substance fixed
contract consideration identified is then allocated based on the relative standalone price to the lease and non-lease components. However, ASC Topic 842,
Leases, provides entities with a practical expedient that allows an accounting policy election to not separate lease and non-lease components by class of
underlying asset. In using this expedient, entities would account for each lease component and the related non-lease component together as a single
component. For new and amended real estate leases beginning after January 1, 2019, the Company elected to account for the lease and non-lease
components together for existing classes of underlying assets and allocates the contract consideration to the lease component only. In contrast, the Company
does not apply the practical expedient for leases embedded in manufacturing and supply agreements with certain of its contract manufacturing
organizations and has instead allocated contract consideration between the lease and non-lease components based on their relative standalone price.
Embedded Derivatives
The Company evaluates certain of its financial and business development transactions to determine if embedded components of these contracts
meet the definition of derivative under ASC 815. In general, embedded derivatives are required to be bifurcated from the host instrument if (i) the
embedded feature is not clearly and closely related to the host contract and (ii) the embedded feature, if considered a freestanding instrument, meets the
definition of a derivative. The embedded derivative is reported on the consolidated balance sheets at its fair value. Any change in fair value, as determined
at each measurement period, is recorded as a component of the consolidated statements of operations and comprehensive loss.
F-14
Contingent Consideration
Certain of the Company’s license and collaboration agreements include future payments that are contingent upon the receipt, or receipt and
subsequent sale, of a Priority Review Voucher (“PRV”). The Company has concluded that these contingent payments represent embedded derivatives. The
Company records a liability for such contingent payments at fair value on the date the agreements are effective. The Company estimates the fair value of
contingent consideration derivatives through a valuation model that includes an income approach based on the probability-weighted expected cash flows
that incorporated industry-based probability adjusted assumptions relating to the achievement of the milestone and thus the likelihood of making the
payments. Changes in the fair value of the contingent consideration derivatives can result from changes to one or multiple assumptions, including
adjustments to the discount rates, the assumed development timeline and the probability of achievement of certain regulatory milestones. The Company
revalues its contingent consideration derivatives upon a material change to one or more of the assumptions discussed above. Changes in the fair value of the
Company’s contingent consideration derivatives are recognized in the Company’s consolidated statements of operations and comprehensive loss. Such
changes are classified as other income (loss), which corresponds to the classification of any gain recognized upon the actual sale of a PRV.
Commitments and Contingencies
The Company records liabilities for legal and other contingencies when information available to the Company indicates that it is probable that a
liability has been incurred and the amount of loss can be reasonably estimated. Legal costs in connection with legal and other contingencies are expensed as
costs are incurred.
Recent Accounting Pronouncements
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 ASC 815, or that do not result in
substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument, such as the 2024 Notes or the 2027 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. 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). 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.
3. LICENSE AND COLLABORATION AGREEMENTS
F. Hoffman-La Roche Ltd.
On December 21, 2019, the Company entered into a license, collaboration and option agreement with Roche and a stock purchase agreement (the
“Roche Agreement”) with Roche, providing Roche with exclusive commercial rights to SRP-9001, the Company’s investigational gene therapy for
Duchenne, outside the U.S. The Company retains all rights to SRP-9001 in the U.S. and will perform all development activities within the joint global
development plan necessary to obtain and maintain regulatory approvals for SRP-9001 in the U.S. and the EU, unless otherwise agreed to by the parties.
Further: (i) research and development expenses incurred under the joint global development plan will be equally shared between the Company and Roche,
(ii) Roche is solely responsible for all costs incurred in connection with any development activities (other than those within the joint global development
plan) that are necessary to obtain or maintain regulatory approvals outside the U.S, and (iii) the Company will continue to be responsible for the
manufacturing of clinical and commercial supplies of SRP-9001. The Company has also granted Roche options to acquire ex-U.S. rights to certain future
Duchenne-specific programs (the “Options”) in exchange for separate option exercise payments, milestone and royalty considerations, and cost-sharing
provisions. The agreement became effective on February 4, 2020. The Roche Agreement is governed by a joint steering committee (“JSC”) formed by
representatives from Roche and the Company.
F-15
The JSC, among other activities, manages the overall strategic alignment between the parties, approves any material update to the joint global development
plan and budget and oversees the operations of the subcommittees.
The Company received an aggregate of approximately $1.2 billion in cash consideration from Roche, consisting of an up-front payment and an
equity investment in the Company. The Company may receive up to $1.7 billion in development, regulatory and sales milestones related to SRP-9001.
Upon commercialization, the Company is also eligible to receive tiered royalty payments on net sales based on the average cost to manufacture SRP-9001.
Of the $1.2 billion cash received from Roche, (i) $312.1 million, net of issuance costs, was allocated to the approximately 2.5 million shares of the
Company’s common stock issued to Roche based on the closing price when the shares were issued, (ii) $485.0 million was allocated to the Options, and
(iii) $348.7 million was allocated to a single, combined performance obligation (“Combined Performance Obligation”) comprised of: (i) the license of IP
relating to SRP-9001 transferred to Roche, (ii) the related research and development services provided under the joint global development plan, (iii) the
services provided to manufacture clinical supplies of SRP-9001, and (iv) the Company’s participation in the JSC, because the Company determined that the
license of IP and related activities were not capable of being distinct from one another.
The value assigned to the Options is reflected as deferred revenue and will not be recognized until an option is either: (i) exercised by Roche, or
(ii) expires. If exercised, the value will be aggregated with the option exercise price and recognized over the applicable performance period. If expired, the
value will be recognized immediately. The Company recognizes revenue related to the Combined Performance Obligation on a straight-line basis over the
expected performance period of the joint global development plan, which is expected to extend through the fourth quarter of 2023. Revenue relating to
future development, regulatory and sales milestones will be recognized when the milestone is probable of achievement (which is typically when the
milestone has occurred). Any royalties payable by Roche in the future will be recognized in the period earned.
For the years ended December 31, 2022, 2021 and 2020, the Company recognized $89.2 million, $89.5 million and $84.2 million of
collaboration and other revenues, respectively, the majority of which relates to the Combined Performance Obligation. As of December 31, 2022, the
Company has total deferred revenue of $574.2 million associated with the Roche Agreement, of which $89.2 million is classified as current. Through 2022,
no Options were exercised or expired. As such, deferred revenue related to the separate material rights for the Options remained unchanged at $485.0
million as of December 31, 2022 and 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 years ended December 31, 2022,
2021 and 2020, costs reimbursable by Roche and reflected as a reduction to operating expenses were $117.8 million, $90.5 million and $66.5 million,
respectively. As of December 31, 2022, there was $41.8 million of collaboration receivable included in other current assets.
Genethon
The Company entered into a sponsored research agreement in May 2017 and subsequently entered into a license and collaboration agreement
with Genethon in November 2019 (the “Genethon Collaboration Agreement”) for Genethon’s micro-dystrophin gene therapy program for the treatment of
Duchenne. The Genethon Collaboration Agreement grants the Company with exclusive rights in the majority of the world (primarily excluding the EU) to
Genethon’s micro-dystrophin gene therapy products (“Genethon Products”) and other micro-dystrophin gene therapy products (“Other Licensed Products”).
The Company may be liable for up to $157.5 million and $78.8 million in development, regulatory and sales milestones for the Genethon Products and
Other Licensed Products, respectively. Furthermore, upon commercialization, the Company will be required to make tiered royalty payments based on net
sales of the Genethon Products and the Other Licensed Products. Under the Genethon Collaboration Agreement, a joint steering committee was established
to plan, monitor and coordinate development activities for Genethon Products and Other Licensed Products. The Company and Genethon are responsible
for 75% and 25%, respectively, of development costs related to both the Genethon Products and the Other Licensed Products.
Upon signing the Genethon Collaboration Agreement, the Company made an up-front payment of $28.0 million, which was recorded as research
and development expense in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2019.
Additionally, for the years ended December 31, 2022, 2021 and 2020, the Company recorded $3.5 million, $11.7 million and $10.1 million, respectively, of
research and development expense related to reimbursable development costs incurred by Genethon for Genethon Products. For the year ended December
31, 2021, the Company recorded $4.0 million of research and development expense related to milestone achievements, with no similar activity during for
the years ended December 31, 2022 and 2020. No additional development or regulatory milestones were deemed probable of being achieved and,
accordingly, no additional expense has been recognized.
StrideBio, Inc.
In November 2019, the Company entered into a collaboration and license agreement and a stock purchase agreement (collectively, the “StrideBio
Agreements”) with StrideBio, Inc. (“StrideBio”). The StrideBio Agreements grant the Company
F-16
exclusive worldwide licenses to develop, collaborate and commercialize StrideBio’s adeno-associated viral capsids for gene therapies with respect to
multiple development targets, to which the Company will have the exclusive right to perform development activities (“Sarepta Development Targets”) and
targets that the two parties will jointly develop through completion of Phase 1/2 clinical trials (“Joint Development Targets”). For Sarepta Development
Targets and Joint Development Targets, respectively, the Company may be liable for up to $450.0 million and $835.0 million in development, regulatory
and sales milestone payments per target. Additionally, upon commercialization, the Company may be required to make tiered royalty payments based on
net sales of each target.
Upon signing the StrideBio Agreements, the Company made an up-front payment of $46.9 million, consisting of a cash payment of $17.5 million
and 301,980 shares of the Company’s common stock delivered to StrideBio with a fair value of $29.4 million. The up-front payment was recorded as
research and development expense in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2019.
In November 2022, the Company amended the collaboration and license agreement with StrideBio (the "StrideBio Amendment") such that all research
activities with respect to the Joint Development Targets were assumed by the Company. This amendment resulted in the elimination of all future
development, regulatory and sales milestone obligations. For the year ended December 31, 2022, no development or regulatory milestones were deemed
probable of being achieved and, accordingly, no additional expense has been recognized.
In March 2021, the Company participated in StrideBio’s Series B round of financing and purchased approximately 0.2 million shares of preferred
stock, for cash consideration of $1.8 million. In August 2022, the Company purchased unsecured convertible promissory notes and warrants through a
rights offering with StrideBio for cash consideration of $0.2 million. As a result of the StrideBio Amendment and the Company’s assessment of the fair
value of the securities it held in StrideBio, the Company recorded an impairment loss of $2.0 million related to the equity investment in StrideBio’s Series
B preferred stock and convertible promissory notes and warrants during the year ended December 31, 2022. Please read Note 5, Fair Value Measurements
for further information.
Myonexus Therapeutics Inc.
In April 2019, the Company completed its acquisition of Myonexus Therapeutics, Inc. (“Myonexus”), a clinical-stage gene therapy
biotechnology company that was developing gene therapies for LGMD for $178.3 million. The Company may also be required to make up to $200.0
million in additional payments to selling shareholders of Myonexus based on the achievement of certain sales-and regulatory- related milestones. The
acquisition was accounted for as an asset acquisition as substantially all of the fair value of the gross assets acquired is concentrated in a group of similar
identifiable assets (the five LGMD gene therapy programs). The Company determined that one regulatory-related milestone (not solely based on drug
approval by the FDA) met the definition of a derivative and recorded a contingent consideration liability. As of December 31, 2022 and 2021, the
contingent consideration liability was $35.5 million and $42.0 million, respectively. The changes in fair value are recorded within other (loss) income, net,
in the Company’s consolidated statements of operations and comprehensive loss. Please read Note 5, Fair Value Measurements for further information on
the change in fair value of the contingent consideration liability.
Lysogene S.A. and Henogen S.A.
In October 2018, the Company entered into a license and collaboration agreement to develop and commercialize LYS-SAF302, a gene therapy to
treat Mucopolysaccharidosis type IIIA (“MPS IIIA”) as well as an equity investment agreement with Lysogene S.A. (“Lysogene”). Under the license and
collaboration agreement, in addition to the payment of up-front fees, the Company was potentially liable for a total of $102.8 million in development,
regulatory and sales milestones. Furthermore, the Company was potentially required to make tiered royalty payments based on net sales of the LYS-
SAF302 product subsequent to its commercialization. Beginning January 1, 2020, the Company began to reimburse Lysogene for expenses incurred in
connection with development activities of the MPS IIIA product candidate. The Company sent a termination notice to Lysogene on January 11, 2022 to
notify them of the Company's intent to terminate the license and collaboration agreement. The termination became effective July 11, 2022. The Company is
not obligated to pay early termination penalties to Lysogene, but incurred research and development reimbursements in the six months following
termination totaling $0.8 million.
The Company entered into a development, manufacturing and supply agreement with Henogen S.A. (“Henogen”) in December 2019. Pursuant to
the terms of the agreement, Henogen agreed to reserve manufacturing capacity within their facility to develop, manufacture and supply the Company with
LYS-SAF302. On June 9, 2022, the Company and Henogen entered into an agreement to terminate the development, manufacturing and supply agreement.
As a result, the Company recorded a charge of $17.1 million during the year ended December 31, 2022, which was recorded in research and development
expenses in the accompanying consolidated statements of operations and comprehensive loss.
F-17
Lacerta Therapeutics
In August 2018, the Company entered into a license, development and option agreement (the “Lacerta License Agreement”) and a Series A
Preferred Stock Purchase Agreement (the “Lacerta Stock Purchase Agreement”) with Lacerta Therapeutics, Inc. (“Lacerta”). Pursuant to the Lacerta
License Agreement, the Company licensed exclusive worldwide rights to develop, manufacture and commercialize a pre-clinical Pompe product candidate
(the “Pompe License”). Lacerta also granted the Company exclusive options to enter into exclusive license agreements to develop, manufacture and
commercialize other gene therapy product candidates for Sanfilipo syndrome and L-Amino Acid Decarboxylase Deficiency for additional consideration of
$42.0 million (collectively, the “Options”) when (and if) the Options are exercised. In November 2022, the Company provided written notice of its intent to
terminate the Lacerta License Agreement. The termination will become effective May 8, 2023. Once effective, the Company will no longer be liable for
any remaining development, regulatory and sales milestones associated with the Pompe License and will no longer be required to make tiered royalty
payments based on net sales of the Pompe product subsequent to its commercialization.
Under the Lacerta Stock Purchase Agreement, the Company purchased approximately 4.5 million shares of Series A preferred stock issued by
Lacerta. Under the agreements, the Company made an up-front payment of $38.0 million to Lacerta, of which $30.0 million was allocated to the Series A
preferred stock investment and recorded as an other non-current asset in the accompanying consolidated balance sheets. Changes in the carrying value of
the investment are reported as a component of earnings whenever there are triggering events that warrant impairment or observable price changes in orderly
transactions for identical or similar investments of Lacerta in the future. For the years ended December 31, 2022, 2021 and 2020, the Company did not
record any changes in carrying value of the investment as Lacerta did not issue identical or similar shares during the corresponding periods nor were there
any triggering events that resulted in the impairment of the investment. For the year ended December 31, 2022, no development or regulatory milestones
were deemed probable of being achieved and, accordingly, no additional expense has been recognized.
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 Duchenne 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 up-front
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 expensed during the year ended December 31, 2020 with the remaining $28.7
million expensed during the year ended December 31, 2021. The expense relating to this payment was recognized to research and development expense. As
a result of this payment, the Company has no further financial obligations to Nationwide resulting from the up-front payment received under the Roche
Agreement. For the year ended December 31, 2022, no development or regulatory milestones were deemed probable of being achieved and, accordingly, no
additional in-licensed rights or expenses have been recognized.
BioMarin Pharmaceutical, Inc.
In July 2017, the Company and UWA entered into a settlement agreement with BioMarin. On the same day, the Company entered into a license
agreement, which was subsequently amended in April 2019, with BioMarin and Academisch Ziekenhuis Leiden (“AZL”) (collectively with the Company,
UWA and BioMarin, the “Settlement Parties”). Under these agreements and amendment, BioMarin agreed to provide the Company with an exclusive
license to certain intellectual property with an option to convert the exclusive license into a co-exclusive license and the Settlement Parties agreed to stop
most existing efforts to continue with ongoing litigation and opposition and other administrative proceedings concerning BioMarin’s intellectual property.
BioMarin is also eligible to receive tiered royalty payments, ranging from 4% to 8%, based on the net sales for the three products and product candidates.
In November 2021, the Company entered into a second settlement agreement and second amendment to the license agreement (the “Second
Amendment”), which waived certain future milestone payments and altered royalty payment terms of the agreement. Under the Second Amendment, the
Company may be liable for up to approximately $50.0 million in regulatory milestones for eteplirsen, casimersen and golodirsen. In addition, on and after
July 1, 2022, the tiered royalty payments ranged from 4% to 5%. The royalty terms under the license agreement will expire in March 2024 in the U.S.,
December 2024 in the EU and no later than December 2024 in other countries.
As a result of execution of the license agreement with BioMarin, the Company recorded an in-licensed right intangible asset of $6.6 million in its
consolidated balance sheets as of December 31, 2017, representing the fair value of the U.S. license to BioMarin’s intellectual property. The intangible asset
is being amortized on a straight-line basis over the remaining life of the patent and has a carrying value of $2.7 million as of December 31, 2022.
The FDA approval of AMONDYS 45 in February 2021 resulted in a settlement charge to BioMarin of $10.0 million during the year ended
December 31, 2021 and was expensed as incurred. For the years ended December 31, 2022, 2021 and 2020, the
F-18
Company recognized royalty expense of $30.4 million, $31.4 million and $23.2 million, respectively. For the year ended December 31, 2022, no other
regulatory milestones were deemed probable of being achieved and, accordingly, no additional in-licensed rights or expenses have been recognized.
University of Western Australia
In April 2013, the Company and UWA entered into an amendment to an existing exclusive license agreement relating to the treatment of
Duchenne by inducing the skipping of certain exons. The agreement was further amended in June 2016. Under the amended agreement, the Company may
be obligated to make payments to UWA totaling up to $26.0 million upon the achievement of certain development, regulatory and sales milestones.
Additionally, the Company is required to pay a low-single-digit percentage royalty on net sales of products covered by issued patents licensed under the
agreements with UWA. Corresponding to the FDA approval of EXONDYS 51 in 2016, VYONDYS 53 in December 2019, and AMONDYS 45 in February
2021, the Company recorded milestone payments of $1.0 million, $0.5 million and $0.5 million as in-licensed right intangible assets in its consolidated
balance sheets, respectively. Each in-licensed right is being amortized on a straight-line basis over the remaining life of the relevant patents and have a
combined carrying value of $1.0 million as of December 31, 2022. For the years ended December 31, 2022, 2021 and 2020, the Company recorded $10.5
million, $7.7 million and $5.7 million in royalty expense, respectively, which is included in cost of sales, related to agreements with UWA. For the year
ended December 31, 2022, no other development, regulatory or sales milestones were deemed probable of being achieved and, accordingly, no additional
in-licensed rights or expenses have been recognized.
Research and Option Agreements
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 pre-clinical 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 $41.8 million in research milestone payments. Under these agreements, there are $243.8 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. For the years ended December 31, 2022 and 2021, the Company recognized $6.0
million and $3.0 million of research, option and milestone expenses, respectively, with no similar activity for the year ended December 31, 2020. For the
year ended December 31, 2022, the Company exercised options in a research and option agreement and recognized $8.5 million of up-front expense as a
research and development expense in the accompanying consolidated statements of operations and comprehensive loss. No option exercise payments were
made during the years ended December 31, 2021 and 2020.
Milestone Obligations
Including the agreements discussed above, the Company has license and collaboration agreements in place for which it could be obligated to pay,
in addition to the payment of up-front fees upon execution of the agreements, certain milestone payments as a product candidate proceeds from the
submission of an investigational new drug application through approval for commercial sale and beyond. As of December 31, 2022, the Company may be
obligated to make up to $3.2 billion of future development, regulatory, commercial, and up-front royalty payments associated with its collaboration and
license 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 December 31, 2022, which are discussed above. For the years ended December 31, 2022, 2021 and 2020, the Company
recognized approximately $32.6 million, $50.3 million, $47.3 million relating to certain up-front, milestone, settlement and other payments as research and
development expense, respectively, under these agreements.
4. GAIN FROM SALE OF PRIORITY REVIEW VOUCHER
In February 2021, the Company entered into an agreement to sell the rare pediatric disease PRV it received from the FDA in connection with the
approval of AMONDYS 45 (the “AMONDYS 45 PRV”). 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 AMONDYS 45 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 (the “VYONDYS 53 PRV”). 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 VYONDYS 53 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.
F-19
5. FAIR VALUE MEASUREMENTS
There were no transfers into or out of Level 3 during the year ended December 31, 2022. The tables below present information about the
Company’s financial assets and liabilities that are measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation
techniques it utilizes to determine such fair value:
Assets
Money market funds
Commercial paper
Government and government agency bonds
Corporate bonds
Strategic investments
Certificates of deposit
Total assets
Liabilities
Contingent consideration
Total liabilities
Assets
Money market funds
Strategic investments
Certificates of deposit
Total assets
Liabilities
Contingent consideration
Total liabilities
Fair Value Measurement as of December 31, 2022
Total
Level 1
Level 2
Level 3
467,553
211,369
807,540
125,741
31,321
42,745
1,686,269
$
$
(in thousands)
467,553
—
—
—
321
—
467,874
$
$
—
211,369
807,540
125,741
—
42,745
1,187,395
$
$
—
—
—
—
31,000
—
31,000
36,900
36,900
$
$
—
—
$
$
—
—
$
$
36,900
36,900
Fair Value Measurement as of December 31, 2021
Total
Level 1
Level 2
Level 3
$
1,562,358
34,892
250
1,597,500
$
(in thousands)
$
1,562,358
2,480
250
1,565,088
$
$
—
—
—
—
$
—
32,412
—
32,412
43,600
43,600
$
$
—
$
—
$
—
$
43,600
—
$
43,600
$
$
$
$
$
$
$
$
The Company’s assets with a fair value categorized as Level 1 within the fair value hierarchy include money market funds and the Company’s
strategic investment in Lysogene, a publicly traded company in France, as more fully described in Note 3, License and Collaboration Agreements.
The Company's assets with a fair value categorized as Level 2 within the fair value hierarchy consist of commercial paper, government and
government agency bonds, corporate bonds and certificates of deposit. These assets have been initially valued at the transaction price and subsequently
valued at the end of each reporting period utilizing third-party pricing services. The Company uses observable market inputs to determine value, which
primarily consist of reportable trades. Certain of the short-term investments with original maturities of less than three months are presented as cash
equivalents on the consolidated balance sheets as of December 31, 2022. The Company did not hold any short-term investments as of December 31, 2021.
The Company’s assets with a fair value categorized as Level 3 within the fair value hierarchy consist of a strategic investment in Series A
preferred stock of Lacerta as more fully described in Note 3, License and Collaboration Agreements and strategic investments in two other private
companies. At the end of each reporting period, the fair value of the Company's strategic investments will be adjusted if the issuers were to issue similar or
identical securities or when there is a triggering event for impairment. During the years ended December 31, 2022 and 2021, the company recorded
impairment losses of $2.6 million and $4.5 million, respectively, related to its investments in the private companies.
F-20
The following table represents a roll-forward of the fair value of Level 3 financial assets for each of the periods indicated:
Fair value, beginning of year
Additions
Changes in estimated fair value
Fair value, end of year
$
$
As of December 31,
2022
2021
$
(in thousands)
32,412
1,163
(2,575 )
31,000 $
35,100
1,800
(4,488 )
32,412
The Company’s contingent consideration liability with a fair value categorized as Level 3 within the fair value hierarchy relates to the regulatory-
related contingent payments to 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. 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.
The following table represents a roll-forward of the fair value of Level 3 financial liabilities for each of the periods indicated:
Fair value, beginning of year
Additions
Changes in estimated fair value, net
Fair value, end of year
$
$
As of December 31,
2022
2021
(in thousands)
43,600
—
(6,700 )
36,900
$
$
50,800
—
(7,200 )
43,600
Net decreases of $6.7 million and $7.2 million were recorded during the years ended December 31, 2022 and December 31, 2021, respectively, to
account for the change in fair value of existing contingent consideration liabilities. These changes, which are recorded through earnings, were a result of
updates made to certain inputs and assumptions impacting the probability-weighted expected cash flows, principally the probability of success of the
underlying programs, the approval date of the underlying programs and the estimate of the amount of payments to be ultimately made. As of December 31,
2022, the contingent consideration was recorded as a non-current liability on the Company's consolidated balance sheets.
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable
approximated fair value because of the immediate or short-term maturity of these financial instruments. For fair value information related to the Company’s
debt facilities, please read Note 13, Indebtedness.
6. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
The following table summarizes the Company’s financial assets with maturities of less than 90 days from the date of purchase included in cash
equivalents in the consolidated balance sheets for each of the periods indicated:
Money market funds
Commercial paper
Government and government agency bonds
Corporate bonds
Total
$
$
F-21
As of December 31,
2022
2021
(in thousands)
467,553
$
33,190
128,451
3,157
632,351
$
1,562,358
—
—
—
1,562,358
It is the Company’s policy to mitigate credit risk in its financial assets by maintaining a well-diversified portfolio that limits the amount of
exposure as to maturity and investment type. The weighted average maturity of the Company's available-for-sale securities as of December 31, 2022 was
approximately four months. The Company did not hold any short-term investments classified as available-for-sale securities as of December 31, 2021.
The following tables summarize the Company’s cash, cash equivalents and short-term investments for each of the periods indicated:
Cash and money market funds
Commercial paper
Government and government agency bonds
Corporate bonds
Certificates of deposit
Total cash, cash equivalents and investments
As reported:
Cash and cash equivalents
Short-term investments
Total cash, cash equivalents and investments
Cash and money market funds
Total cash and cash equivalents
As reported:
Cash and cash equivalents
Total cash and cash equivalents
Amortized
Cost
As of December 31, 2022
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Market
Value
(in thousands)
—
$
—
178
9
—
187
$
9
178
187
$
$
—
—
(1,542 )
(282 )
—
(1,824 )
—
(1,824 )
(1,824 )
$
$
$
$
801,979
211,369
807,540
125,741
42,745
1,989,374
966,777
1,022,597
1,989,374
As of December 31, 2021
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Market
Value
(in thousands)
$
—
$
—
—
—
$
$
—
—
—
—
$
$
$
$
2,115,869
2,115,869
2,115,869
2,115,869
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
801,979
211,369
808,904
126,014
42,745
1,991,011
966,768
1,024,243
1,991,011
Amortized
Cost
2,115,869
2,115,869
2,115,869
2,115,869
F-22
7. PRODUCT REVENUES, NET, ACCOUNTS RECEIVABLE AND RESERVES FOR PRODUCT REVENUES
For the years ended December 31, 2022, 2021, and 2020, the Company recorded $843.8 million, $612.4 million and $455.9 million, respectively,
of net product revenues. Three individual customers accounted for 48%, 33% and 7% of net product revenues for the year ended December 31, 2022, 48%,
39% and 10% for the year ended December 31, 2021 and 47%, 39% and 11% for the year ended December 31, 2020. The Company considers there to be
revenue concentration risks for regions where net product revenues exceed 10% of consolidated net product revenues. The concentration of the Company’s
net product revenues within a particular region may have a material adverse effect on the Company’s revenues and results of operations if sales in the
respective regions experience difficulties. For the year ended December 31, 2022, net product revenues totaled $747.1 million and $96.7 million within the
United States and the rest of the world, respectively, with no individual rest of world country or region exceeding 10% of total net product revenues. Net
product revenues within the United States exceeded 90% of total net product revenues for each of the years ended December 31, 2021 and 2020,
respectively.
As of December 31, 2022 and 2021, the Company's accounts receivable were $214.6 million and $153.0 million, respectively, both of which
were related to product sales receivable, net of discounts and allowances. Three individual customers accounted for 36%, 35% and 12% of accounts
receivable from product sales for the year ended December 31, 2022 and 41%, 41% and 10% for the year ended December 31, 2021. As of December 31,
2022, the Company believes that such customers are of high credit quality.
The following table summarizes an analysis of the change in reserves for discounts and allowances for the periods indicated:
Balance, as of December 31, 2020
Provision
Payments/credits
Balance, as of December 31, 2021
Provision
Payments/credits
Balance, as of December 31, 2022
Chargebacks
Rebates
Prompt Pay
Other Accruals
Total
$
$
$
2,281 $
13,308
(14,790 )
799 $
12,446
(12,828 )
417 $
41,771 $
78,637
(59,902 )
60,506 $
102,835
(95,848 )
67,493 $
(in thousands)
1,949 $
9,400
(8,551 )
2,798 $
12,904
(12,359 )
3,343 $
4,969 $
16,107
(14,713 )
6,363 $
47,684
(30,602 )
23,445 $
50,970
117,452
(97,956 )
70,466
175,869
(151,637 )
94,698
The following table summarizes the total reserves above included in the Company’s consolidated balance sheets for the periods indicated:
Reduction to accounts receivable
Component of accrued expenses
Total reserves
$
$
As of December 31,
2022
2021
(in thousands)
25,914
$
68,784
94,698
$
8,321
62,145
70,466
8. INVENTORY
The following table summarizes the components of the Company’s inventory for each of the periods indicated:
Raw materials
Work in progress
Finished goods
Total inventory
As of December 31,
2022
2021
(in thousands)
59,181 $
269,185
38,147
366,513 $
58,822
230,194
26,717
315,733
$
$
F-23
No material inventory reserves existed as of December 31, 2022 or 2021. Non-current inventory, which consists of raw materials and work in
progress, is included in other non-current assets in the Company's consolidated balance sheets. Non-current inventory is anticipated to be consumed beyond
our normal operating cycle.
The following table summarizes the balance sheet classification of the Company's inventory for each of the periods indicated:
Balance sheet classification
Inventory
Other non-current assets
Total inventory
As of December 31,
2022
2021
(in thousands)
$
$
203,968 $
162,545
366,513 $
186,212
129,521
315,733
9. OTHER ASSETS
The following table summarizes the Company’s other current assets for each of the periods indicated:
As of December 31,
2022
2021
(in thousands)
Manufacturing-related deposits and prepaids
Collaboration receivable
Prepaid clinical and pre-clinical expenses
Prepaid maintenance services
Prepaid insurance
Interest receivable
Prepaid commercial expenses
Prepaid research expenses
Prepaid income tax
Other
Total other current assets
$
$
66,455
41,758
11,237
9,815
3,717
3,311
2,947
1,927
1,002
7,722
149,891
$
$
The following table summarizes the Company’s other non-current assets for each of the periods indicated:
Non-current inventory
Manufacturing-related deposits and prepaids
Strategic investments
Restricted cash and investments
Prepaid clinical expenses
Other
Total other non-current assets
$
$
F-24
As of December 31,
2022
2021
(in thousands)
162,545
97,409
31,321
19,024
2,150
5,487
317,936
$
$
93,656
18,647
12,667
8,452
5,282
8
831
3,082
1,100
5,303
149,028
129,521
112,765
34,892
9,904
2,007
3,860
292,949
10. PROPERTY AND EQUIPMENT, NET
Property and equipment are recorded at historical cost, net of accumulated depreciation. The following table summarizes components of property
and equipment, net, for each of the periods indicated:
Leasehold improvements
Lab and manufacturing equipment
Building and improvements
Software and computer equipment
Furniture and fixtures
Land
Land improvements
Office equipment
Construction in progress
Property and equipment, gross
Less: accumulated depreciation
Property and equipment, net
2022
As of December 31,
(in thousands)
2021
97,328
91,806
47,942
47,573
9,313
5,183
4,988
1,193
23,587
328,913
(148,876 )
180,037
$
$
103,370
64,613
47,605
42,506
9,242
5,183
4,921
1,189
25,159
303,788
(112,632 )
191,156
$
$
For the years ended December 31, 2022, 2021 and 2020, depreciation expense totaled $40.0 million, $36.6 million and $25.2 million,
respectively.
11. INTANGIBLE ASSETS, NET
The following table summarizes the components of the Company’s intangible assets for each of the periods indicated:
In-licensed rights
Patents
Software licenses
Intangible assets, gross
Less: accumulated amortization
Intangible assets, net
As of December 31,
2022
2021
(in thousands)
8,573
5,106
302
13,981
(6,403 )
7,578
$
$
8,573
12,382
299
21,254
(7,015 )
14,239
$
$
The in-licensed rights relate to agreements with BioMarin and UWA. As a result of the FDA approval of EXONDYS 51, VYONDYS 53 and
AMONDYS 45, the Company recorded in-licensed rights of $1.0 million, $0.5 million and $0.5 million, respectively, related to its agreement with UWA.
Following the execution of the settlement and license agreements with BioMarin in July 2017, the Company recorded a $6.6 million intangible asset related
to EXONDYS 51 in the U.S. The in-licensed rights are being amortized on a straight-line basis over the remaining life of the related patent because the life
of the related patent reflects the expected time period that the Company will benefit from the in-licensed right. For more information about the in-licensed
rights, please read Note 3, License and Collaboration Agreements. For all the years ended December 31, 2022, 2021 and 2020, the Company recorded $0.7
million, respectively, of amortization related to the in-licensed rights.
Patent amortization expense was $1.1 million, $0.6 million and $0.6 million for the years ended December 31, 2022, 2021 and 2020,
respectively. The Company also expensed the remaining net book value of previously capitalized patents that were later abandoned of $6.0 million, $0.5
million and $0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively, which were included in research and development expenses
on the consolidated statements of operations and comprehensive loss.
Amortization related to internal use software was less than $0.1 million for the years ended December 31, 2022 and 2021, respectively, and $0.5
million for the year ended December 31, 2020.
F-25
The following table summarizes the estimated future amortization for intangible assets:
2023
2024
2025
2026
2027
Thereafter
Total
As of
December 31, 2022
(in thousands)
1,032
1,026
969
837
767
2,947
7,578
$
$
12. ACCRUED EXPENSES
The following table summarizes the Company’s accrued expenses for each of the periods indicated:
$
Accrued contract manufacturing costs
Product revenue related reserves
Accrued employee compensation costs
Accrued clinical and pre-clinical costs
Accrued income taxes
Accrued professional fees
Accrued royalties
Accrued milestone and license expense
Accrued interest expense
Accrued collaboration cost-sharing
Other
Total accrued expenses
$
As of December 31,
2022
2021
(in thousands)
202,173 $
68,784
65,946
28,884
12,521
12,061
8,636
7,702
4,956
2,019
5,314
418,996 $
104,311
62,145
48,299
25,955
216
9,381
11,965
100
1,045
2,887
5,393
271,697
13. INDEBTEDNESS
2027 Convertible Notes Issuance
On September 16, 2022, the Company issued $1,150.0 million aggregate principal amount of convertible senior notes due on September 15,
2027. The 2027 Notes are senior unsecured obligations of the Company and bear interest at a rate of 1.25% per annum, payable semi-annually in cash on
each March 15 and September 15, commencing on March 15, 2023. The net proceeds were $1,126.7 million after deducting the discounts and offering
expenses of $23.3 million. The debt discount is amortized under the effective interest method and recorded as additional interest expense over the life of the
2027 Notes. The effective interest rate on the 2027 Notes is 1.67%. The aggregate issuance of the 2027 Notes includes the issuance of $20.0 million in
aggregate principal amount of 2027 Notes to the Michael A. Chambers Living Trust, an entity affiliated with Michael Chambers, a member of the
Company’s board of directors.
The 2027 Notes may be convertible into shares of the Company’s common stock under certain circumstances prior to maturity at a conversion
rate of 7.0439 shares per $1,000 principal amount of the 2027 Notes (8,100,485 shares of the Company’s common stock in the aggregate), which represents
a conversion price of $141.97 per share, subject to adjustment under certain conditions. Upon conversion, the Company may pay cash, shares of its
common stock or a combination of cash and stock, as determined by the Company at its discretion.
The holders of the 2027 Notes may convert their 2027 Notes at their option only in the following circumstances: (1) during any calendar quarter
commencing after the calendar quarter ending on December 31, 2022, if the last reported sale price per share of common stock exceeds 130% of the
conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the
immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (the
“measurement period”) in which the trading price per $1,000 principal amount of 2027 Notes for each trading day of the measurement period was less than
98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (3) upon
the occurrence of
F-26
certain corporate events or distributions on the Company's common stock, as described in the indenture agreement; (4) if the Company calls such notes for
redemption; and (5) at any time from, and including, March 15, 2027 until the close of business on the second trading day immediately before the maturity
date.
The 2027 Notes are not redeemable by the Company prior to September 20, 2025. On or after September 20, 2025, the Company may redeem for
cash all or any portion of the 2027 Notes at a redemption price equal to the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid
interest, if the last reported sale price of the Company’s common stock exceeds 130% of the conversion price then in effect for at least 20 trading days
(whether or not consecutive) during any 30 consecutive trading day period. Holders of the 2027 Notes have the right to require the Company to repurchase
for cash all or a portion of their notes at 100% of its respective principal amount, plus any accrued and unpaid interest, upon the occurrence of a
fundamental change as defined in the indenture agreement for the 2027 Notes. The 2027 Notes contain customary covenants and events of default,
occurrence of which permits the holders to accelerate all outstanding obligations, including principal and interest.
2022 Capped Call Transactions
In connection with the issuance of the 2027 Notes, the Company entered into privately negotiated capped call transactions with counterparties
intended to minimize the impact of potential dilution upon conversion of the 2027 Notes (the “2022 Capped Calls”). The 2022 Capped Calls have an initial
strike price of approximately $141.97 per share, which corresponds to the initial conversion price of the 2027 Notes and is subject to anti-dilution
adjustments generally similar to those applicable to the 2027 Notes and have a cap price of approximately $210.32 per share. The 2022 Capped Calls cover,
subject to anti-dilution adjustments, 8,100,485 shares of the Company’s common stock, which is the same number of shares of the Company’s common
stock initially underlying the 2027 Notes. If, upon conversion of the 2027 Notes, the price of the Company’s common stock is between the strike price and
the cap price of the capped calls, the counterparties will deliver shares of the Company’s common stock and/or cash with an aggregate value equal to the
difference between the price of the Company’s common stock at the conversion date and the strike price, multiplied by the number of shares of the
Company’s common stock related to the capped calls being exercised. The Company paid $127.3 million for the 2022 Capped Calls, which was recorded
within additional paid-in capital.
2024 Convertible Notes Issuance
On November 14, 2017, the Company issued $570.0 million aggregate principal amount of senior convertible notes due on November 15, 2024.
The 2024 Notes are senior unsecured obligations of the Company and bear interest at a rate of 1.50% per annum, payable semi-annually in cash on each
May 15 and November 15, commencing on May 15, 2018. The net proceeds were $559.4 million after deducting the discounts and offering expenses of
$10.6 million. The debt discount is amortized under the effective interest method and recorded as additional interest expense over the life of the 2024
Notes. The effective interest rate on the 2024 Notes is 1.9%.
The 2024 Notes may be convertible into 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 (7,763,970 shares of the Company's common stock in the aggregate), which represents
a conversion price of $73.42 per share, subject to adjustment under certain conditions. Upon conversion, the Company may pay cash, shares of its common
stock or a combination of cash and stock, as determined by the Company at its discretion.
The holders of the 2024 Notes may convert their 2024 Notes at their option only in the following circumstances: (1) during any calendar quarter
commencing after the calendar quarter ending on December 31, 2017, if the last reported sale price per share of common stock exceeds 130% of the
conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the
immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (the
“measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98%
of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day; (3) upon the
occurrence of certain corporate events or distributions on the Company's common stock, as described in the indenture agreement; and (4) at any time from,
and including, May 15, 2024 until the close of business on the scheduled trading day immediately before the maturity date.
The 2024 Notes are not redeemable by the Company prior to the maturity date. Holders of the 2024 Notes have the right to require the Company
to repurchase for cash all or a portion of their notes at 100% of its respective principal amount, plus any accrued and unpaid interest, upon the occurrence of
a fundamental change as defined in the indenture agreement for the 2024 Notes. The 2024 Notes contain customary covenants and events of default,
occurrence of which permits the holders to accelerate all outstanding obligations, including principal and interest.
2017 Capped Call Transactions
In connection with the issuance of the 2024 Notes, the Company entered into privately negotiated capped call transactions with counterparties
intended to minimize the impact of potential dilution upon conversion of the 2024 Notes (the “2017 Capped Calls”). The 2017 Capped Calls have an initial
strike price of approximately $73.42 per share, which corresponds to the initial conversion price of the 2024 Notes and is subject to anti-dilution
adjustments generally similar to those applicable to the 2024 Notes,
F-27
and have a cap price of approximately $104.88 per share. The 2017 Capped Calls initially covered, subject to anti-dilution adjustments, 7,763,970 shares of
the Company’s common stock, which is the same number of shares of the Company’s common stock initially underlying the 2024 Notes. If, upon
conversion of the 2024 Notes, the price of the Company’s common stock is between the strike price and the cap price of the capped calls, the counterparties
will deliver shares of the Company’s common stock and/or cash with an aggregate value equal to the difference between the price of the Company’s
common stock at the conversion date and the strike price, multiplied by the number of shares of the Company’s common stock related to the capped calls
being exercised. The Company paid $50.9 million for the 2017 Capped Calls, which was recorded within additional paid-in capital.
2024 Notes Repurchase
In connection with the issuance of the 2027 Notes, on September 14, 2022, the Company entered into separate, privately negotiated transactions
to repurchase a portion of the outstanding 2024 Notes. The holders exchanged $150.6 million in aggregate principal value of 2024 Notes held by them for
an aggregate payment of $248.6 million for full settlement of the principal value and accrued interest on such date. The repurchase was not pursuant to the
conversion privileges included in the terms of the debt at issuance and therefore was accounted for as a debt extinguishment. The Company accounted for
the debt extinguishment by recognizing the difference between the reacquisition price of the debt and the net carrying amount of the extinguished debt as
loss on debt extinguishment. Accordingly, on the repurchase date, the Company: (i) reduced the carrying value of repurchased 2024 Notes by $149.3
million, (ii) eliminated accrued interest of $0.8 million, and (iii) recorded $98.5 million of debt extinguishment expense which is included in the loss on
debt extinguishment in consolidated statements of operations and comprehensive loss. The outstanding principal balance of the 2024 Notes as of December
31, 2022, after considering the repurchase discussed above, is $419.4 million, which is convertible into 5,712,253 shares of Company common stock.
2017 Capped Calls Partial Settlement
As a result of the repurchase of a portion of the 2024 Notes discussed above, on September 19, 2022, the Company entered into agreements with
the 2017 Capped Calls counterparties to terminate a portion of the 2017 Capped Calls in a notional amount corresponding to the principal amount of the
2024 Notes repurchased. In connection with the termination, the Company received $26.3 million in cash from the counterparties, which was included
within additional paid-in capital.
Termination of 2019 Term Loan
On September 16, 2022, using proceeds received from the issuance of the 2027 Notes described above, the Company prepaid in full all of its
amounts outstanding with respect to the December 2019 term loan with Biopharma Credit PLC and Biopharma Credit Investments V (Master) LP (the
"December 2019 Term Loan") and repaid in full all obligations due. The aggregate payoff amount was approximately $585.5 million, which includes
$550.0 million of principal, additional loan consideration and premiums of $25.4 million, and accrued interest of $10.1 million through the repayment date.
The loss on debt extinguishment was $26.9 million, and is included in the loss on debt extinguishment in the consolidated statements of operations and
comprehensive loss.
Derivatives
Embedded derivatives are required to be separated from the host contract and accounted for as a derivative instrument if the economic
characteristics and risk of the embedded derivative are not clearly and closely related to the economic characteristics and risks of the host contract and if a
separate instrument with the same terms as the embedded derivative would be a derivative instrument subject to the scope of ASC 815. ASC 815 includes a
scope exception for instruments issued by a reporting entity that are both (1) indexed to the reporting entity’s own stock and (2) classified in stockholders’
equity in the reporting entity’s statement of financial position.
All of the features of the 2027 Notes were evaluated to determine if separate accounting as a derivative instrument was required. The conversion
feature in the 2027 Notes is indexed solely in the Company's common stock and since the Company retains the option to settle these notes in shares, the
conversion feature qualified for a “scope exception” from treatment as a derivative since the conversion feature qualifies as “fixed for fixed”, meaning the
settlement is equal to the difference between a fixed monetary amount of convertible notes and the fair value of a fixed number of the Company’s shares,
and therefore, the Company did not separately account for it as a derivative. Other features of the notes, such as rights under certain default events, were not
considered clearly and closely related to the economic characteristics and risks of the underlying debt host instrument, however, the fair value of these
features were determined to be immaterial.
The capped calls are indexed solely to the Company’s common stock and classified in stockholders’ equity since Sarepta retains the right to
receive shares if there is an exercise of the capped call options. The premiums paid for the capped call options, equal to their fair value at inception, were
recorded as a reduction to additional paid-in capital.
Total Debt Obligations
As of December 31, 2022 and 2021, the Company recorded approximately $1,544.3 million and $1,096.9 million as long-term debt on the
consolidated balance sheets. For the years ended December 31, 2022, 2021 and 2020, the Company recorded $53.2 million, $63.5 million and $59.9 million
of contractual interest expense, respectively. Contractual interest expense for the years ended
F-28
December 31, 2022, 2021 and 2020 is inclusive of $7.5 million, $7.6 million and $25.5 million of amortization of debt discounts, respectively.
The following table summarizes the Company’s debt facilities for the periods indicated:
Principal amount of the 2024 Notes
Principal amount of the 2027 Notes
Unamortized discount - debt issuance costs of 2024 Notes
Unamortized discount - debt issuance costs of 2027 Notes
Net carrying value of the convertible notes
Principal amount of the 2019 Term Loan
Unamortized discounts
Net carrying value of 2019 Term Loan
Total carrying value of debt facilities
Fair value of 2024 Notes
Fair value of 2027 Notes
Fair value of 2019 Term Loan
Total fair value of debt facilities
As of December 31,
2022
2021
(in thousands)
419,371 $
1,150,000
(3,059 )
(22,020 )
1,544,292
—
—
—
1,544,292 $
765,046 $
1,308,482
—
2,073,528 $
569,993
—
(6,320 )
—
563,673
550,000
(16,797 )
533,203
1,096,876
846,138
—
576,085
1,422,223
$
$
$
$
The fair values of the 2027 Notes and 2024 Notes are based on open market trades and is classified as Level 1 in the fair value hierarchy. The fair
value of the December 2019 Term Loan is classified as Level 2 in the fair value hierarchy and is determined using a discounted cash flow analysis with
market interest rates adjusted for credit risk as a significant input.
The following table summarizes the total principal payments due under the Company’s debt arrangements:
2023
2024
2025
2026
2027
Thereafter
Total payments
As of
December 31, 2022
(in thousands)
—
419,371
—
—
1,150,000
—
1,569,371
$
$
The aggregate annual maturities of long-term debt principal and contractual interest during the years ending December 31, 2023, 2024, 2025,
2026 and 2027 are $20.6 million, $440.0 million, $14.4 million, $14.4 million and $1,164.4 million, respectively.
14. EQUITY
In October 2021, the Company issued approximately 7.1 million shares of common stock through an underwritten public offering. The offering
price was $81.00 per share. The Company received net proceeds of approximately $548.5 million from the offering, net of commission and offering
expenses of approximately $26.5 million.
In February 2020, the Company issued approximately 2.5 million shares of common stock with a fair value of $312.1 million, net of direct
transaction fees of $4.3 million as part of the Roche transaction (see Note 3, License and Collaboration Agreements).
F-29
15. STOCK-BASED COMPENSATION
In June 2013, the Company’s stockholders approved the 2013 Employee Stock Purchase Plan (the “2013 ESPP”) which authorized 0.3 million
shares of common stock available to be issued. In June 2016 and 2019, the Company’s stockholders approved an additional 0.3 million and 0.5 million
shares, respectively, of common stock available for issuance under the 2013 ESPP. As of December 31, 2022, 0.2 million shares of common stock remain
available for future grant under the 2013 ESPP.
In September 2014, the Company initiated the 2014 Employment Commencement Incentive Plan (the “2014 Plan”). The 2014 Plan, which
authorized 0.6 million shares of common stock to be issued and allows for the grant of stock options, stock appreciation rights ("SARs"), RSAs, RSUs,
performance shares and performance units. As of December 31, 2022, 7.0 million shares have been added to the Company's 2014 Plan. As of December 31,
2022, 0.8 million shares of common stock remain available for future grant under the 2014 Plan.
In June 2018, the Company’s stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan, which authorized 2.9
million shares of common stock to be issued, allows for the grant of stock options, SARs, RSAs, RSUs, performance shares and performance units. In June
2020, an additional 3.8 million shares of common stock were approved by the Company’s stockholders and added to the 2018 Plan. In August 2022, an
additional 2.5 million shares of common stock were approved by the Company’s shareholders and added to the 2018 Plan. Together with the roll-over
shares from the Company’s 2011 Equity Incentive Plan, 4.9 million shares of common stock remain available for future grant under the 2018 Plan as of
December 31, 2022.
Stock Options
In general, stock options have a ten-year term and vest over a four-year period, with one-fourth of the underlying shares vesting on the first
anniversary of the grant and 1/48th of the underlying shares vesting monthly thereafter, such that the underlying shares will be fully vested on the fourth
anniversary of the grant, subject to the terms of the applicable plan under which they were granted.
The fair values of stock options granted during the periods presented are measured on the date of grant using the Black-Scholes-Merton option-
pricing model, with the following assumptions:
Risk-free interest rate (1)
Expected dividend yield (2)
Expected term (3)
Expected volatility (4)
2022
1.6 - 4.2%
—
5.09 years
52.4 - 72.9%
For the Year Ended December 31,
2021
0.4 - 1.3%
—
4.99 years
60.1 - 70.8%
2020
0.1 - 1.3%
—
5.00 years
57.3 - 68.2%
(1)
(2)
(3)
(4)
The risk-free interest rate is estimated using an average of Treasury bill interest rates over a historical period commensurate with the expected term
of the option that correlates to the prevailing interest rates at the time of grant.
The expected dividend yield is zero as the Company has not paid any dividends to date and does not expect to pay dividends in the future.
The expected term is estimated using historical exercise behavior.
The expected volatility is the implied volatility in exchange-traded options of the Company’s common stock.
The amounts estimated according to the Black-Scholes-Merton option-pricing model may not be indicative of the actual values realized upon the
exercise of these options by the holders.
F-30
The following table summarizes the Company’s stock option activity for the period indicated:
Grants outstanding at beginning of
the period
Granted
Exercised
Cancelled and forfeited
Grants outstanding at end of the period
Grants exercisable at end of the period
Grants vested and expected to vest at
end of the period
For the Year Ended December 31, 2022
Shares
Weighted Average
Exercise Price
8,196,921 $
1,777,370
(318,258 )
(525,893 )
9,130,140 $
4,692,578 $
8,696,519 $
69.39
84.70
70.25
109.31
70.04
70.27
69.05
The weighted-average grant date fair value per share of stock options granted during the years ended December 31, 2022, 2021 and 2020 was
$48.82, $48.16 and $61.38, respectively.
Options outstanding at December 31, 2022
Options exercisable at December 31, 2022
Options vested and expected to vest at December 31, 2022
Aggregate
Intrinsic Value
(in thousands)
$
$
$
557,927
289,473
540,503
Weighted Average
Remaining
Contractual
Life (Years)
6.1
5.2
6.0
The following table summarizes the Company’s shares vested and stock options exercised for each of the periods indicated:
Aggregate grant date fair value of shares vested
Aggregate intrinsic value of stock options
exercised
Grant Modification
For the Year Ended December 31,
2022
2021
(in thousands)
2020
$
$
140,889
12,150
$
$
79,068 $
80,355
10,622 $
144,750
In June 2017, the Company granted its Chief Executive Officer 3,300,000 options with service and market conditions which were subject to a
five-year cliff vesting schedule. On April 19, 2022 (the “Effective Date”), the Company entered into an agreement with its Chief Executive Officer to
modify the vesting conditions of the options. Under the agreement, one-third of the options vested (the “Vested Tranche”) on the Effective Date with no
required service or market conditions. Subject to the Chief Executive Officer's continued service through each applicable vesting date and the compound
annual growth rate of the Company's common stock exceeding that of the Nasdaq Biotech Index in varying percentages, the remaining two-thirds of the
options (the “Unvested Tranche”) shall vest in varying increments at any time between the Effective Date and June 26, 2025 (the “Measurement Period”)
when (and if) the average of the closing price of the Company’s common stock during any consecutive 20 trading day period during the Measurement
Period reaches certain pre-determined target stock prices. Additionally, the Chief Executive Officer is subject to a one-year post-exercise restriction to sell,
transfer or dispose shares acquired upon the exercise of any options that vest after deduction of any shares withheld or sold to pay the applicable aggregate
exercise price and/or withholding taxes.
To determine the incremental compensation cost of the modification, the fair value of the modified awards was compared to the fair value of the
original awards measured immediately before its terms or conditions were modified. As the Vested Tranche became immediately vested on the Effective
Date, the Vested Tranche does not have service or market conditions. As such, the post-modification fair value for the Vested Tranche is based on the
Black-Scholes-Merton option-pricing model, while the pre-modification fair value is based on a lattice model with Monte Carlo simulations.
The Unvested Tranche represents awards with market conditions only. Both the pre- and post-modification fair values for the Unvested Tranche
are determined by a lattice model with Monte Carlo simulations. The incremental compensation costs related to varying increments of the Unvested
Tranche will be recognized as stock-based compensation expense over their respective derived service periods, an output from the Monte Carlo simulation,
and will be fully recognized over a 1.3 year period from the date of modification.
F-31
During the year ended December 31, 2022, 550,110 options relating to the Unvested Tranche met the conditions for vesting in that the average
closing price of the Company's common stock exceeded $105.74 during 20 consecutive trading days in August 2022 and the compound annual growth rate
of the Company's common stock exceeded that of the Nasdaq Biotech Index by greater than 5%. Accordingly, all previously unrecognized expense
associated with these options was immediately recognized. The aggregate incremental cost of the modification of the Chief Executive Officer's awards was
$123.3 million. Of this amount, $109.9 million was recognized as stock-based compensation expense during the year ended December 31, 2022. The
remaining amount, or $13.4 million, will be recognized during the year ended December 31, 2023.
Restricted Stock Units
The Company grants RSUs to members of its board of directors and employees. The following table summarizes the Company’s RSU activity for
the period indicated:
Grants outstanding at beginning of the
period
Granted *
Vested
Forfeited
Grants outstanding at end of the period
For the Year Ended December 31, 2022
Shares
Weighted Average
Grant Date
Fair Value
1,320,206 $
1,044,826
(389,761 )
(145,639 )
1,829,632 $
98.69
85.39
103.05
93.36
90.59
*Included in this amount are 38,500 RSUs with performance conditions relating to regulatory approval of certain of the Company's product candidates. As
of December 31, 2022, none of the performance conditions were probable of being achieved. Accordingly, no stock-based compensation relating to these
grants has been recognized. If the performance milestones are achieved within the required time frame, the Company may recognize up to $3.1 million of
stock-based compensation related to these grants, which represents the aggregate grant date fair value of these awards. All other stock options and the
remaining RSUs granted during the periods presented in the tables above have only service-based vesting conditions and the majority vest over four years.
2013 Employee Stock Purchase Plan
Under the Company’s 2013 ESPP, participating employees purchase common stock through payroll deductions. The purchase price is equal to
85% of the lower of the closing price of the Company’s common stock on the first business day and the last business day of the relevant purchase period.
The 24-month offering period will end between February 29, 2024 and August 31, 2024. The following table summarizes the Company’s ESPP activity for
each of the periods indicated:
Number of shares purchased
Proceeds received (in millions)
Stock-based Compensation Expense
For the Year Ended December 31,
2022
2021
2020
$
115,124
7.5 $
111,171
7.8 $
102,031
7.5
The following table summarizes stock-based compensation expense by function included within the consolidated statements of operations and
comprehensive loss:
Research and development
Selling, general and administrative
Total stock-based compensation
For the Year Ended December 31,
2022
2021
(in thousands)
2020
61,293 $
171,725
233,018 $
50,526 $
63,417
113,943 $
41,671
66,399
108,070
$
$
F-32
The following table summarizes stock-based compensation expense by grant type included within the consolidated statements of operations and
comprehensive loss:
Stock options
Restricted stock awards/units
Employee stock purchase plan
Total stock-based compensation
2022
For the Year Ended December 31,
2021
(in thousands)
2020
174,868 $
52,601
5,549
233,018 $
68,995 $
40,055
4,893
113,943 $
68,832
33,457
5,781
108,070
$
$
As of December 31, 2022, there was $206.6 million of total unrecognized stock-based compensation expense related to the Company’s stock-
based compensation plans. The expense is expected to be recognized over a weighted-average period of approximately three years. Of this amount, $98.9
million relates to options with service conditions only, $13.4 million relates to awards with service and market conditions, and the remaining $94.3 million
related to restricted stock units with service conditions only.
16. 401 (K) PLAN
The Company sponsors a 401(k) Plan (“the Plan”) in the U.S. and other retirement plans in the rest of the world, all of which are defined
contribution plans. The Plan is available to all employees who are age 21 or older. Participants may make voluntary contributions and the Company makes
matching contributions according to the Plan’s matching formula. Matching contributions fully vest after one year of service for all employees. The
expense related to the Plan primarily consists of the Company’s matching contributions.
Expense related to the Plan totaled $6.5 million, $5.3 million and $5.3 million for the years ended December 31, 2022, 2021 and 2020,
respectively.
17. OTHER (LOSS) INCOME, NET
The following table summarizes other (loss) income, net for the periods indicated:
Interest expense
Interest income
Accretion of investment discount, net
Impairment of equity investment
Other (expense) income
Other expense, net
Loss on debt extinguishment
Gain (loss) on contingent consideration, net*
Gain from sale of Priority Review Voucher
Total other (loss) income, net
For the Year Ended December 31,
2022
2021
2020
(in thousands)
$
$
$
(53,248 ) $
16,488
11,235
(2,575 )
(6,921 )
(35,021 ) $
(125,441 )
6,700
—
(153,762 ) $
(63,525 ) $
354
157
(4,488 )
(936 )
(68,438 ) $
—
7,200
102,000
40,762 $
(59,947 )
2,970
4,489
—
517
(51,971 )
—
(45,000 )
108,069
11,098
* The gain (loss) on contingent consideration, net is related to the fair value adjustment of the regulatory-related contingent payments that are accounted for
as derivatives. Please see Note 5. Fair Value Measurements for further details.
F-33
18. INCOME TAXES
The following table summarizes the loss before the provision (benefit) for income taxes by jurisdiction for the periods indicated:
Domestic
Foreign
Total
For the Year Ended December 31,
2022
2021
(in thousands)
2020
$
$
(251,384 ) $
(438,579 )
(689,963 ) $
(47,633 ) $
(371,315 )
(418,948 ) $
(204,956 )
(348,109 )
(553,065 )
The following table summarizes provision (benefit) for income taxes in the accompanying consolidated financial statements for the periods
indicated:
For the Year Ended December 31,
2022
2021
(in thousands)
2020
Current provision:
Federal
State
Foreign
Total current provision
Deferred benefit:
Federal
State
Foreign
$
— $
13,193
944
14,137
—
—
(612 )
(612 )
13,525 $
— $
(40 )
181
141
—
—
(309 )
(309 )
(168 ) $
4
624
680
1,308
—
—
(245 )
(245 )
1,063
Total deferred benefit
Total income tax expense (benefit)
$
The following table summarizes the reconciliation between the Company’s effective tax rate and the statutory income tax rate for each of the
periods indicated:
Federal income tax rate
State taxes
Research and development and other tax
credits
Valuation allowance
Permanent differences
Stock-based compensation
Foreign rate differential
Other
Effective tax rate
For the Year Ended December 31,
2022
2021
2020
21.0 %
4.1
6.9
(14.7 )
(3.3 )
(1.2 )
(13.2 )
(1.6 )
(2.0 ) %
21.0 %
0.4
10.0
(9.8 )
(0.3 )
(3.0 )
(18.4 )
0.1
(0.0 ) %
21.0 %
0.6
10.1
(21.3 )
(1.6 )
3.5
(12.9 )
0.4
(0.2 ) %
Permanent differences affecting the Company’s effective tax rate primarily include the premium paid to repurchase a portion of the 2024 Notes,
excess stock-based compensation tax deductions, net of non-deductible stock-based compensation and limitation on deductibility of officer compensations.
F-34
The following table summarizes the analysis of the deferred tax assets and liabilities for each of the periods indicated:
Deferred tax assets:
Net operating loss carryforwards
Difference in depreciation and amortization
Research and development tax credits
Stock-based compensation
Lease liabilities
Capitalized inventory
Debt discount
Capitalized research and development costs
Other
Total deferred tax assets
Deferred tax liabilities:
Right of use asset
Debt discount
Total deferred tax liabilities
Valuation allowance
Net deferred tax assets
As of December 31,
2022
2021
(in thousands)
$
241,826 $
39,725
261,067
80,193
11,782
33,366
35,975
74,886
44,022
822,842
(9,174 )
—
(9,174 )
(811,908 )
$
1,760 $
330,392
31,563
201,512
38,132
10,890
24,172
5,875
—
38,315
680,851
(7,405 )
—
(7,405 )
(672,319 )
1,127
For tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to currently deduct research and
development expenses and requires taxpayers to capitalize and amortize the costs over five years for research activities performed in the United States and
15 years for research activities performed outside the United States. The provision required the Company to record a current state tax expense of $13.2
million primarily due to the temporary suspension of utilizing net operating loss carryforwards in certain states the Company operates in.
The Company has evaluated the positive and negative evidence bearing upon the realizability of its U.S. net deferred tax assets, which are
comprised principally of federal and state net operating loss carryforwards, research and development tax credit carryforwards, capitalized research and
development costs, stock-based compensation expense, capitalized inventory, and intangibles. Under the applicable accounting standards, management has
considered the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of net federal and
state deferred tax assets. Accordingly, a full valuation allowance against the U.S. net deferred tax asset is maintained at December 31, 2022 and 2021. The
net change in the valuation allowance for deferred tax assets was an increase of $139.6 million and $66.5 million for the years ended December 31, 2022
and 2021, respectively. This increase for the year ended December 31, 2022 was primarily due to the generation of federal and state income tax credits, an
increase in equity compensation, capitalized research and development costs and an increase in the debt discount deferred tax asset as a result of the
integration of the 2022 Capped Calls associated with the 2027 Notes, which from a tax perspective resulted in an increase to the valuation allowance which
was recorded through equity.
The Company generated foreign deferred tax assets mainly consisting of net operating loss carryforwards, stock-based compensation and
unrealized gain/losses. Based upon the income projections in the majority of the foreign jurisdictions, the Company believes it will realize the benefit of its
future deductible differences in these jurisdictions. As such, the Company has not recorded a valuation allowance against these foreign jurisdictions. Brazil
and the Netherlands have generated deferred tax assets, which consist primarily of net operating loss carryforwards. The Company has concluded that it is
more likely than not that we will not recognize the future benefits of the deferred tax assets in these jurisdictions, and accordingly, a full valuation
allowance has been recorded against these foreign deferred tax assets.
As of December 31, 2022, the Company had federal and state net operating loss carryforwards of $925.7 million and $616.2 million,
respectively, available to reduce future taxable income. Federal and state net operating loss carry forwards of $229.8 million and $572.0 million will expire
at various dates between 2023 and 2041. Federal and state net operating loss carryforwards of $695.9 million and $44.2 million, respectively, can be carried
forward indefinitely. Utilization of these net operating losses could be limited under Section 382 of the Internal Revenue Code and similar state laws based
on historical or future ownership changes and the value of the Company’s stock. Additionally, the Company has $180.1 million and $102.4 million of
federal and state research and development credits, respectively, available to offset future taxable income. These federal and state research and development
credits begin to expire between 2023 and 2042 and between 2023 and 2037, respectively. The Company also has foreign net operating loss
F-35
carryforwards of $15.3 million, mainly derived from the net operating loss generated by its subsidiary in Brazil, which may be carried forward indefinitely.
The Company, or one of its subsidiaries, files income tax returns in the U.S., and various state and foreign jurisdictions. The federal, state and
foreign income tax returns are generally subject to tax examinations for the tax years ended December 31, 2019 through December 31, 2022. To the extent
the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal
Revenue Service, state or foreign tax authorities to the extent utilized in a future period.
The follow table summarizes the reconciliation of the beginning and ending amount of total unrecognized tax benefits for each of the periods
indicated:
Balance at beginning of the period
Increase related to current year tax positions
Increase related to prior year tax positions
Decrease related to prior year tax positions
Balance at end of the period
For the Year Ended December 31,
2022
2021
(in thousands)
2020
$
$
53,815 $
8,079
—
(190 )
61,704 $
48,475 $
5,503
—
(163 )
53,815 $
41,753
6,722
—
—
48,475
The balance of total unrecognized tax benefits at December 31, 2022, if recognized, would not affect the effective tax rate on income from
continuing operations, due to a full valuation allowance against the Company’s U.S. deferred tax assets. The Company does not expect that the amount of
unrecognized tax benefits to change significantly in the next twelve months. The Company’s policy is to recognize interest and/or penalties related to
income tax matters in income tax expense. It had no accrual for interest or penalties on its consolidated balance sheets at December 31, 2022 or 2021. No
interest and/or penalties were recognized in 2022 or 2021.
The Company’s intent is to only make distributions from non-U.S. subsidiaries in the future when they can be made at no net tax cost. Otherwise,
the Company considers all of its foreign earnings to be permanently reinvested outside of the U.S. and has no plans to repatriate these foreign earnings to
the U.S. The Company has no material unremitted earnings from its non-U.S. subsidiaries.
Effective December 31, 2021, the Company adopted a policy to account for Global Intangible Low-Taxed Income ("GILTI") as a period cost
under the Tax Cuts and Jobs Act.
19. LEASES
The Company has real estate operating leases in Cambridge, Andover, Burlington and Bedford, Massachusetts, Dublin and Columbus, Ohio, and
Durham, North Carolina that provide for scheduled annual rent increases throughout each lease’s term. The Company has also identified leases embedded
in certain of its manufacturing and supply agreements as the Company determined that it controls the use of the facilities and related equipment therein. For
more information related to manufacturing and supply agreements with Catalent, Inc. (“Catalent”), please refer to Note 21, Commitments and
Contingencies.
Bedford, Massachusetts
On April 22, 2022, the Company entered into a lease agreement (the “Bedford Lease”) for 288,000 square feet of to-be-constructed research and
development and manufacturing space in Bedford, Massachusetts. The term of the Bedford Lease commences upon the landlord’s completion of the initial
construction of the core and shell of the building, at which time the Company will obtain control of the premises and commence internal construction
activities. The Company is not involved in the initial construction of the core and shell of the building and will record the lease liability and ROU asset on
its consolidated balance sheets when it obtains control of the premises, which is currently expected to be during the first quarter of 2023. The initial term of
the Bedford Lease is anticipated to be 15 years commencing at the earlier of (i) date the certificate of occupancy is issued; or (ii) January 1, 2024,
representing the establishment of the Company’s obligation to pay rent for the premises. The Company has two options to extend the lease for a period of
ten years each, exercisable under certain conditions and at a market rate determined in accordance with the lease agreement.
Undiscounted minimum rent payments due over the 15-year term of the lease aggregate to $307.4 million. Additionally, the Company is
responsible for reimbursing the landlord for the Company’s share of the property’s operating expenses and property taxes.
F-36
The Bedford lease also provides for a tenant improvement allowance of $72.0 million to be used towards costs incurred by the Company in the design and
construction of the premises.
In May 2022, in connection with the execution of the Bedford Lease, the Company issued a letter of credit collateralized by cash deposits of
approximately $8.4 million, which was included as restricted cash in the other non-current assets of the Company’s consolidated balance sheets. Such letter
of credit shall be reduced to approximately $5.6 million at the commencement of the fourth rent year, provided certain conditions set forth in the Bedford
Lease are satisfied.
Columbus, Ohio
On December 22, 2018, the Company entered into a lease agreement for a research and development facility in Columbus, Ohio (the “Columbus
Lease”). On May 19, 2022 (the "Columbus Lease Amendment Date"), the Company entered into an amendment to the Columbus Lease to expand the
footprint and extend the lease term from June 2026 to December 2036 (the “Columbus Amendment”). The Columbus Amendment will expand from its
current form of approximately 78,000 square feet to 167,000 square feet through a series of expansion spaces commencing at various periods through
January 1, 2025.
Each expansion space commences on the date which approximates when the landlord will deliver control of that space for the Company to carry
out design and construction activities (the “Columbus Commencement Date”). The Company is obligated to pay rent on each expansion space nine months
after the Columbus Commencement Date. The Columbus Lease and Columbus Amendment expire on December 31, 2036, and the Company has options to
extend the lease by five years in both 2036 and 2041. Each option is exercisable under certain conditions and at a market rate determined in accordance
with the lease agreement. As a result of the Columbus Amendment, total undiscounted rent payments due over the 15-year term from the Columbus Lease
Amendment Date aggregate to $38.9 million.
On June 1, 2022, the Company commenced design and construction activities on an area of the premises of approximately 18,000 square feet
(the “Second Expansion Space”) and, therefore, it was determined that the lease related to the Second Expansion Space had commenced on that date. On
October 1, 2022, the Company commenced design and construction activities on an area of the premises of approximately 36,000 (the "Initial Expansion
Space") and, therefore, it was determined that the lease related to the Initial Expansion space had commenced on that date. The total ROU asset and lease
liability associated with the Columbus Lease, inclusive of the Second Expansion Space and the Initial Expansion Space, was $10.7 million and $16.4
million, respectively, as of December 31, 2022.
As of December 31, 2022, ROU assets for operating leases were $65.0 million and operating lease liabilities were $73.1 million. The following
table contains a summary of the lease costs recognized and other information pertaining to the Company’s operating leases for the periods indicated:
Lease cost
Operating lease cost
Variable lease cost
Total lease cost
Other information
Operating lease payments
Operating lease liabilities arising from obtaining ROU
assets
Weighted average remaining lease term
Weighted average discount rate
$
$
$
$
F-37
For the Year Ended December 31,
2022
2021
(in thousands)
18,184 $
35,505
53,689 $
28,737
18,742
47,479
20,778 $
24,449
40,006 $
6.4 years
8.3 %
13,225
3.5 years
7.6 %
The following table summarizes maturities of lease liabilities and the reconciliation of lease liabilities as of December 31, 2022:
2023
2024
2025
2026
2027
Thereafter
Total minimum lease payments
Less: imputed interest
Total operating lease liabilities
Included in the consolidated balance sheet:
Current portion of lease liabilities within other current liabilities
Lease liabilities, non-current
Total operating lease liabilities
For the Year Ended
December 31, 2022
(in thousands)
21,046
20,754
15,324
8,423
8,518
27,633
101,698
(28,631 )
73,067
15,489
57,578
73,067
$
$
$
$
20. NET LOSS PER SHARE
Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding. Diluted net
loss per share is computed by dividing net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents
outstanding. Given that the Company recorded a net loss for each of the periods presented, there is no difference between basic and diluted net loss per
share since the effect of common stock equivalents would be anti-dilutive and are, therefore, excluded from the diluted net loss per share calculation.
Net loss
Weighted-average common shares outstanding - basic
Effect of dilutive securities*
Weighted-average common shares outstanding - diluted
Net loss per share — basic and diluted
For the Year Ended December 31,
2022
2021
2020
(in thousands, except per share amounts)
$
(703,488 ) $
87,559
—
87,559
$
(8.03 ) $
(418,780 ) $
81,262
—
81,262
(5.15 ) $
(554,128 )
77,956
—
77,956
(7.11 )
* For the years ended December 31, 2022, 2021 and 2020, stock options, RSAs, RSUs and ESPP to purchase of approximately 11.2 million, 9.7 million and
9.0 million shares of common stock, respectively, were excluded from the net loss per share calculation as their effect would have been anti-dilutive. The
Company accounts for the effect of its 2027 Notes and 2024 Notes on diluted net earnings per share (“EPS”) 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 year ended December 31, 2022, the inclusion of the potential share settlement of the 2027 Notes was anti-dilutive.
During the years ended December 31, 2022, 2021 and 2020, the inclusion of the potential share settlement of the 2024 Notes was anti-dilutive.
Accordingly, the potential conversion of 5,712,253, 7,763,970 and 7,763,970 shares related to the 2024 Notes has been excluded from the computation of
diluted net loss per share for the years ended December 31, 2022, 2021 and 2020, respectively, and the potential conversion of 8,100,485 shares related to
the 2027 Notes has been excluded from the computation of diluted net loss per share for the year ended December 31, 2022.
21. COMMITMENTS AND CONTINGENCIES
Manufacturing Obligations
The Company has entered into long-term contractual arrangements from time to time for the provision of goods and services.
Thermo Fisher Scientific, Inc.
The Company entered into a development, commercial manufacturing, and supply agreement in June 2018 and, subsequently, entered into the
first and second amendments in May 2019 and July 2020, respectively, with Thermo, formerly
F-38
Brammer Bio MA, LLC (collectively, the “Thermo Agreements”). Pursuant to the terms of the Thermo Agreements, the Company had access to
substantially all of the facility’s eight clean room suites for the Company’s gene therapy programs, subject to certain minimum and maximum volume
limitations. The Company determined that the Thermo Agreements contained a lease because the Company had the right to direct the use of the facility and
related equipment therein. The lease on four of the eight dedicated clean room suites at Thermo commenced during 2020 and the remaining four
commenced during 2021, which is when the dedicated clean room suites became available for use by the Company.
In October 2021, the Company executed a third amendment (the “Amendment”) that modified the terms of the Thermo Agreements. The
modification significantly decreased the Company’s right of use of the facility’s capacity and significantly reduced the fixed and in-substance fixed
payments due over the remaining term of the agreement. The modification was accounted for as a lease termination, resulting in: (i) the derecognition of
right of use assets of $23.4 million, (ii) the derecognition of lease liabilities of $20.1 million, and (iii) the recognition of a loss of $3.3 million, which is
included in research and development expense. In addition, as a result of the capacity changes associated with the Amendment, $21.1 million of accelerated
amortization of nonrefundable advance payments made to Thermo that were previously recorded as other assets in the accompanying consolidated balance
sheets were charged to research and development expense for the year ended December 31, 2021.
Under the Amendment, the Thermo Agreements will expire on December 31, 2028, or earlier if certain conditions are met. The Company has the
ability to extend the term with an 18-months’ notice and an agreement between the two parties. The Company also has the ability to terminate the Thermo
Agreements prior to expiration, subject to the payment of additional financial consideration. Further, the Company has committed to guaranteed purchases
under the Amendment on a take-or-pay basis regardless of whether services or goods are ordered. During the year ended December 31, 2022, the Company
did not satisfy the total guaranteed purchase requirements in the fiscal year 2022. As such, the Company recognized a loss of approximately $54.0 million
during the year ended December 31, 2022, reflecting the estimated shortfall related to the annual guaranteed purchase requirement for the manufacturing
and supply of gene therapy materials. The loss has been classified as research and development expense in the accompanying consolidated statement of
operations and comprehensive loss for the year ended December 31, 2022, with the outstanding liability reflected as accrued contract manufacturing costs
within accrued expenses in the consolidated balance sheets as of December 31, 2022. No similar losses were incurred in 2021 or 2020.
Catalent, Inc.
The Company entered into a manufacturing collaboration agreement and, subsequently, entered into a manufacturing and supply agreement with
Catalent, formerly Paragon Biosciences, Inc. in October 2018 and February 2019, respectively (collectively, the “Catalent Agreements”). Pursuant to the
terms of the Catalent Agreements, Catalent agreed to provide the Company with two dedicated clean room suites and an option to reserve two additional
clean room suites for its gene therapy programs, subject to certain minimum and maximum volume limitations. In September 2019, the Company exercised
the option to gain access to the two additional clean room suites. The Catalent Agreements will expire on December 31, 2024. The Company has the ability
to terminate the Catalent Agreements prior to expiration, subject to the payment of additional financial consideration. The Company determined that the
Catalent Agreements contained a lease because the Company had the right to direct the use of the facility and related equipment therein. The lease on all
four dedicated clean room suites at Catalent commenced during 2020, which is when the dedicated clean room suites became available for use by the
Company.
In March 2021, the Company modified the terms of the Catalent Agreements. The modification decreased the Company’s right of use of certain
dedicated clean room suites and reduced the fixed and in-substance fixed payments due over the remaining term of the agreement. The modification was
accounted for as a partial lease termination, resulting in: (i) the derecognition of right of use assets of $22.8 million, (ii) the derecognition of lease liabilities
of $20.0 million, and (iii) the recognition of a loss of $2.8 million, which is included in research and development expense.
In November 2022, the Company further modified certain terms of the Catalent Agreements which extended the term of the agreement through
December 31, 2028. The extension of the term of the agreement resulted in no change to the Company’s right of use of certain dedicated clean room suites
other than the length of the term and extended no additional control over other suites at the date of modification. The change in the term of the Catalent
Agreements represents a modification of the existing embedded lease over certain clean room suites. The modification resulted in the following: (i) the
recognition of additional right of use assets of $19.2 million, (ii) the recognition of additional lease liabilities of $19.2 million, and (iii) a $3.9 million
increase to long-term deposits manufacturing and a corresponding $3.9 million decrease to short-term deposits manufacturing, which are included in other
current assets and other non-current assets, respectively, within the consolidated balance sheets. The modification also removed certain fixed payments due
over the remaining term of the agreement. Further, in order to maintain the Company's dedicated clean room suites, it has committed to guaranteed
purchases under the Amendment on a take-or-pay basis regardless of whether services or goods are ordered. As of December 31, 2022, the Company
believes it is probable that the guaranteed purchase requirements will be met in the normal course of business throughout the term of the Catalent
Agreements.
F-39
Aldevron, LLC
The Company entered into a clinical and commercial supply agreement in December 2018, as subsequently amended in June 2020, with
Aldevron LLC (“Aldevron”) for the supply of plasmid DNA to fulfill its needs for gene therapy clinical trials and commercial supply (collectively, the
“Aldevron Agreements”). Pursuant to the terms of the Aldevron Agreements, Aldevron agreed to reserve a certain amount of manufacturing capacity on a
quarterly basis. In return, the Company is required to make advance payments to Aldevron related to the manufacturing capacity. The term of the Aldevron
Agreements will expire on December 31, 2026. The Company has the option to extend the term of the Aldevron Agreements by one year if the Company
delivers a written notice of its intention to extend to Aldevron no later than June 1, 2025. Both parties have the right to early terminate without additional
penalty. The Company has determined that the Aldevron Agreements do not contain an embedded lease because it does not convey the right to control the
use of Aldevron’s facility or related equipment therein.
The following table presents non-cancelable contractual obligations arising from long-term contractual arrangements, including obligations
related to leases embedded in certain supply agreements:
2023
2024
2025
2026
2027
Thereafter
Total manufacturing commitments
As of
December 31, 2022
(in thousands)
649,644
221,774
162,698
117,220
117,220
117,220
1,385,776
$
$
Additionally, should the Company obtain regulatory approval for any drug product candidate produced as a part of the Company’s manufacturing
obligations above, additional minimum batch requirements with the respective manufacturing parties would be required.
Other Funding Commitments
The Company has several on-going clinical trials in various clinical trial stages. Its most significant clinical trial expenditures are to contract
research organizations (“CROs”). The CRO contracts are generally cancellable at the Company’s option. As of December 31, 2022, the Company has
approximately $480.8 million in cancellable future commitments based on existing CRO contracts. For the years ended December 31, 2022, 2021 and
2020, the Company recognized approximately $78.7 million, $47.9 million and $40.4 million, respectively, for expenditures incurred by CROs.
Litigation
In the normal course of business, the Company from time to time is named as a party to various legal claims, actions and complaints, which have
included and may include matters involving securities, employment, intellectual property, arising from the use of therapeutics utilizing its technology, or
others. We record a loss contingency reserve for a legal proceeding when we consider the potential loss probable and we can reasonably estimate the
amount of the loss or determine a probable range of loss. We provide disclosure when we consider a loss reasonably possible or when we determine that a
loss in excess of a reserve is reasonably possible. We provide an estimate of such reasonably possible losses or an aggregate range of such reasonably
possible losses, unless we believe that such an estimate cannot be made. The Company has not recorded any material accruals for loss contingencies and in
management's opinion no material range of loss is estimable for the matters described below as of December 31, 2022.
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 the
patented cultured host cell technology allegedly used 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 and willful infringement, an unspecified amount of damages that is no less than a
reasonable royalty (treble damages), attorneys’ fees and costs, and such other relief as the court deems just and proper. On January 4, 2022, the Court
denied Sarepta’s motion 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). Sarepta answered the Complaint on January 18, 2022, and a case schedule has been set with a trial commencing on
January 29, 2024.
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
F-40
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 sought to invalidate certain NS patents concerning exon 53
skipping technology (U.S. Patent Nos. 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 and willful infringement of each of the NS Patents allegedly arising
from Sarepta’s activities, including the sale of, its exon 53 skipping product, VYONDYS 53 (golodirsen). NS further seeks a determination of non-
infringement by NS alleged to arise from NS’s activities, including the sale of, its exon 53 skipping product, Viltepso (viltolarsen) and invalidity of certain
patents licensed to the Company from University of Western Australia (“UWA”) (U.S. Patent Nos. 9,994,851, 10,227,590, and 10,266,827, collectively the
“UWA Patents”). NS is seeking legal fees and costs, an unspecified amount of monetary relief (treble damages) attributed to Sarepta’s alleged infringement,
and such other relief as the court deems just and proper. In January 2022, the PTAB granted institution of all claims of all NS Patents in response to
Sarepta’s IPR Petitions and determined that Sarepta has demonstrated a reasonable likelihood of success in proving that the NS Patents are unpatentable.
NS filed a motion for preliminary injunction solely seeking Sarepta’s withdrawal of the IPR Petitions, which was ultimately granted after the U.S. Court of
Appeals for the Federal Circuit reversed and remanded to the district court on February 8, 2022. Sarepta subsequently withdrew the IPRs, which were
terminated on June 14, 2022. On December 27, 2021, the district court partially granted and denied the motion to dismiss by Sarepta and ordered NS to file
a Second Amended Complaint (“SAC”), which it did on January 14, 2022. In the SAC, NS maintains all claims of the original complaint of July 13, 2021,
except a determination of non-infringement of the UWA Patents. On January 28, 2022, Sarepta filed its answer to the SAC, with defenses and
counterclaims against NS and NS Pharma Inc. that include infringement of the UWA Patents allegedly arising from their activities concerning, including
the sale of, its exon 53 skipping product, Viltepso (viltolarsen) and breach of contract. Sarepta is also seeking a determination of invalidity of the NS
Patents. Sarepta is seeking an award of relief in its defenses to NS’ allegations, a judgment of breach of contract, a determination of invalidity of the NS
Patents, a judgment of infringement and willful infringement of the UWA Patents, legal fees and costs, an unspecified amount of monetary relief (treble
damages) attributable to NS’ alleged infringement, and such other relief as the court deems just and proper. The Court entered a scheduling order with a
trial scheduled to commence on May 13, 2024.
F-41
Exhibit 10.70
TENTH AMENDMENT TO LICENSE, COLLABORATION, AND OPTION AGREEMENT
This TENTH AMENDMENT TO LICENSE, COLLABORATION, AND OPTION AGREEMENT (this
“Tenth Amendment”) is made and entered into as of May 31, 2022 (the “Tenth Amendment Effective Date”) between
Sarepta Therapeutics Three LLC, a limited liability company organized and existing under the laws of the State of
Delaware, United States of America, with its principal offices at 215 First Street, Cambridge, MA, 02142 (“Sarepta”) and
F. Hoffmann-La Roche Ltd, a company organized and existing under the laws of Switzerland, with its principal office at
Grenzacherstrasse 124, 4070 Basel, Switzerland (“Roche”). Sarepta and Roche may be referred to herein individually as a
“Party” and collectively as the “Parties.”
WHEREAS, Sarepta and Roche entered into that certain License, Collaboration, and Option Agreement executed on
December 21, 2019 and effective as of February 4, 2020 and amended October 23, 2020,
October 28, 2020, February 4, 2021, June 23, 2021, August 31, 2021, November 30, 2021, January 5, 2022, and January 28,
2022, and March 23, 2022 (the “Original Agreement”); and
WHEREAS, the Parties desire to make certain further amendments to the Original Agreement;
NOW, THEREFORE, in consideration of the promises and covenants contained in this Tenth Amendment, and intending to
be legally bound, the Parties hereby agree as follows:
1.
Interpretation. Capitalized terms not defined in this Tenth Amendment have the meanings given such terms in the
Original Agreement. References to Sections and Schedules herein will be to Sections and Schedules of the Original
Agreement, except as otherwise noted.
2. Amendments.
a.
Section 8.6.1 shall be deleted and replaced by the following:
Development Supply Agreement. Unless otherwise agreed by the Parties, no later than
(a) June 30, 2022, with regards to the Lead Product, and (b) no later than nine months following the
effective date of exercise of the Option with regards to every other Licensed Product to which this
Article 8 (Manufacturing and Supply) applies in accordance with Section 8.1, (or such other time as
agreed by each Party), the Parties will negotiate in good faith and enter into a supply agreement on
reasonable and customary terms for the supply of such Licensed Product by Sarepta to Roche in the
Roche Territory at the Supply Price (the “Development Supply Agreement”), and a related quality
agreement, which agreements will govern the terms and conditions of the Manufacturing of such
Licensed Product for Development purposes. The Parties may choose to combine into a single agreement
the Development Supply Agreement and the Commercial Supply Agreement for a Licensed Product.
b.
Section 8.6.2 shall be deleted and replaced by the following:
Commercial Supply Agreement. Unless otherwise agreed by the Parties, no later than
(a) June 30, 2022, with regards to the Lead Product, and (b) no later than twelve (12) months following
the effective date of the Option Exercise with regards to every other Licensed Product to which this
Article 8 (Manufacturing and Supply) applies in accordance with Section 8.1, (or such other time as
agreed by each Party), the Parties will negotiate in good faith and enter into a commercial supply
agreement on reasonable and customary terms for the commercial-grade supply of such Licensed
Product by Sarepta to Roche in
1
the Roche Territory at the Supply Price (the “Commercial Supply Agreement” and together with the
Development Supply Agreement, the “Supply Agreements”), and a related quality agreement, which
agreements will govern the terms and conditions of the Manufacturing and supply of such Licensed Product
for Commercialization purposes. As noted above, the Parties may choose to combine into a single agreement
the Development Supply Agreement and the Commercial Supply Agreement for a Licensed Product,
3. Effect on Original Agreement. Except as specifically amended by this Tenth Amendment, the Original Agreement will
remain in full force and effect and is hereby ratified and confirmed. Each future reference to the Original Agreement
will refer to the Original Agreement as amended by this Tenth Amendment. To the extent a conflict arises between the
terms of the Original Agreement and this Tenth Amendment, the terms of this Tenth Amendment shall prevail but only
to the extent necessary to accomplish their intended purpose.
4.
Incorporation. Article 17 of the Original Agreement is hereby incorporated mutatis mutandis into this Amendment.
5. Binding Effect. This Tenth Amendment will be binding upon and inure to the benefit of the Parties and their respective
permitted successors and assigns.
6. Authority. As of the Tenth Amendment Effective Date, each Party hereby represents and warrants that
(a) it has the power and authority to execute and deliver this Tenth Amendment, (b) the execution, delivery, and
performance of this Tenth Amendment by it has been duly authorized by all requisite corporate action, and (c) this
Tenth Amendment has been duly executed and delivered on behalf of such Party and constitutes a legal, valid, and
binding obligation of such Party and is enforceable against it in accordance with its terms.
7. Governing Law. This Tenth Amendment and all amendments, modifications, alterations, or supplements hereto, and
the rights of the Parties, will be construed under and governed by the laws of the State of New York, United States,
exclusive of its conflicts of laws principles.
8. Amendments. This Tenth Amendment may not be modified or amended, except by another agreement in writing
executed by duly authorized signatories of each Party.
9. Counterparts. This Tenth Amendment may be executed in two or more counterparts, all of which taken together will be
regarded as one and the same instrument. Each Party may execute this Tenth Amendment in Adobe™ Portable
Document Format (PDF) sent by electronic mail. PDF signatures of authorized signatories of the Parties will be
deemed to be original signatures, will be valid and binding upon the Parties, and, upon delivery, will constitute due
execution of this Tenth Amendment.
[Signatures Follow]
2
IN WITNESS WHEREOF, the Parties have executed this Tenth Amendment to License, Collaboration, and Option
Agreement through their duly authorized representatives.
Sarepta Therapeutics Three, LLC
By: /s/ Adam Hopkin
Name: Adam Hopkin
Title: Manager
F. Hoffmann-La Roche Ltd
By: /s/ Claire Steers
Name: Claire Steers
Title: Global Alliance Director
By: /s/ Hannah Boehm
Name: Hannah Boehm
Title: Legal Counsel
[Signature Page To Tenth Amendment To License, Collaboration, and Option Agreement]
Exhibit
10.72
November
18, 2022
Mr. Douglas S. Ingram
Dear Doug:
Re: Amendments to Employment Agreement
This letter agreement (“Letter Agreement”) amends, effective on the date above, certain terms of the Employment Agreement
(the “Employment Agreement”) dated June 26, 2017 between you and Sarepta Therapeutics, Inc. (the “Company”). This Letter Agreement is
intended to relate to the Letter Agreement dated April 19, 2022 between you and the Company. Except as provided herein, the Employment
Agreement will continue in accordance with its terms.
The noncompetition covenant set forth in Section 10(b) of the Employment Agreement will change such that the noncompetition
covenant will extend until the later of (x) eighteen (18) months following the termination of your employment with the Company and (y) April 19,
2027.
To indicate your agreement with the foregoing, pleasesign and return this Letter Agreement to me. This Letter Agreement
will become effective as of the date on which you sign below.
Very truly yours,
SAREPTA THERAPEUTICS, INC.
By: /s/ Ryan Brown
Name: Ryan E. Brown
Title: SVP, General Counsel
Accepted and Agreed:
/s/ Douglas S. Ingram
Name: Douglas S.
Ingram
Date: November 18,
2022
[Signature Page to Letter
Agreement]
Exhibit 10.73
SEPARATION AND CONSULTING AGREEMENT AND GENERAL RELEASE
This Separation and Consulting Agreement and General Release (the “Agreement”) by and between Bill
Ciambrone (“Employee”) and Sarepta Therapeutics, Inc. (the “Company”), is made effective as of the date following
Employee’s signature and the expiration of the seven (7) day revocation period without revocation (the “Effective Date”)
with reference to the following facts:
A.
Employee was employed by the Company as Sarepta Therapeutics and was an at- will employee with no
employment agreement in place.
B.
“Separation Date”).
Employee is being separated as an employee of the Company effective December 31, 2022 (the
C.
The Company wishes to continue to retain Employee as a consultant, and Employee is willing to
provide consulting services pursuant to the terms of this Agreement.
D.
Employee and the Company want to end their relationship amicably and establish the obligations of the
parties including, without limitation, all amounts due and owing to the Employee.
NOW, THEREFORE, in consideration of the agreements hereinafter set forth, the parties agree as follows:
1.
Separation Date; Consulting Services.
(a)
Employee’s Separation. Employee acknowledges and agrees that his/her status as an employee
of the Company ends on the Separation Date. Employee hereby agrees to execute such further document(s)
as shall be determined by the Company as necessary or desirable to give effect to the termination of
Employee’s status as an employee of the Company; provided that such documents shall not be inconsistent
with any of the terms of this Agreement.
(b)
Consulting Services. Beginning January 1, 2023 and ending on the earlier of June 30, 2023, or
the date upon which the Company terminates for Cause (as defined below) the relationship as defined herein
(the “Consulting Period”), Employee shall be retained by the Company as a Consultant, and shall be available
to
(i) answer questions with respect to matters that were previously within the scope of Employee’s
responsibilities; (ii) produce any deliverables that may be assigned by the Company, including without
limitation, cooperate with assigned Company employees to establish an appropriate file structure, and provide
to the Company any and all data, metadata, analyses and other information owned by, and/or generated on
behalf of, the Company; and (iii) cooperate with the Company with respect to any internal investigation or
administrative, regulatory or judicial proceeding involving matters within the scope of Employee’s duties and
responsibilities to the Company or its affiliates during his/her employment with the Company (including,
without limitation, Employee being reasonably available to the Company upon reasonable
notice for interviews and factual investigations, appearing at the Company’s reasonable request to give
testimony without requiring service of a subpoena or other legal process, and
turning over to the Company all relevant Company documents, files and records which are, or may have
come into, Employee’s possession during his/her employment) (the “Consulting Services”). Employee’s
primary contact with the Company, including for the arrangement of any Consulting Services, shall be Bilal
Arif. However, Employee may contact other Company employees as necessary to perform his consulting
services. The Company’s requests for Consulting Services shall not be unduly burdensome and shall not
require more than twenty (20) hours a week of Employee’s time. The Company shall reimburse Employee
for reasonable, pre-approved out-of-pocket expenses incurred in providing Consulting Services consistent
with the Company’s policies. Such expenses shall include, without limitation, travel costs and, to the extent
Employee reasonably believes that separate representation is warranted in connection with any internal
investigation or administrative, regulatory or judicial proceeding, reasonable legal fees. “Cause” shall mean
(i) Employee’s failure to reasonably provide Consulting Services requested by the Company, or (ii)
Employee’s material breach of his/her continuing obligations pursuant to this Agreement or the Confidential
Proprietary Rights and Non- Disclosure Agreement (attached hereto as Exhibit B).
(c)
Consideration. In consideration for agreeing to provide the Consulting Services, during the
Consulting Period the Employee shall be paid a consulting fee of $ 500 per hour. Employee shall submit a
monthly invoice outlining the hours and tasks performed, and payment is due within 30 days of the
Company’s receipt of invoice.
2.
Equity. The outstanding equity awards (“Equity Awards”) issued to Employee as of the Separation Date, as
attached hereto in Exhibit A, shall continue to vest through the last day of the Consulting Period (as defined above) in
accordance with the Company’s 2018 Equity Incentive Plan, the Company’s Amended and Restated 2011 Equity Incentive
Plan, and the Company’s 2014 Employment Commencement Incentive Plan, as amended (collectively, the “Equity
Agreement”). Employee shall have no less than nine months (through 9/30/2023) from the Separation Date (but in no event
beyond the remaining term of such Equity Awards) to exercise any Equity Awards already vested as of the Separation Date.
Equity Awards that vest during the Consulting Period shall be exercisable following the termination of the Consulting period
through 9/30/2023. All unvested Equity Awards as of the termination of the Consulting Period shall be immediately
cancelled and forfeited. Employee’s rights with respect to Equity Awards granted to him/her shall be governed by the Equity
Agreement, provided that nothing therein shall be construed in a manner that reduces the period of continued vesting or the
period of exercisability identified in this Section 2(b). Employee shall not be entitled to any additional consideration,
including but not limited to, equity vesting in the event of a Change of Control during, or at any time after, the Consulting
Period. Employee acknowledges and agrees that except as otherwise stated in this paragraph, he/she does not now, and will
not in the future, have rights to vest in any other stock options or equity under any stock option or other equity plan (of
whatever name or kind) that Employee participated in, or was eligible to participate in, during his/her employment with the
Company.
3.
Benefits. The Company hereby agrees, subject to (i) Employee’s signing of this Agreement without
revocation and not revoking this Agreement as provided in Section 5(b) below; (ii) Employee’s performance of his/her
continuing obligations pursuant to this Agreement, and the Confidential Proprietary Rights and Non-Disclosure
Agreement (attached hereto as Exhibit B), and (iii) provided that the Consulting Period does not terminate prior to June
30, 2023, to provide to Employee the following payments and benefits.
(a)
Good Faith Payment. Employee acknowledges that he has no legal right or entitlement to a
2023 annual bonus under the 2022 annual bonus plan; however, Company and Employee agree that Employee
will be paid a lump sum, good faith payment in an amount equal to his 2022 annual incentive bonus at the
bonus multiplier percentage approved by the Board of Directors (the “Good Faith Payment”). The Good Faith
Payment will be paid at
some time after the bonus multiplier percentage is approved by the Board of Directors.
(b)
Benefits. Employee will continue to be covered by the Company’s group medical, dental and/or
vision insurance plans (“Health Plans”) as currently elected through the Separation Date. Regardless of
whether Employee executes this Agreement, the Employee’s rights to continue coverage under the Health
Plans following the Separation Date shall be governed by the federal law known as COBRA (the terms
regarding COBRA will be set forth in a separate written notice). Subject to Employee signing and not
revoking this Agreement as provided in Section 5(b) below, and to Employee’s eligibility for, entitlement to,
and timely election of continued coverage in Health Plans under COBRA, then during the period between
January 1, 2023 and June 30, 2023 (the “Eligibility Period”), Employee will be entitled to continued
participation in Company’s Health Plans and the Company will directly pay the entire COBRA premium on
the Employee’s behalf. At the end of the Eligibility Period, the Company will no longer be obligated to pay
premiums as described, and coverage under the Health Plans will be continued only to the extent required by
COBRA and only to the extent that Employee timely pays the full premium amount required for COBRA
continuation coverage of the Health Plans. Employee should consult the COBRA materials that will be
provided under separate cover for details regarding eligibility for, and election of, COBRA continuation
coverage of the Health Plans.
4.
Final Paycheck; Payment of Accrued Wages and Expenses
(a)
Final Paycheck. Employee acknowledges that on or about the Separation Date, Employee
received any and all (a) unpaid regular wages and/or any vacation time accrued through the Separation Date;
and (b) any other monies under any other form of compensation or benefit that was due to Employee in
connection with his/her employment with, or separation of employment from, the Company. Employee is
entitled to these payments regardless of whether Employee executes this Agreement. Employee
acknowledges and agrees that he/she is not entitled to bonus compensation for 2022.
(b)
Business Expenses. The Company shall reimburse Employee for all outstanding expenses
incurred prior to the Separation Date that are consistent with the
Company’s policies in effect from time to time with respect to travel and other business expenses, subject to
the Company’s written requirements in effect at the time of the Separation Date with respect to reporting and
documenting such expenses. Employee shall submit for reimbursement all outstanding expenses incurred by
the Separation Date on or before December 31, 2022. Employee is entitled to these payments regardless of
whether Employee executes this Agreement.
(c)
Full Payment. Employee acknowledges that the payment and arrangements described in
this Section and Section 2 shall constitute full and complete satisfaction of any and all amounts properly due
and owing to Employee as a result of his/her employment with the Company.
5.
Employee’s Release of the Company. In exchange for the Good Faith Payment described in Section 3
above, the receipt and adequacy of which consideration is hereby acknowledged:
(a)
Employee, on his/her own behalf and on behalf of his/her family members, heirs, executors,
administrators, agents, and assigns, hereby and forever releases the Company and its current and former
officers, directors, employees, agents, investors, attorneys, affiliates,
divisions, and subsidiaries, and predecessor and successor corporations and assigns (collectively, the
“Releasees”) from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any
claim, complaint, charge, duty, obligation, or cause of action relating to any matters of any kind, whether
presently known or unknown, suspected or unsuspected, that Employee may possess against any of the
Releasees arising from any omissions, acts, facts, or damages that have occurred up until and including the
Effective Date of this Agreement, including, without limitation:
(i)
Company and the termination of that relationship;
any and all claims relating to or arising from Employee’s employment relationship with the
any and all claims for wrongful discharge of employment; termination in violation of public
(ii)
policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of
covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or
intentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent
or intentional interference with contract or prospective economic advantage; unfair business practices;
defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false
imprisonment; conversion; and disability benefits;
any and all claims for violation of any federal, state, or municipal statute, including, but not
(iii)
limited to, Title VII of the Civil Rights Act of 1964, 42 U.S.C.
§ 2000e et seq., the Americans With Disabilities Act of 1990, 42 U.S.C. § 12101 et seq., the Age
Discrimination in Employment Act, 29 U.S.C. § 621 et seq. (“ADEA”), the Genetic Information
Nondiscrimination Act of 2008, 42 U.S.C. § 2000ff et seq., the Family and Medical Leave Act, 29
U.S.C. § 2601 et seq., the
Worker Adjustment and Retraining Notification Act (“WARN”), 29 U.S.C. § 2101 et seq., , the
Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq., Executive Order 11246, Executive Order 11141, the
Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and the Employee Retirement Income Security Act
of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., all as amended; all claims arising out of the Massachusetts
Fair Employment Practices Act, Mass. Gen. Laws ch. 151B, § 1 et seq., the Massachusetts Civil Rights
Act, Mass. Gen. Laws ch. 12, §§ 11H and 11I, the Massachusetts Equal Rights Act, Mass. Gen. Laws.
ch. 93, § 102 and Mass. Gen. Laws ch. 214, § 1C, the Massachusetts Payment of Wages Act, Mass. Gen.
Laws ch. 149, § 1 et seq., the Massachusetts Right of Privacy Law, Mass.
Gen. Laws ch. 214, § 1B, the Massachusetts Parental Leave Act, Mass. Gen. Laws ch. 149, § 105D, and
the Massachusetts Small Necessities Leave Act, Mass. Gen. Laws ch. 149, § 52D, and the Massachusetts
Paid Family and Medical Leave Law, Mass. Gen. Laws ch.175M, § 1 et seq., all as amended;
(iv)
any and all claims for violation of the federal or any state constitution;
(v)
employment discrimination;
any and all claims arising out of any other laws and regulations relating to employment or
(vi)
any claim for any loss, cost, damage, or expense arising out of any dispute over the non-
withholding or other tax treatment of any of the proceeds received by Employee as a result of this
Agreement;
(vii)
and any all claims relating to wages, compensation, bonuses, incentive pay,
equity, stock, stock options or change in control agreement with the Company;
(viii)
dealing inherent in any contract between the parties; and
and all claims for breach of contract or of the implied covenant of good faith and fair
(ix)
(b)
any and all claims for attorneys’ fees and costs.
Employee acknowledges that he/she is waiving and releasing any rights he/she may have under
the ADEA, and that this waiver and release is knowing and voluntary. Employee acknowledges that this
waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective
Date of this Agreement. Employee acknowledges that the consideration given for this waiver and release is in
addition to anything of value to which Employee was already entitled. Employee further acknowledges that
he/she has been advised by this writing that: (i) he/she should consult with an attorney prior to executing this
Agreement; (ii) he/she has been given at least twenty-one (21) days within which to consider this Agreement;
(iii) he/she has seven (7) days following his/her execution of this Agreement in which to revoke it; (iv) this
Agreement shall not be effective until after the revocation period has expired and Employee will not receive
the benefits of Section 3 of this Agreement until such period has expired without revocation; and (v) nothing
in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith
of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs
for doing so, unless specifically authorized by federal law. To revoke his/her acceptance of this Agreement,
Employee must contact Ryan E. Brown, Senior Vice President, General Counsel, by email at
RBrown@Sarepta.com by no later than 5:00 P.M. Eastern Time on or before the seventh (7th) day following
Employee’s signature of this Agreement.
(c)
In giving this release, the Employee expressly waives and relinquishes all rights and benefits
under any statute or other law, which provides that a general release does not extend to claims which the
creditor/employee does not know or suspect to exist in his/her favor at the time of executing the release, which
if known by him/her must have materially affected his/her settlement with the debtor/employer.
(d)
THIS RELEASE CONTAINS A WAIVER OF RIGHTS UNDER THE MASSACHUSETTS
WAGE ACT: Employee acknowledges, agrees and understands that employees have certain rights under the
Massachusetts Wage Act, M.G.L. chapter 149 et seq. (the “MA Wage Act”) regarding when, how, and how
much they must be paid, including but not limited to the right to be paid wages earned within timeframes
provided in the MA Wage Act; that wages include amounts payable to employees for hours worked, which
may include salaries, determined and due commissions, overtime pay, tips, and earned vacation or holiday
payments due to employees under oral or written agreements; and that employees have the right to bring
private lawsuits for violation of the MA Wage Act. Employee affirms that he/she has received all wages,
including accrued unused vacation as of the Separation Date, and that as to any amounts not hereby affirmed,
Employee voluntarily and knowingly waives all rights under the MA Wage Act.
(e)
Notwithstanding anything in this Section 5 to the contrary, nothing in this Agreement is
intended to release or waive Employee’s rights (i) under COBRA,
(ii) to unemployment insurance and worker’s compensation benefits, (iii) to any vested retirement benefits, or
Equity Awards in accordance with the terms and conditions of the applicable Equity Agreement and Equity
Plan, (iv) to commence an action or proceeding to enforce the terms of this Agreement, or (v) to
indemnification for actions taken by Employee in the course and scope of employment to the extent provided
for in applicable statutes, or the certificates of incorporation and by-laws of the Company or its affiliates or
subsidiaries.
(f)
Nothing in this Agreement will bar or prohibit Employee from filing an administrative charge,
contacting, seeking assistance from or participating in any proceeding
before the Equal Opportunity Commission or a state fair employment practices agency , including the
Massachusetts Commission Against Discrimination provided, however, Employee nevertheless will be
prohibited to the fullest extent authorized by law from obtaining monetary damages in any proceeding.
6.
Promise Not to Sue. Employee agrees that Employee will not, directly or indirectly, initiate, support or
encourage any complaint or lawsuit or action in any court arising out of or relating to the claims released under this
Agreement, whether on Employee’s behalf or
in a representative capacity, and will not participate in any such action, whether individually or as a member of a class or
other collective mechanism. Provided however, that nothing in this Agreement is intended to interfere with or discourage
Employee from communicating with a governmental or regulatory body or official(s) or self-regulatory organization
(collectively, “Agency” or “Agencies”) about possible violations of law or otherwise providing information to Agencies or
participating in Agency investigations or proceedings. Except as otherwise prohibited by law (e.g., pursuant to Section 21F
of the Securities Exchange Act and its corresponding regulations), Employee waives his/her rights to individual relief or
monetary recovery based on a charge or complaint filed with an Agency.
7.
Non-Disparagement; Transfer of Company Property; Non-Solicitation. The Company and
Employee further agree that:
(a)
Non-Disparagement. Employee shall not disparage, criticize or defame the Company, its
affiliates and their respective affiliates, directors, officers, agents, partners, stockholders, individuals who are
known by Employee to be employees of the Company, products, services, technology or business, either
publicly or privately. Nothing in this Section 6(a) shall have application to any evidence or testimony
required by any court, arbitrator or government agency or to any truthful statements necessary in any
litigation regarding the enforcement of this Agreement. Further, nothing in this Section is intended or shall be
construed to limit the disclosures referred to in Section 6 above.
(b)
Transfer of Company Property. On or before the Separation Date, Employee shall return to
the Company all physical and electronic files, memoranda, records, and other documents (“Documents”),
and any other physical property, including any Company-issued data storage devices such as a laptop, iPad
or cell phone (“Devices”), which are the property of the Company and which he/she has in his/her
possession, custody or control at the Separation Date. All Devices shall be returned without deletion,
alteration or copying by Employee of Company information, data and files. Employee represents and
warrants that as of the Separation Date he or she has returned to the Company all Documents and Devices.
(c)
Non-Solicitation. Employee acknowledges and agrees that the Company has invested
substantial time, money and resources in the development of its Confidential Information (as defined in the
Employee’s Confidential Proprietary Rights and Non-Disclosure Agreement) and the development and
retention of its customers, clients, collaborators, and employees. Employee further acknowledges and agrees
that to the extent Employee was introduced to customers, clients and collaborators of Sarepta during the
course of his/her employment, any “goodwill” associated with any customer, client, or collaborator belongs
exclusively to the Company. In recognition of the foregoing, Employee specifically acknowledges and agrees
that during the Consulting Period and for a period of one (1) year after termination of such Consulting Period
Employee will not directly or indirectly in any position or capacity engage in the following activities for
himself/herself or for any other person, business, corporation,
partnership or other entity:
(i)
call upon, solicit, divert, or accept, or attempt to solicit or divert any of the
Company’s business or prospective business from any of the Company’s customers, clients,
collaborators, or prospective customers, clients or collaborators with whom Employee had contact or
whose dealings with the Company Employee coordinated or supervised or about whom Employee
obtained Confidential Information (as defined in the Employee’s Confidential Proprietary Rights and
Non-Disclosure Agreement), at any time during the two
(2) year period after the termination of Employee’s employment, unless Employee obtains prior written
consent of the Company; or
(ii)
request, solicit, induce, hire (or attempt or assist in doing any of these
actions) any employee or other person (including consultants) who may have performed work or services
for the Company within one (1) year after the termination of Employee’s employment with the Company
to perform work or services for any person or entity other than the Company.
(d)
Survival of Provisions. If it is determined by a court of competent jurisdiction in any state that
any restriction in this Section is excessive in duration or scope or is unreasonable or unenforceable under the
laws of that state, it is the intention of the parties that such restriction may be modified or amended by the
court to render it enforceable to the maximum extent permitted by the law of that state.
(e)
Remedies. Employee acknowledges and agrees that the provisions of this Agreement are of a
special and unique nature, the loss of which cannot be accurately compensated for in damages by an action at
law, and that the breach or threatened breach of this Agreement by the Employee or any of his or her
Representatives would cause the Company and its Affiliates irreparable harm and that money damages would
not be an adequate remedy. Employee agrees on behalf of him or herself and his or her Representatives that
the Company (and its affiliates) shall be entitled to equitable relief, including, without limitation, an
injunction or injunctions (without the requirement of posting a bond, other security or any similar requirement
or proving any actual damages), to prevent breaches or threatened breaches of this Agreement by Employee
or any of his or her Representatives and to specifically enforce the terms and provisions of this Agreement,
this being in addition to any other remedy to which the Company (or its affiliates) may be entitled at law or in
equity.
8.
Employee Representations. Employee warrants and represents that (a) he/she has not filed or authorized
the filing of any complaints, charges or lawsuits (that are subject to release under Section 5 of this Agreement) against the
Releasees or any affiliate of any Releasee with any Agency or court, and that if, unbeknownst to Employee, such a
complaint, charge or lawsuit has been filed on his/her behalf, he/she will use reasonable best efforts to immediately cause it
to be withdrawn and dismissed, unless it has been filed with an Agency and such efforts are prohibited by law and (b)
he/she has no known workplace injuries or occupational diseases and has been provided and/or has not been denied any
leave requested under the Family and Medical Leave Act or any similar state law.
9.
No Assignment by Employee. Employee warrants and represents that no portion of any of the matters
released herein, and no portion of any recovery or settlement to which Employee might be entitled, has been assigned or
transferred to any other person, firm or corporation not a party to this Agreement, in any manner, including by way of
subrogation or operation of law or otherwise. If any claim, action, demand or suit should be made or instituted against the
Company or any other Releasees because of any actual assignment, subrogation or transfer by Employee, Employee agrees
to indemnify and hold harmless the Company and all other Releasees against such claim, action, suit or demand, including
necessary expenses of investigation, attorneys’ fees and costs. In the event of Employee’s death, this Agreement shall inure
to the benefit of Employee and Employee’s executors, administrators, heirs, distributees, devisees, and legatees. None of
Employee’s rights or obligations may be assigned or transferred by Employee, other than Employee’s rights to payments
hereunder, which may be transferred only upon Employee’s death by will or operation of law.
10.
Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the laws of the Commonwealth of Massachusetts without regard to conflicts of laws
principles, or where applicable, United States federal law. The Parties agree that the exclusive jurisdiction for any legal
action arising out of or relating to this Agreement shall be in the state or federal courts located in the Commonwealth of
Massachusetts.
11.
Defend Trade Secrets Act of 2016. Employee is hereby advised that, in accordance with the Defend
Trade Secrets Act of 2016, Employee will not be held criminally or civilly liable under any federal or state trade secret law
for the disclosure of a trade secret that:
(a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an
attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a
complaint or other document that is filed under seal in a lawsuit or other proceeding.
12.
Confidentiality of this Agreement. Employee understands and agrees that, to the extent permitted by
law and except as otherwise permitted by Section 6 of this Agreement, the terms and contents of this Agreement, and the
contents of the negotiations and discussions resulting in this Agreement, shall be maintained by Employee in confidence
and shall not be disclosed to any third party, provided however, that Employee may disclose the terms and contents of this
Agreement to his/her spouse and legal and financial advisors on condition that those parties agree not disclose same to
others.
13.
Miscellaneous. This Agreement, together with the Confidential Proprietary Rights and Non-Disclosure
Agreement and the Equity Agreement, comprise the entire agreement between the parties with regard to the subject matter
hereof and supersede, in their entirety, any other agreements between Employee and the Company with regard to the subject
matter hereof. Employee acknowledges that there are no other agreements, written, oral or implied, and that he/she may not
rely on any prior negotiations, discussions, representations or agreements. This Agreement may be modified only in writing,
and such writing must be signed by both parties and recited that it is intended to modify this Agreement. This Agreement
may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
Page 9
14.
Company Assignment and Successors. The Company shall assign its rights and obligations under this
Agreement to any successor to all or substantially all of the business or the assets of the Company (by merger or otherwise).
This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns, personnel and
legal representatives.
15.
Compliance with Continuing Obligations. Employee reaffirms his/her continuing obligations under the
Confidential Proprietary Rights and Non-Disclosure Agreement dated November 11, 2019, and under all similar
agreements executed during the course of Employee’s employment by the Company (collectively, the “Confidentiality
Agreements”). Employee acknowledges and agrees that the payments and benefits provided by Section 3 of this Agreement
shall be subject to Employee’s continued compliance with Employee’s obligations under the Confidentiality Agreements.
16.
Signatures. Employee and Company agree that this Agreement and any other documents to be
delivered in connection herewith may be electronically signed, and that any electronic signatures appearing on this
Agreement or such other documents are the same as handwritten signatures for the purposes of validity, enforceability,
and admissibility.
To accept the terms of this Separation Agreement and Consulting Agreement and General Release, Employee must
sign, date and email a copy to HumanResources@Sarepta.com, within twenty-one (21) days.
[The remainder of this page intentionally left blank.]
IN WITNESS WHEREOF, the undersigned have caused this Separation Agreement and Consulting Agreement and
General Release to be duly executed and delivered as of the date indicated next to their respective signatures below.
Dated: November 22, 2022
William Ciambrone
Dated: November 22, 2022
Sarepta Therapeutics, Inc.
/s/ Bill Ciambrone
Signature
By: Ryan E. Brown
/s/ Ryan Brown
Signature
Title: Senior Vice President, General Counsel
EXHIBIT A
EQUITY OWNERSHIP
REPORT
[***]
CONFIDENTIAL PROPRIETARY RIGHTS AND NON-DISCLOSURE AGREEMENT
EXHIBIT B
This Confidential Proprietary Rights and Non-Disclosure Agreement (this “Agreement”) is entered into as of the
11th day of November, 2019 (the “Effective Date”), by and between Sarepta
Therapeutics, Inc., a Delaware corporation, on behalf of itself, its subsidiaries and other corporate affiliates (“Sarepta”) and
William Ciambrone (“Employee”) (each, a “Party” and, collectively, the “Parties”).
RECITALS
A.
will employee.
Employee will be engaged as an employee to provide services to Sarepta (the “Services”) as an at-
B.
Employee will have access to certain material, non-public information about Sarepta.
As a condition precedent to providing such information to the Employee in connection with the Services and Employee’s
employment, the Parties have agreed to enter into this Agreement.
NOW, THEREFORE, as a condition of employment and continued employment with Sarepta, and in consideration
of the mutual covenants expressed herein, the receipt and sufficiency of which are acknowledged, the Parties, intending to be
legally bound, agree as follows.
1.
Definitions. For the purposes of this Agreement:
AGREEMENT
1.1
1.2
1.3
1.4
“Affiliate” of a Party means any entity that a Party directly or indirectly controls, or is controlled by,
including but not limited to employees, agents, and entities.
“Representative” means, with respect to either Party, such Party’s members, managers, partners,
Affiliates, attorneys, advisors, potential lenders, potential co- investors, directors, officers, employees,
agents, representatives, or family members.
“Confidential Information” means any business, marketing, technical, or other information in tangible or
intangible form disclosed by Sarepta to Employee that, at the time of disclosure, is designated as
confidential (or like designation), is disclosed in circumstances of confidence, or would be understood by
the Parties (or their Affiliates and Representatives), exercising reasonable business judgment, to be
confidential. This includes information that is conceived, compiled, developed, discovered or received by,
or made available to Employee during his/her
Employment, and whether or not while engaged in performing work for Sarepta. Confidential Information
includes information, both written and oral, relating to Inventions, trade secrets and other proprietary
information, technical data, products, services, unpublished financial information or projections, business,
marketing and strategic plans, future service and product development plans, legal affairs, suppliers,
customers, prospects, opportunities, contracts or assets of Sarepta. It specifically includes but is not limited
to Sarepta business plans, product concepts, technical know-how, methods of and other information relating
to operations, development strategies, distribution arrangements, financial data, marketing plans, and
business practices, policies,
1.5
1.6
1.7
1.8
1.9
or objectives. Confidential Information also includes any information which has been made available to
Sarepta by or with respect to third parties and which Sarepta is obligated to keep confidential.
“Invention” means any product, device, technique, know-how, computer program, algorithm, method,
process, procedure, improvement, discovery or invention, whether or not patentable or copyrightable and
whether or not reduced to practice, that (a) is within the scope of Sarepta’s business, research or
investigations or results from or is suggested by any work performed by Employee for Sarepta and
(b) is created, conceived, reduced to practice, developed, discovered, invented or made by Employee
during the Term, whether solely or jointly with others, and whether or not while engaged in performing
work for Sarepta.
“Material” means any product, prototype, model, document, diskette, tape, picture, design, recording,
writing or other tangible item which contains or manifests, whether in printed, handwritten, coded,
magnetic or other form, any Confidential Information, Invention or Proprietary Right.
“Proprietary Right” means any patent, copyright, trade secret, trademark, trade name, service mark,
maskwork or other protected intellectual property right in any Confidential Information, Invention or
Material.
“Work Product” means any information, created by Employee, Sarepta, and/or jointly by Employee and
Sarepta during Employee’s employment with Sarepta in connection with Sarepta’s research, development
and commercialization of drugs and related products, including but not limited to, data, reports, analysis,
summaries, formulae, ideas, research, developments, inventions (patentable or not), processes, designs,
drawings, works, clinical data and analysis, biological materials, chemical formulas, trade secrets,
concepts, know-how, improvements, techniques, products, and any and all results of the research and
development process.
“Term” means the term of Employee’s employment or independent contracting relationship with Sarepta,
whether on a full-time or part-time basis, as well as the period preceding execution of this Agreement,
retroactive to the first date of Employee’s employment, subject to section 7.1 below.
2.
Disclosure, Use Restrictions and Proprietary Rights.
2.1
Disclosure and Use.
(a)
Except as expressly provided in this Agreement, during the Term and thereafter, Employee shall
retain all Confidential Information in confidence and shall not, unless Employee obtains Sarepta’s
prior written consent (which may be withheld at Sarepta’s sole discretion), directly or indirectly,
disclose, reveal, divulge, publish or otherwise make known any of the Confidential Information
for any reason or purpose whatsoever, except as required for performance of Employee’s work
for Sarepta and then only on a need to know basis used only in accordance with this Agreement.
Employee shall take all steps necessary to safeguard and protect the Confidential Information
from unauthorized access, use or disclosure by or to others, including but not limited to,
maintaining appropriate security measures. The obligations of confidence set forth in this
Agreement shall extend to any of Employee’s Representatives that may receive Confidential
Information and Employee shall be responsible for any breach of this Agreement by his or her
Representatives.
(b)
(c)
In accordance with Section 2.3 below, Employee shall notify Sarepta immediately upon
discovery of any unauthorized use or disclosure of Confidential Information or any other breach
of this Agreement by Employee or his or her Representatives, and will cooperate with Sarepta to
assist Sarepta to regain possession of the Confidential Information and prevent its further
unauthorized use or disclosure.
Exemptions. Employee shall not be bound by the obligations restricting disclosure and use set
forth in this Agreement with respect to Confidential Information, or any part thereof, which: (i)
was known by Employee prior to his/her employment with Sarepta; (ii) prior to its disclosure or
use by Employee, was already lawfully in the public domain or publicly available other than
through a breach of this Agreement; (iii) was disclosed to Employee by a third party, provided
such third party is not in breach of any confidentiality obligation in respect of such information;
(iv) is independently developed by Employee, where the burden is on Employee to prove
independent development; or (v) is disclosed when such disclosure is compelled pursuant to legal,
judicial or administrative proceedings, or otherwise required by law, subject to Employee giving
reasonable prior notice to Sarepta to allow Sarepta to seek protective court orders. The foregoing
exemptions shall extend to any Representatives that receive or have received Confidential
Information.
For the avoidance of doubt, this Agreement does not prohibit or restrict Employee from lawfully
(A) communicating or cooperating with, providing
relevant information to, or otherwise assisting in an investigation by any governmental or
regulatory body or official(s) or self-regulatory organization regarding a possible violation of any
federal law relating to fraud or any rule or regulation of the Securities and Exchange Commission;
(B) filing an administrative complaint with the Equal Employment Opportunity Commission, U.S.
Department of Labor, National Labor Relations Board, or other federal, state or local agency
responsible for administering fair employment, wage-hour, labor and other employment laws and
regulations; (C) cooperating in an investigation, or responding to an inquiry from any such
agency; or (D) testifying, participating in, or otherwise assisting in an action or proceeding
relating to a possible violation of any such law, rule or regulation; provided, however, that
Employee agrees that, to the maximum extent permitted by law, the Employee waives any claim
for individual monetary relief in connection with any such action, investigation or proceeding.
2.2
2.3
Proprietary Rights. During the Term, Employee (including his or her Representatives) shall not acquire
any rights, express or implied, in the Confidential Information of Sarepta (including its Affiliates),
except for the limited use specified in this Agreement. The Confidential Information, including all right,
title and interest therein, remains the sole and exclusive property of Sarepta (and its Affiliates).
Compulsory Disclosure. If Employee is legally compelled to disclose any of the Confidential
Information, Employee shall promptly provide written notice to Sarepta to enable Sarepta (at its sole cost
and expense) to seek a protective order or other appropriate remedy to avoid public or third-party
disclosure of its Confidential Information. If such protective order or other remedy is not obtained,
Employee shall furnish only so much of the Confidential Information that it is legally compelled to
disclose, and shall exercise its commercially reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded the Confidential Information. Employee shall cooperate with and
assist Sarepta, at Sarepta’s expense, in seeking any protective order or other relief requested pursuant to
this Section 2.3.
2.4
DTSA Notice. Nothing in this Agreement is intended to interfere with or discourage Employee from
communicating with government agencies about possible violations of law or otherwise providing
information to government agencies or participating in government agency investigations or proceedings.
Employee is not required to notify Sarepta of any such communications; provided however, that nothing
herein authorizes the disclosure of information Employee obtained through a communication that was
subject to the attorney-client privilege. Further, Employee is hereby advised that in accordance with the
Defend Trade Secrets Act of 2016 that Employee will not be held criminally or civilly liable under any
federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a
federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for
the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other
document that is filed under seal in a lawsuit or other proceeding.
Employee is further notified that if Employee files a lawsuit for retaliation by Sarepta for reporting a
suspected violation of law, Employee may disclose Sarepta’s trade secrets to Employee’s attorney and use
the trade secret information in the court proceeding only if Employee: (a) files any document containing
the trade secret under seal; and (b) does not disclose the trade secret, except pursuant to court order.
3.
Solicitation.
Ownership of Confidential Information, Inventions, Materials, Work Product and Proprietary Rights, Non-
3.1
3.2
Sarepta will be the exclusive owner of all Confidential Information, Inventions, Materials, Work Product
and Proprietary Rights. To the extent applicable, all Materials will constitute “works for hire” under
applicable copyright laws. Employee will not at any time use Sarepta’s name, trademarks, trade names or
other Proprietary Rights in any advertising or publicity without Sarepta’s consent.
Employee hereby assigns and transfers, and agrees to assign and transfer, to Sarepta all rights and ownership
that Employee has or will have in Confidential Information, Inventions, Materials, Work Product and
Proprietary Rights, subject to the limitations set forth in Section 3.5 and the Notice in Section 3.6 below.
Further, Employee waives any moral rights that Employee may have in any Confidential Information,
Inventions, Materials, Work Product and Proprietary Rights. Employee will take such action (including
signature and assistance in preparation of documents or the giving of testimony) as may be requested by
Sarepta to evidence, transfer, vest or confirm Sarepta’s rights and ownership in Confidential Information,
Inventions, Materials, Work Product and Proprietary Rights. Employee agrees to keep and maintain
adequate and current written records of all Inventions and Proprietary Rights during the Term. The records
will be in the form of notes, sketches, drawings, and any other format that may be specified by Sarepta. The
records will be available to and remain the sole property of Sarepta at all times. Employee will not contest
the validity of any Proprietary Right, or aid or encourage any third party to contest the validity of any
Proprietary Right of Sarepta.
3.2.1
If Sarepta is unable for any reason to secure Employee’s signature to fulfill the intent of the
foregoing paragraph or to apply for or to pursue any application for any United States or foreign
patents or copyright registrations covering Inventions assigned to Sarepta above, then Employee
irrevocably appoints Sarepta and its authorized agents as Employee’s agent and attorney in fact, to
transfer, vest or confirm Sarepta’s rights and to execute and file any such applications and to do all
other lawful acts to further the prosecution and issuance of letters patent or copyright registrations
with the same legal force as if done by Employee.
3.3
Except as required for performance of Employee’s work for Sarepta or as authorized in writing by Sarepta,
Employee will not (a) use, disclose, sell, publish or distribute any
3.4
3.5
3.6
3.7
Confidential Information, Inventions, Materials, Work Product or Proprietary Rights or (b) remove any
Materials from Sarepta’s premises. Employee shall maintain at his or her work station and/or any other
place under his or her control only such Confidential Information, Inventions, Materials, Work Product and
Proprietary Rights as Employee has a current “need to know,” and will return it when that need no longer
exists. Employee shall not make copies of or otherwise reproduce Sarepta’s Confidential Information,
Inventions, Materials or Proprietary Rights, unless there is a legitimate business need of Sarepta for
reproduction.
Employee will promptly disclose to Sarepta all Confidential Information, Inventions, Materials or
Proprietary Rights, as well as any business opportunity which comes to Employee’s attention during the
Term and which relates to Sarepta’s business or which arises as a result of Employee’s employment
with Sarepta. Employee will not take advantage of or divert any such opportunity for the benefit of
Employee or any other person either during or after the Term without the prior written consent of
Sarepta.
Exhibit A is a list describing inventions, original works of authorship, developments, improvements, and
trade secrets which were made by Employee prior to the Term (collectively referred to as “Prior
Inventions”), which belong to Employee, which relate to Sarepta’s current or proposed business, products or
research and development, and which are not assigned to Sarepta; or, if no such list is attached, Employee
represents that there are no such Prior Inventions. If, during the Term, Employee incorporates or allows
Sarepta to incorporate into a Sarepta product, process or machine a Prior Invention owned by Employee or
in which Employee has an interest, Sarepta is granted and shall have a nonexclusive, royalty- free,
irrevocable, perpetual, worldwide license to make, have made, modify, use, offer to sell, and sell such Prior
Invention as part of or in connection with such product, process or machine. If, during the Term, Employee
incorporates or allows Sarepta to incorporate into a Sarepta product, process or machine a Prior Invention
not listed in Exhibit A (Non-Listed Prior Invention), Employee shall provide to Sarepta within thirty (30)
days written notice of such Non-Listed Prior Invention and written documentation proving Employee’s
rights to or ownership interest in that Non-Listed Prior Invention. Employee agrees that failure to timely
provide such written notice and documentation bars Employee from asserting against Sarepta any rights to
or ownership interest in the Non- Listed Prior Invention.
NOTICE: Notwithstanding any other provision of this Agreement to the contrary, this Agreement does not
obligate Employee to assign or offer to assign to Sarepta any of Employee’s rights in an invention for
which no equipment, supplies, facilities or trade secret information of Sarepta was used and which was
developed entirely on Employee’s own time, unless (a) the invention relates (i) directly to the business of
Sarepta or (ii) to Sarepta’s actual or demonstrable anticipated research or development, or (b) the invention
results from any work performed by Employee for Sarepta.
Non-Solicitation. Employee acknowledges and agrees that Sarepta has invested substantial time, money
and resources in the development of its Confidential Information and the development and retention of its
customers, clients, collaborators, and employees. Employee further acknowledges that during the course of
his/her employment, he/she may be introduced to customers, clients, and collaborators of Sarepta, and
agrees that any “goodwill” associated with any customer, client, or collaborator belongs exclusively to
Sarepta. In recognition of the foregoing, Employee specifically acknowledges and agrees that while he/she
is employed by Sarepta and for a period of one (1) year after termination of such employment (for any
reason, whether voluntary or involuntary) Employee will not directly or indirectly in any position or
capacity engage in the following activities for himself/herself or for any other person, business,
corporation, partnership or other entity:
(a)
call upon, solicit, divert, or accept, or attempt to solicit or divert any of Sarepta’s business or
prospective business from any of Sarepta’s customers,
clients, collaborators, or prospective customers, clients or collaborators with whom
Employee had contact or whose dealings with Sarepta Employee coordinated or supervised
or about whom Employee obtained Confidential Information, at any time during the two (2)
year period prior to the termination of Employee’s employment, unless Employee obtains
prior written consent of Sarepta; or
(b)
request, solicit, induce, hire (or attempt or assist in doing any of these actions) any employee or
other person (including consultants) who may have performed work or services for Sarepta within
one (1) year prior to the termination of Employee’s employment with Sarepta to perform work or
services for any person or entity other than Sarepta.
3.7.1 EMPLOYEE ACKNOWLEDGES THAT THESE RESTRICTIONS SHALL APPLY
AND BE BINDING REGARDLESS OF CHANGES IN EMPLOYEE’S POSITION, DUTIES,
GEOGRAPHIC LOCATION, RESPONSIBILITIES OR COMPENSATION DURING HIS/HER
EMPLOYMENT.
3.7.2
If it is determined by a court of competent jurisdiction in any state that any restriction in this
Section 3.7 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that
state, it is the intention of the Parties that such restriction may be modified or amended by the court to
render it enforceable to the maximum extent permitted by the law of that state.
Remedies. Employee acknowledges and agrees that the provisions of this Agreement are of a special and unique
4.
nature, the loss of which cannot be accurately compensated for in damages by an action at law, and that the breach or
threatened breach of this Agreement by the Employee or any of his or her Representatives would cause Sarepta and its
Affiliates irreparable harm and that money damages would not be an adequate remedy. Employee agrees on behalf of him or
herself and his or her Representatives that Sarepta (and its Affiliates) shall be entitled to equitable relief, including, without
limitation, an injunction or injunctions (without the requirement of posting a bond, other security or any similar requirement or
proving any actual damages), to prevent breaches or threatened breaches of this Agreement by Employee or any of his or her
Representatives and to specifically enforce the terms and provisions of this Agreement, this being in addition to any other
remedy to which Sarepta (or its Affiliates) may be entitled at law or in equity.
Indemnification. Employee shall indemnify and defend Sarepta and its Representatives and each of their respective
5.
directors, officers, employees, managers, members, partners, shareholders, agents and affiliates (collectively, the “Indemnified
Persons”) against and hold each Indemnified Person harmless from any and all liabilities, obligations, losses, damages, costs,
expenses, claims, penalties, lawsuits, proceedings, actions, judgments, disbursements of any kind or nature whatsoever,
interest, fines, settlements and reasonable attorneys’ fees and expenses that the Indemnified Persons may incur, suffer, sustain
or become subject to arising out of, relating to, or due to the breach of this Agreement by Employee or any of his or her
Representatives. The provisions of this Section 5 shall survive indefinitely any termination of this Agreement, the completion
or the termination of Employee’s employment.
Securities Laws. Employee hereby acknowledges that Sarepta is a publicly traded company. Employee hereby
6.
acknowledges that Employee is aware that federal and state securities laws prohibit any person who has received material,
non-public information (information about Sarepta or its business that is not generally available to the public) concerning
Sarepta, including, without limitation, the matters that are the subject of this Agreement, from purchasing or selling securities
of Sarepta while in possession of such non-public information, and from communicating that information to any other person
who may purchase or sell securities of Sarepta or otherwise violate such laws. Employee specifically acknowledges these
obligations and agrees to be bound by them, including, without limitation, Sarepta’s insider trading policies in existence as of
the Effective Date and as may be adopted or changed in the future.
7.
Term of Confidentiality Obligation.
7.1
7.2
Term. The confidentiality obligations set forth in this Agreement shall continue with regard to an item of
information as long as that information continues to meet the definition of “Confidential Information” and is
not exempt under Section 2.1(c).
Return of Confidential Information. At any time upon written request by Sarepta, Employee shall return or
destroy all documents or other materials embodying Confidential Information, shall retain no copies
thereof, and shall certify in writing that such destruction or return has been accomplished. The
confidentiality obligations set forth in this Agreement shall survive any termination of the Agreement.
8.
Further Obligations.
8.1
8.2
8.3
During the Term, Employee will not, directly or indirectly, engage in, be employed by, perform
services for or otherwise participate in any competing business or any other activity which conflicts
with the commercial interests of Sarepta.
Employee’s execution, delivery and performance of this Agreement and the performance of Employee’s
other obligations and duties to Sarepta will not cause any breach, default or violation of any other
employment, nondisclosure, confidentiality, consulting or other agreement to which Employee is a party
or by which Employee may be bound. Attached as Exhibit B is a list of all prior agreements now in effect
under which Employee has agreed to keep information confidential or not to compete or solicit
employees of any employer or person.
Employee agrees he or she will not use in performance of Employee’s work for Sarepta or disclose to
Sarepta any trade secret, confidential or proprietary information of any prior employer or other person
if and to the extent that such use or disclosure may cause a breach, default or violation of any
obligation or duty that Employee owes to such other person (e.g., under any agreement or applicable
law). Employee warrants that Employee’s compliance with this paragraph will not prohibit, restrict or
impair the performance of Employee’s work, obligations and duties to Sarepta.
9.
Termination of Relationship.
9.1
9.2
9.3
To the extent permissible under applicable law, Employee hereby authorizes and specifically agrees to
allow Sarepta to deduct from his or her wages the value of any Sarepta property (including equipment,
goods, or other items provided to Employee by Sarepta during Employee’s employment) which he or she
fails to return when requested to do so by Sarepta, provided that such deduction (a) does not exceed the
cost of the item, (b) does not reduce Employee’s salary below the statutory minimum applicable to
exempt employees, (c) is not made for normal wear and tear on or nonwillful loss or breakage of the
provided item(s), and (d) is accompanied with a list of all items for which deductions are being made.
Employee also agrees that if Sarepta loans him or her any money or advances Employee paid leave before
it is earned or accrued, that Sarepta can deduct from Employee’s wages the value of the balance of the
unpaid loan or unaccrued paid leave.
Employee agrees that at the end of the Term, Employee will deliver to Sarepta (and will not keep in his or
her possession, re-create or deliver to anyone else) any and all Materials and other property belonging to
Sarepta, its successors or assigns.
Employee agrees that after the Term, Sarepta may disclose this Agreement to his or her new employer
or another person to notify them of Employee’s rights and obligations under this Agreement.
10.
Employment At Will. Unless stated otherwise in a separately executed Employment Agreement between
Employee and Sarepta, Employee agrees that his or her employment is “at will” which means that it can be terminated at
any time by Employee or Sarepta, with or without cause and with or without notice. Employee agrees that any promise or
obligation that his or her employment be on any other basis than “at will” is invalid unless in writing signed by the
President of Sarepta.
11.
General.
11.1 Waiver. The failure of Sarepta to claim a breach of any term of this Agreement shall not constitute a
waiver of such breach or the right of Sarepta to enforce any subsequent breach of such term.
11.2
11.3
11.4
11.5
Assignment. This Agreement shall be binding on and inure to the benefit of each Party and their
respective successors and assigns.
Severability. In the event that any provision of this Agreement is found to be invalid, void or
unenforceable, the Parties agree that unless such provision materially affects the intent and purpose of
this Agreement, such invalidity, voidability or unenforceability shall not affect the validity of this
Agreement nor the remaining provisions herein.
Governing Law. Any issue or dispute arising out of or concerning this Agreement shall be covered by the
laws of the Commonwealth of Massachusetts without regard to conflict of law principles and without regard
to Employee’s relocating to any other state in which Sarepta does business. The Parties agree that the
exclusive jurisdiction for any legal action arising out of or relating to this Agreement shall be in the state or
federal courts located in the Commonwealth of Massachusetts.
Entire Agreement. This Agreement, along with any non-conflicting provisions of any Employment
Agreement that Employee may have signed, constitutes the entire agreement between the Parties on the
subject matter hereof and supersedes all prior agreements, communications and understandings of any
nature whatsoever, oral or written. In the event of any conflict, this Agreement controls. This Agreement
may not be modified or waived orally and may be modified only in a writing signed by a duly authorized
representative of both Parties. Nothing herein shall constitute an offer or guarantee of future employment
for Employee by Sarepta.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized
representatives and to be effective on the Effective Date.
Sarepta Therapeutics, Inc.
William Ciambrone
By: /s/ David T. Howton
Name: David T. Howton
Title: General Counsel
By: /s/ William Ciambrone
Sarepta Therapeutics, Inc.
Subsidiaries of the Registrant
Name
Sarepta Securities Corp.
ST International Holdings Two, Inc.
Sarepta Therapeutics Three, LLC
Jurisdiction of Incorporation
Massachusetts, USA
Delaware, USA
Delaware, USA
EXHIBIT 21.1
Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.1
We consent to the incorporation by reference in the registration statements (Nos. 333-234698 and 333-263208) on Form S-3ASR and (Nos. 333-101826,
333-172823, 333-175031, 333-192287, 333-199037, 333-209710, 333-213022, 333-34047, 333-49994, 333-221271, 333-228719, 333-233715, 333-240996
and 333-266461) on Form S-8 of our report dated February 28, 2023, with respect to the consolidated financial statements of Sarepta Therapeutics, Inc. and
the effectiveness of internal control over financial reporting.
/s/ KPMG LLP
Boston, Massachusetts
February 28, 2023
EXHIBIT 31.1
I, Douglas S. Ingram, certify that:
1. I have reviewed this Annual Report on Form 10-K of Sarepta Therapeutics, Inc., (the “Registrant”);
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent
fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control
over financial reporting.
February 28, 2023
/s/ Douglas S. Ingram
Douglas S. Ingram
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
I, Ian M. Estepan, certify that:
1. I have reviewed this Annual Report on Form 10-K of Sarepta Therapeutics, Inc., (the “Registrant”);
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent
fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control
over financial reporting.
February 28, 2023
/s/ Ian M. Estepan
Ian M. Estepan
Executive Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
EXHIBIT 32.1
I, Douglas S. Ingram, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Annual Report of Sarepta Therapeutics, Inc. on Form 10-K for the fiscal year ended December 31, 2022, fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of Sarepta Therapeutics, Inc.
February 28, 2023
/s/ Douglas S. Ingram
Douglas S. Ingram
President and Chief Executive Officer
(Principal Executive Officer)
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Sarepta Therapeutics,
Inc. and will be retained by Sarepta Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the
extent required by such Act, be deemed filed by Sarepta Therapeutics, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended,
or the Exchange Act, except to the extent that Sarepta Therapeutics, Inc. specifically incorporates it by reference.
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
EXHIBIT 32.2
I, Ian M. Estepan, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Annual Report of Sarepta Therapeutics, Inc. on Form 10-K for the fiscal year ended December 31, 2022, fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of Sarepta Therapeutics, Inc.
February 28, 2023
/s/ Ian M. Estepan
Ian M. Estepan
Executive Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Sarepta Therapeutics,
Inc. and will be retained by Sarepta Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the
extent required by such Act, be deemed filed by Sarepta Therapeutics, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended,
or the Exchange Act, except to the extent that Sarepta Therapeutics, Inc. specifically incorporates it by reference.