The following discussion and analysis is meant to provide material information
relevant to an assessment of the financial condition and results of operations
of our company, including an evaluation of the amounts and certainty of cash
flows from operations and from outside resources, so as to allow investors to
better view our company from management's perspective. The following discussion
of our financial condition and results of operations should be read in
conjunction with our financial statements and the notes to those financial
statements appearing elsewhere in this Annual Report on Form 10-K. This
discussion contains forward-looking statements that involve significant risks
and uncertainties. As a result of many factors, such as those set forth in
Part I, Item 1A. Risk Factors, of this Annual Report on Form 10-K, our actual
results may differ materially from those anticipated in these forward-looking
statements.
We are a science-driven global biopharmaceutical company focused on the
discovery, development and commercialization of clinically differentiated
medicines that provide benefits to patients with rare disorders. Our ability to
innovate to identify new therapies and to globally commercialize products is the
foundation that drives investment in a robust and diversified pipeline of
transformative medicines. Our mission is to provide access to best-in-class
treatments for patients who have few or no treatment options. Our strategy is to
leverage our strong scientific and clinical expertise and global commercial
infrastructure to bring therapies to patients. We believe that this allows us
to maximize value for all of our stakeholders. We have a portfolio pipeline that
includes several commercial products and product candidates in various stages of
development, including clinical, pre-clinical and research and discovery stages,
focused on the development of new treatments for multiple therapeutic areas for
rare diseases.
We have two products, Translarna™ (ataluren) and Emflaza® (deflazacort), for the
treatment of Duchenne muscular dystrophy, or DMD, a rare, life threatening
disorder. Translarna has marketing authorization in the European Economic Area,
or EEA, and Brazil for the treatment of nonsense mutation Duchenne muscular
dystrophy, or nmDMD, in ambulatory patients aged two years and older and in
Russia for the treatment of nmDMD in patients aged two years and older. In
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July 2020, the European Commission approved the removal of the statement
"efficacy has not been demonstrated in non-ambulatory patients" from the
indication statement for Translarna. During the year ended December 31, 2021, we
recognized $236.0 million in sales of Translarna. We hold worldwide
commercialization rights to Translarna for all indications in all territories.
Emflaza is approved in the United States for the treatment of DMD in patients
two years and older. During the year ended December 31, 2021, Emflaza achieved
net sales of $187.3 million.
Our marketing authorization for Translarna in the EEA is subject to annual
review and renewal by the European Commission following reassessment by the
European Medicines Agency, or EMA, of the benefit-risk balance of the
authorization, which we refer to as the annual EMA reassessment. In June 2021,
the European Commission renewed our marketing authorization, making it
effective, unless extended, through August 5, 2022. In February 2022, we
submitted a marketing authorization renewal request to the EMA. This marketing
authorization is further subject to a specific obligation to conduct and submit
the results of an 18-month, placebo-controlled trial, followed by an 18-month
open-label extension, which we refer to together as Study 041. We expect results
from the placebo-controlled trial to be available in mid-2022. We then expect to
submit a report on the placebo-controlled trial and the open-label extension
data that has been collected to date to the EMA by the end of the third quarter
of 2022, as required.
Each country, including each member state of the EEA, has its own pricing and
reimbursement regulations. In order to commence commercial sale of product
pursuant to our Translarna marketing authorization in any particular country in
the EEA, we must finalize pricing and reimbursement negotiations with the
applicable government body in such country. As a result, our commercial launch
will continue to be on a country-by-country basis. We also have made, and expect
to continue to make, product available under early access programs, or EAP
programs, both in countries in the EEA and other territories. Our ability to
negotiate, secure and maintain reimbursement for product under commercial and
EAP programs can be subject to challenge in any particular country and can also
be affected by political, economic and regulatory developments in such country.
There is substantial risk that if we are unable to renew our EEA marketing
authorization during any annual renewal cycle, or if our product label is
materially restricted, or if Study 041 does not provide the data necessary to
maintain our marketing authorization, we would lose all, or a significant
portion of, our ability to generate revenue from sales of Translarna in the EEA
and other territories.
Translarna is an investigational new drug in the United States. During the first
quarter of 2017, we filed a New Drug Application, or NDA, for Translarna for the
treatment of nmDMD over protest with the United States Food and Drug
Administration, or FDA. In October 2017, the Office of Drug Evaluation I of the
FDA issued a Complete Response Letter for the NDA, stating that it was unable to
approve the application in its current form. In response, we filed a formal
dispute resolution request with the Office of New Drugs of the FDA. In
February 2018, the Office of New Drugs of the FDA denied our appeal of the
Complete Response Letter. In its response, the Office of New Drugs recommended a
possible path forward for the ataluren NDA submission based on the accelerated
approval pathway. This would involve a re-submission of an NDA containing the
current data on effectiveness of ataluren with new data to be generated on
dystrophin production in nmDMD patients' muscles. We followed the FDA's
recommendation and collected, using newer technologies via procedures and
methods that we designed, such dystrophin data in a new study, Study 045, and
announced the results of Study 045 in February 2021. Study 045 did not meet its
pre-specified primary endpoint. We expect results from the placebo-controlled
trial of Study 041 to be available in mid-2022, and subject to a positive
outcome in that study, we expect to re-submit the NDA.
We hold the rights for the commercialization of Tegsedi® (inotersen) and
Waylivra® (volanesorsen) for the treatment of rare diseases in countries in
Latin America and the Caribbean pursuant to a Collaboration and License
Agreement, or the Tegsedi-Waylivra Agreement, dated August 1, 2018, by and
between us and Akcea Therapeutics, Inc., or Akcea, a subsidiary of Ionis
Pharmaceuticals, Inc. Tegsedi has received marketing authorization in the United
States, European Union, or EU, and Brazil for the treatment of stage 1 or stage
2 polyneuropathy in adult patients with hereditary transthyretin amyloidosis, or
hATTR amyloidosis. We have initiated our commercial launch for Tegsedi for the
treatment of hATTR amyloidosis in Brazil and we continue to make Tegsedi
available in certain other countries within Latin America and the Caribbean
through early access programs. In August 2021, ANVISA, the Brazilian health
regulatory authority, approved Waylivra as the first treatment for familial
chylomicronemia syndrome, or FCS, in Brazil and we have initiated our commercial
launch in Brazil while continuing to make Waylivra available in certain other
countries within Latin
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America and the Caribbean through EAP programs. Waylivra has also received
marketing authorization in the EU for the treatment of FCS. Additionally, we
submitted an application to ANVISA in December 2021 for the approval of Waylivra
for the treatment of familial partial lipodystrophy, or FPL, and we expect a
regulatory decision on approval in the second half of 2022.
We also have a spinal muscular atrophy, or SMA, collaboration with F. Hoffman-La
Roche Ltd. and Hoffman-La Roche Inc., which we refer to collectively as Roche,
and the Spinal Muscular Atrophy Foundation, or SMA Foundation. The SMA program
has one approved product, Evrysdi® (risdiplam), which was approved by the FDA in
August 2020 for the treatment of SMA in adults and children two months and older
and by the European Commission in March 2021 for the treatment of 5q SMA in
patients two months and older with a clinical diagnosis of SMA Type 1, Type 2 or
Type 3 or with one to four SMN2 copies. Evrysdi also received marketing
authorization for the treatment of SMA in Brazil in October 2020 and Japan in
June 2021. In January 2022, the FDA granted priority review of a supplemental
new drug application for Evrysdi to expand the indication to include
pre-symptomatic infants under two months old with SMA. In addition to our SMA
program, our splicing platform also includes PTC518, which is being developed
for the treatment of Huntington's disease, or HD. We announced the results from
our Phase 1 study of PTC518 in healthy volunteers in September 2021
demonstrating dose-dependent lowering of huntingtin messenger ribonucleic acid
and protein levels, that PTC518 efficiently crosses blood brain barrier at
significant levels and that PTC518 was well tolerated. We expect to initiate a
Phase 2 study of PTC518 in the first quarter of 2022.
We have a pipeline of gene therapy product candidates for rare monogenic
diseases that affect the central nervous system, or CNS, including PTC-AADC for
the treatment of Aromatic L-Amino Acid Decarboxylase, or AADC, deficiency, a
rare CNS disorder arising from reductions in the enzyme AADC that result from
mutations in the dopa decarboxylase gene. In January 2020, we submitted a
marketing authorization application, or MAA, for PTC-AADC for the treatment of
AADC deficiency in the EEA to the EMA and we expect an opinion from the CHMP in
April 2022. We are also preparing a biologics license application, or BLA, for
PTC-AADC for the treatment of AADC deficiency in the United States. In response
to discussions with the FDA, we intend to provide additional information
concerning the use of the commercial cannula for PTC-AADC in young patients. We
expect to submit a BLA to the FDA in the second quarter of 2022.
Our Bio-e platform consists of small molecule compounds that target
oxidoreductase enzymes that regulate oxidative stress and inflammatory pathways
central to the pathology of a number of CNS diseases. The two most advanced
molecules in our Bio-e platform are vatiquinone and PTC857. We initiated a
registration-directed Phase 2/3 placebo-controlled trial of vatiquinone in
children with mitochondrial disease associated seizures in the third quarter of
2020. We have experienced delays in enrolling this trial due to the COVID-19
pandemic and now anticipate results from this trial to be available in the
fourth quarter of 2022. We also initiated a registration-directed Phase 3 trial
of vatiquinone in children and young adults with Friedreich ataxia in the fourth
quarter of 2020 and anticipate results from this trial to be available in the
second quarter of 2023. In the third quarter of 2021, we completed a Phase 1
trial in healthy volunteers to evaluate the safety and pharmacology of PTC857.
PTC857 was found to be well-tolerated with no reported serious adverse events
while demonstrating predictable pharmacology. We expect to initiate a Phase 2
trial of PTC857 for amyotrophic lateral sclerosis in the second quarter of 2022.
The most advanced molecule in our metabolic platform is PTC923, an oral
formulation of synthetic sepiapterin, a precursor to intracellular
tetrahydrobiopterin, which is a critical enzymatic cofactor involved in
metabolism and synthesis of numerous metabolic products, for orphan diseases. We
initiated a registration-directed Phase 3 trial for PTC923 for phenylketonuria,
or PKU, in the third quarter of 2021 and expect results from this trial to be
available by the end of 2022.
We also have two oncology agents in that are in clinical development, unesbulin
and emvododstat. We completed our Phase 1 trials evaluating unesbulin in
leiomyosarcoma, or LMS, and diffuse intrinsic pontine glioma, or DIPG, in the
fourth quarter of 2021. We expect to initiate a registration-directed Phase 2/3
trial of unesbulin for the treatment of LMS in the second quarter of 2022 and we
expect to initiate a registration-directed Phase 2 trial of unesbulin for the
treatment of DIPG in the third quarter of 2022. We completed our Phase 1 trial
evaluating emvododstat, a small molecule dihydrooratate dehydrogenase inhibitor
that inhibits de novo pyrimidine nucleotide synthesis, in acute myelogenous
leukemia, or AML, in the fourth quarter of 2021. We expect to provide further
updates regarding our emvododstat program at a later date.
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In June 2020, we initiated a Phase 2/3 clinical trial evaluating the efficacy
and safety of emvododstat in patients hospitalized with COVID-19. In February
2021, we announced the completion of the first stage of the Phase 2/3 trial. We
expect results from this trial to be available in the first half of 2022.
In addition, we have a pipeline of product candidates and discovery programs
that are in early clinical, pre-clinical and research and development stages
focused on the development of new treatments for multiple therapeutic areas for
rare diseases.
COVID-19 Impact
The global pandemic caused by a strain of novel coronavirus, COVID-19, has
impacted and is continuing to impact the timing of certain of our clinical
trials and regulatory submissions as well as other aspects of our business
operations. In particular, the following expectations have been revised as a
result of the impact or expected impact of the COVID-19 pandemic:
We have experienced delays in enrolling patients for our registration-directed
Phase 2/3 placebo-controlled trial of vatiquinone in children with
• mitochondrial disease associated seizures as some patients have been unable or
hesitant to travel to clinical sites due to the COVID-19 pandemic. We
anticipate results from this trial to be available in the fourth quarter of
2022.
As a result of the COVID-19 pandemic, the Brazilian Ministry of Health is
continuing to experience significant delays processing centralized group
• purchase orders. Almost all of our product revenue for Translarna in Brazil is
attributable to such purchase orders. These centralized group purchase order
delays have caused, and may continue to cause, fluctuations in our ability to
generate revenue in Brazil.
As of the date of this Report on Form 10-K, except as otherwise disclosed with
respect to Translarna product revenue in Brazil, our ability to generate
revenue has not been significantly affected by the COVID-19 pandemic. However,
due to travel restrictions, social distancing and the continued global
• uncertainty resulting from the COVID-19 pandemic, we may have difficulty
identifying and accessing new patients, supporting existing patients and
meeting with regulatory authorities or other governmental entities, which may
negatively affect our future revenue. We continue to support our existing
patient base and remotely connect with them, as necessary. We have not
encountered any material issues in supplying those patients.
As previously disclosed, in response to the global uncertainty caused by the
• COVID-19 pandemic, we are continuing to prioritize our expenses where we deem
appropriate and strategically positioning our capital allocation.
The COVID-19 pandemic and responsive measures thereto may result in further
negative impacts, including additional delays in our clinical and regulatory
activities and further fluctuations in our revenue. We cannot be certain what
the overall impact of the COVID-19 pandemic will be on our business and it has
the potential to materially adversely affect our business, financial condition,
results of operations, and prospects. For additional information, see "Item 1A.
Risk Factors - We face risks related to health epidemics and other widespread
outbreaks of contagious disease, which are, and may continue to, delay our
ability to complete our ongoing clinical trials and initiate future clinical
trials, disrupt regulatory activities and have other adverse effects on our
business and operations, including the novel coronavirus (COVID-19) pandemic,
which has disrupted, and may continue to disrupt, our operations and may
significantly impact our operating results. In addition, the COVID-19 pandemic
has caused substantial disruption in the financial markets and economies, which
could result in adverse effects on our business and operations."
Overview-Funding
The success of our products and any other product candidates we may develop,
depends largely on obtaining and maintaining reimbursement from governments and
third-party insurers. During 2021, our revenues were primarily generated from
sales of Translarna for the treatment of nmDMD in countries where we were able
to obtain acceptable commercial pricing and reimbursement terms and in select
countries where we are permitted to distribute Translarna under
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our EAP programs, and from sales of Emflaza for the treatment of DMD in the
United States. We have also recognized revenue associated with milestone and
royalty payments from Roche pursuant to a License and Collaboration Agreement,
or the SMA License Agreement, by and among us, Roche and, for the limited
purposes set forth therein, the SMA Foundation, under our SMA program.
See "Item 1. Business-Commercial Matters-Market Access Considerations" for
additional information and "Item 1A. Risk Factors-Commercialization of
Translarna has been in, and is expected to continue to take place in, countries
that tend to impose strict price controls, which may adversely affect our
revenues. Failure to obtain and maintain acceptable pricing and reimbursement
terms for Translarna for the treatment of nmDMD in the EEA and other countries
where Translarna is available would delay or prevent us from marketing our
product in such regions, which would adversely affect our business, results of
operations, and financial condition."
In January 2019, we closed an underwritten public offering of our common stock.
We issued and sold an aggregate of 7,563,725 shares of common stock at a public
offering price of $30.20 per share, including 843,725 shares issued upon
exercise by the underwriter of its option to purchase additional shares in
February 2019. We received net proceeds of approximately $224.2 million after
deducting underwriting discounts and commissions and other offering expenses
payable by us.
In August 2019, we entered into an At the Market Offering Sales Agreement, or
the Sales Agreement, with Cantor Fitzgerald and RBC Capital Markets, LLC, or
together, the Sales Agents, pursuant to which, we may offer and sell shares of
our common stock, having an aggregate offering price of up to $125.0 million
from time to time through the Sales Agents by any method that is deemed to be an
"at the market offering" as defined in Rule 415(a)(4) promulgated under the
Securities Act of 1933, as amended, or the Securities Act. During the year ended
December 31, 2019, we issued and sold an aggregate of 63,926 shares of common
stock pursuant to the Sales Agreement at a weighted average public offering
price of $46.60 per share. We received net proceeds of $2.6 million after
deducting agent discounts and commissions and other offering expenses payable by
us. During the year ended December 31, 2020, we issued and sold an aggregate of
542,470 shares of common stock pursuant to the Sales Agreement at a weighted
average public offering price of $53.37 per share. We received net proceeds of
$28.1 million after deducting agent discounts and commissions and other offering
expenses payable by us. We did not issue or sell any shares of common stock
pursuant to the Sales Agreement during the year ending December 31, 2021. The
remaining shares of our common stock available to be issued and sold, under the
Sales Agreement, have an aggregate offering price of up to $93.0 million as of
December 31, 2021.
In September 2019, we closed an underwritten public offering of our common
stock. We issued and sold an aggregate of 2,475,248 shares of common stock at a
public offering price of $40.40 per share. The offering included an option to
purchase up to an additional 371,287 shares for a period of 30 days following
the offering. This option was not exercised by the underwriter. We received net
proceeds of $97.0 million after deducting underwriting discounts and commissions
and other offering expenses payable by us.
In September 2019, we issued $287.5 million aggregate principal amount of 1.50%
convertible senior notes due September 15, 2026, or the 2026 Convertible Notes,
which included an option to purchase up to an additional $37.5 million in
aggregate principal amount of the 2026 Convertible Notes, which was exercised in
full by the initial purchasers. We received net proceeds of $279.3 million after
deducting the initial purchasers' discounts and commissions and the offering
expenses payable by us. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and capital
resources-Sources of Liquidity" for additional information.
On October 25, 2019, we completed our acquisition of substantially all of the
assets of BioElectron Technology Corporation, or BioElectron, for total upfront
consideration of $10.0 million in cash less (i) transaction expenses incurred by
BioElectron, (ii) the amount of outstanding indebtedness of BioElectron
including a $4.0 million loan advance to BioElectron plus accrued and unpaid
interest thereon and (iii) $1.5 million held in an escrow account to secure
potential indemnification obligations owed to us.
On April 29, 2020, we entered into a Rights Exchange Agreement, or the Rights
Exchange Agreement, pursuant to which we issued 2,821,176 shares of our common
stock and paid $36.9 million, in the aggregate, to certain former equityholders,
or the Participating Rightholders, of Agilis Biotherapeutics, Inc., or Agilis,
in exchange for the cancellation
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and forfeiture by the Participating Rightholders of their rights to receive
certain milestone-based contingent payments under the Agreement and Plan of
Merger, dated as of July 19, 2018 by and among us, Agility Merger Sub, Inc. and,
solely in its capacity as the representative, agent and attorney-in-fact of the
equityholders of Agilis, Shareholder Representative Services LLC, or the Agilis
Merger Agreement.
On May 29, 2020, we acquired Censa for total upfront consideration composed of
(i) cash consideration of $15.0 million, which consisted of an upfront payment
of $10.4 million and an additional $4.6 million for the net assets on Censa's
opening balance sheet as of the date of the acquisition, and (ii) 845,364 shares
of our common stock, which were valued at $42.9 million based on the closing
stock price on the acquisition date. The number of shares issued was determined
using a 30-day VWAP pursuant to the Censa Merger Agreement.
In July 2020, we entered into a Royalty Purchase Agreement, or the Royalty
Purchase Agreement, with RPI 2019 Intermediate Finance Trust, or RPI, pursuant
to which we sold to RPI 42.933%, or the Assigned Royalty Payment, of our right
to receive sales-based royalty payments, or the Royalty, on worldwide net sales
of Evrysdi and any other product developed pursuant to the SMA License
Agreement. In consideration for the sale of the Assigned Royalty Payments, RPI
paid us $650.0 million in cash consideration. The Royalty Purchase Agreement
will terminate 60 days following the earlier of the date on which Roche is no
longer obligated to make any payments of the Royalty pursuant to the SMA License
Agreement and the date on which RPI has received $1.3 billion in respect of the
Assigned Royalty Payments.
In June 2021, we filed a Certificate of Amendment to our Restated Certificate of
Incorporation, which increased the number of authorized shares of our common
stock from 125,000,000 to 250,000,000 shares.
To date, we have financed our operations primarily through our offering of 3.00%
convertible senior notes due August 15, 2022, or the 2022 Convertible
Notes offering, our offering of the 2026 Convertible Notes, and, together with
the 2022 Convertible Notes, the Convertible Notes, our public offerings of
common stock in February 2014, in October 2014, in April 2018, in January 2019,
and in September 2019, the common stock issued in our "at the marketing
offering", our initial public offering of common stock in June 2013, proceeds
from the Royalty Purchase Agreement, private placements of our convertible
preferred stock, collaborations, bank and institutional lender debt, grant
funding and clinical trial support from governmental and philanthropic
organizations and patient advocacy groups in the disease areas addressed by our
product candidates. Since 2014, we have also relied on revenue generated from
net sales of Translarna for the treatment of nmDMD in territories outside of the
United States, and since May 2017, we have generated revenue from net sales of
Emflaza for the treatment of DMD in the United States. We have also relied on
revenue associated with milestone and royalty payments from Roche pursuant to
the SMA License Agreement, under our SMA program.
As of December 31, 2021, we had an accumulated deficit of $2,098.0 million. We
had a net loss of $523.9 million, $438.2 million, and $251.6 million for the
fiscal years ended December 31, 2021, 2020, and 2019, respectively.
We anticipate that our expenses will continue to increase in connection with our
commercialization efforts in the United States, the EEA, Latin America and other
territories, including the expansion of our infrastructure and corresponding
sales and marketing, legal and regulatory, distribution and manufacturing,
including expanding our direct manufacturing capabilities at our leased
biologics manufacturing facility and administrative and employee-based expenses.
In addition to the foregoing, we expect to continue to incur ongoing research
and development expenses for our products and product candidates, including our
splicing, gene therapy, Bio-e, metabolic and oncology programs and our studies
of emvododstat for COVID-19 as well as studies in our products for maintaining
authorizations, including Study 041, label extensions and additional
indications. In addition, we may incur substantial costs in connection with our
efforts to advance our regulatory submissions. We continue to seek marketing
authorization for Translarna for the treatment of nmDMD in territories that we
do not currently have marketing authorization in and we may also seek marketing
authorization for Translarna for other indications. We submitted an MAA to the
EMA for the treatment of AADC deficiency with PTC-AADC in the EEA. We are also
preparing a BLA for PTC-AADC for the treatment of AADC deficiency in the United
States and we anticipate submitting a BLA to the FDA in the second quarter of
2022. We filed for marketing authorization for Waylivra with ANVISA for the
treatment of FPL and we expect a regulatory decision on approval from ANVISA in
the second half of 2022. These efforts may significantly impact the timing and
extent of our commercialization expenses.
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We may seek to expand and diversify our product pipeline through
opportunistically in-licensing or acquiring the rights to products, product
candidates or technologies and we may incur expenses, including with respect to
transaction costs, subsequent development costs or any upfront, milestone or
other payments or other financial obligations associated with any such
transaction, which would increase our future capital requirements.
With respect to our outstanding 2022 Convertible Notes, cash interest payments
are payable on a semi-annual basis in arrears, which require total funding of
$4.5 million annually. The 2022 Convertible Notes will mature on August 15, 2022
and we will be required to pay any outstanding principal amount of the 2022
Convertible Notes at that time, unless earlier converted, redeemed or
repurchased in accordance with their terms prior to such date. As of
February 15, 2022, until the close of business on the business day immediately
preceding the maturity date, holders may convert their 2022 Convertible Notes at
any time. Upon conversion, we will pay or deliver, as the case may be, cash,
shares of our common stock or any combination thereof at our election. With
respect to our outstanding 2026 Convertible Notes, cash interest payments are
payable on a semi-annual basis in arrears, which will require total funding of
$4.3 million annually. In 2021, we paid Akcea an additional milestone payment of
$4.0 million upon receipt of regulatory approval for Waylivra from ANVISA for
the treatment of FCS. In addition, we expect to pay Marathon Pharmaceuticals,
LLC (now known as Complete Pharma Holdings, LLC), or Marathon, a single $50.0
million sales-based milestone in connection with Emflaza sales in 2022. We also
expect to pay the former equityholders of Agilis an aggregate of $70.0 million
upon the achievement of certain development and regulatory milestones in 2022
relating to PTC-AADC. Furthermore, since we are a public company, we have
incurred and expect to continue to incur additional costs associated with
operating as such including significant legal, accounting, investor relations
and other expenses.
We have never been profitable and we will need to generate significant revenues
to achieve and sustain profitability, and we may never do so. Accordingly, we
may need to obtain substantial additional funding in connection with our
continuing operations. Adequate additional financing may not be available to us
on acceptable terms, or at all. If we are unable to raise capital when needed or
on attractive terms, we could be forced to delay, reduce or eliminate our
research and development programs or our commercialization efforts.
Financial operations overview
To date, our net product revenues have consisted primarily of sales of
Translarna for the treatment of nmDMD in territories outside of the United
States and sales of Emflaza for the treatment of DMD in the United States. Our
process for recognizing revenue is described below under "Critical accounting
policies and significant judgments and estimates-Revenue recognition".
Roche and the SMA Foundation Collaboration. In November 2011, we entered into
the SMA License Agreement pursuant to which we are collaborating with Roche and
the SMA Foundation to further develop and commercialize compounds identified
under our SMA program with the SMA Foundation. The research component of this
agreement terminated effective December 31, 2014. We are eligible to receive
additional payments from Roche if specified events are achieved with respect to
each licensed product, including up to $135.0 million in research and
development event milestones, up to $325.0 million in sales milestones upon
achievement of specified sales events, and up to double digit royalties on
worldwide annual net sales of a commercial product. As of December 31, 2021, we
had recognized a total of $160.0 million in milestone payments and $59.4 million
royalties on net sales pursuant to the SMA License Agreement. As of December 31,
2021, there are no remaining research and development event milestones that we
can receive. The remaining potential sales milestones as of December 31, 2021
are $300.0 million upon achievement of certain sales events.
Pursuant to the Royalty Purchase Agreement, we sold to RPI the Assigned Royalty
Payment, in consideration for $650.0 million. We have retained a 57.067%
interest in the Royalty and all economic rights to receive the remaining
potential regulatory and sales milestone payments under the License Agreement.
The Royalty Purchase Agreement will terminate 60 days following the earlier of
the date on which Roche is no longer obligated to make any payments of the
Royalty pursuant to the SMA License Agreement and the date on which RPI has
received $1.3 billion in respect of the Assigned Royalty Payments.
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Research and development expense
Research and development expenses consist of the costs associated with our
research activities, as well as the costs associated with our drug discovery
efforts, conducting preclinical studies and clinical trials, manufacturing
development efforts and activities related to regulatory filings. Our research
and development expenses consist of:
external research and development expenses incurred under agreements with
? third-party contract research organizations and investigative sites,
third-party manufacturing organizations and consultants;
employee-related expenses, which include salaries and benefits, including
? share-based compensation, for the personnel involved in our drug discovery and
development activities; and
facilities, depreciation and other allocated expenses, which include direct and
? allocated expenses for rent and maintenance of facilities, IT, human resources,
and other support functions, depreciation of leasehold improvements and
equipment, and laboratory and other supplies.
We use our employee and infrastructure resources across multiple research
projects, including our drug development programs. We track expenses related to
our clinical programs and certain preclinical programs on a per project basis.
We expect our research and development expenses to fluctuate in connection with
our ongoing activities, particularly in connection with Study 041 and other
studies for Translarna for the treatment of nmDMD, our activities under our
splicing, gene therapy, Bio-e, metabolic and oncology programs, and our studies
of emvododstat for COVID-19 and performance of any post-marketing requirements
imposed by regulatory agencies with respect to our products. The timing and
amount of these expenses will depend upon the outcome of our ongoing clinical
trials and the costs associated with our planned clinical trials. The timing and
amount of these expenses will also depend on the costs associated with potential
future clinical trials of our products or product candidates and the related
expansion of our research and development organization, regulatory requirements,
advancement of our preclinical programs, and product and product candidate
manufacturing costs.
The following table provides research and development expense for our most
advanced principal product development programs, for the years ended
December 31, 2021, 2020, and 2019.
December 31,
2021 2020 2019
(in thousands)
Global DMD Franchise $ 83,791 $ 80,742 $ 113,312
PTC923 49,458 59,135 -
Gene Therapy 150,566 213,206 62,839
Bio-e 60,964 29,322 10,060
Oncology 18,618 16,467 21,199
Splicing 53,429 18,567 10,317
Emvododstat for COVID-19 38,348 13,590 -
Discovery 85,510 46,614 39,725
Total research and development $ 540,684 $ 477,643 $ 257,452
The successful development of our product and product candidates is highly
uncertain. This is due to the numerous risks and uncertainties associated with
developing drugs, including the uncertainty of:
? the scope, rate of progress and expense of our clinical trials and other
research and development activities;
? the potential benefits of our product and product candidates over other
therapies;
our ability to market, commercialize and achieve market acceptance for our
? products or any of our product candidates that we are developing or may develop
in the future, including our ability to negotiate pricing and reimbursement
terms acceptable to us;
? clinical trial results;
? the terms and timing of regulatory approvals; and
? the expense of filing, prosecuting, defending and enforcing patent claims and
other intellectual property rights.
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A change in the outcome of any of these variables with respect to the
development of any of our products or product candidates could mean a
significant change in the costs and timing associated with the development of
that product candidates. For example, if the EMA or FDA or other regulatory
authority were to require us to conduct clinical trials beyond those which we
currently anticipate will be required for the completion of clinical development
of any of our products or product candidate or if we experience significant
delays in enrollment in any of our clinical trials, we could be required to
expend significant additional financial resources and time on the completion of
clinical development. In addition, the uncertainty with respect to the duration,
nature and extent of negative impacts of the COVID-19 pandemic and responsive
measures relating thereto on our ability to successfully enroll our current and
future clinical trials, has caused us to experience delays, and may cause us to
experience further delays, in our clinical trials and regulatory submissions.
Selling, general and administrative expense
Selling, general and administrative expenses consist primarily of salaries and
other related costs for personnel, including share-based compensation expenses,
in our executive, legal, business development, commercial, finance, accounting,
information technology and human resource functions. Other selling, general and
administrative expenses include facility-related costs not otherwise included in
research and development expense; advertising and promotional expenses; costs
associated with industry and trade shows; and professional fees for legal
services, including patent-related expenses, accounting services and
miscellaneous selling costs.
We expect that selling, general and administrative expenses will increase in
future periods in connection with our continued efforts to commercialize our
products, including increased payroll, expanded infrastructure, commercial
operations, increased consulting, legal, accounting and investor relations
expenses.
Interest expense, net
Interest expense, net consists of interest expense from the liability for the
sale of future royalties related to the Royalty Purchase Agreement, the
Convertible Notes outstanding, and from our credit and security agreement, or
the Credit Agreement, with MidCap Financial Trust that was terminated in July
2020 offset by interest income earned on investments.
Critical accounting policies and significant judgments and estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which we have prepared in
accordance with generally accepted accounting principles in the United States.
The preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported revenues and expenses during the reporting
periods. Actual results may differ from these estimates under different
assumptions or conditions.
Effective January 1, 2021, we early adopted the Financial Accounting Standards
Board, or the FASB, Accounting Standards Update, or 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" using the
modified retrospective method of adoption. ASU 2020-06 simplifies the accounting
for convertible instruments by removing certain separation models in Subtopic
470- 20, Debt-Debt with Conversion and Other Options, for convertible
instruments. Under ASU 2020-06, the embedded conversion features no longer are
separated from the host contract for convertible instruments with conversion
features that are not required to be accounted for as derivatives under Topic
815, Derivatives and Hedging, or that do not result in substantial premiums
accounted for as paid-in capital. Consequently, a convertible debt instrument
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. By
removing those separation models, the interest rate of convertible debt
instruments typically will be closer to the coupon interest rate when applying
the guidance in Topic 835, Interest. We now account for our Convertible Notes as
single liabilities measured at amortized cost. As a result, the adoption of the
guidance had a material impact on the consolidated financial statements and
accompanying notes, resulting in adjustments of $175.2 million, $54.8 million,
and $120.4 million to the opening balances of additional paid-in capital,
retained earnings, and long term debt, respectively, as of January 1, 2021.
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Additionally, due to the adoption, we reversed the remaining balance of the
deferred tax liability of $29.6 million, which was initially recorded in
connection with the Convertible Notes. Additionally, we increased the existing
valuation allowance by $29.6 million as part of the adoption adjustment. We
concluded that the adoption of the ASU did not change our prior valuation
allowance conclusions. We have updated our debt note (Note 8) with additional
and modified disclosures as required by the standard upon adoption.
Of our policies, the following are considered critical to an understanding of
our consolidated financial statements as they require the application of the
most subjective and complex judgment, involving critical accounting estimates
and assumptions impacting our consolidated financial statements:
? Revenue recognition related to net product revenue
? Liability for sale of future royalties
? Contingent consideration from business combinations
? Indefinite-lived intangible assets annual impairment assessment
Revenue recognition related to net product revenue
Our net product revenue primarily consists of sales of Translarna in territories
outside of the U.S. and sales of Emflaza in the U.S., both for the treatment of
DMD. We recognize revenue when performance obligations with customers have been
satisfied. Our performance obligations are to provide products based on customer
orders from distributors, hospitals, specialty pharmacies or retail pharmacies.
The performance obligations are satisfied at a point in time when our customer
obtains control of the product, which is typically upon delivery. We invoice
customers after the products have been delivered and invoice payments are
generally due within 30 to 90 days of invoice date. We determine the transaction
price based on fixed consideration in its contractual agreements. Contract
liabilities arise in certain circumstances when consideration is due for goods
not yet provided. As we have identified only one distinct performance
obligation, the transaction price is allocated entirely to the product sale. In
determining the transaction price, a significant financing component does not
exist since the timing from when we deliver product to when the customers pay
for the product is typically less than one year. Customers in certain countries
pay in advance of product delivery. In those instances, payment and delivery
typically occur in the same month.
We record product sales net of any variable consideration, which includes
discounts, allowances, rebates related to Medicaid and other government pricing
programs, and distribution fees. We use the expected value or most likely amount
method when estimating variable consideration, unless discount or rebate terms
are specified within contracts. The identified variable consideration is
recorded as a reduction of revenue at the time revenues from product sales are
recognized. These estimates for variable consideration are adjusted to reflect
known changes in factors and may impact such estimates in the quarter those
changes are known. Revenue recognized does not include amounts of variable
consideration that are constrained. During the years ended December 31, 2021,
2020, and 2019, net product sales in the United States were $187.3 million,
$139.0 million, and $101.0 million, respectively, consisting solely of sales of
Emflaza, and net product sales outside of the United States were $241.6 million,
$194.4 million, and $190.3 million respectively, consisting of sales of
Translarna, Tegsedi, and Waylivra. Translarna net product revenues made up
$236.0 million, $191.9 million, and $190.0 million of the net product sales
outside the United States for the years ended December 31, 2021, 2020, and 2019,
respectively.
In relation to customer contracts, we incur costs to fulfill a contract but do
not incur costs to obtain a contract. These costs to fulfill a contract do not
meet the criteria for capitalization and are expensed as incurred. The Company
considers any shipping and handling costs that are incurred after the customer
has obtained control of the product as a cost to fulfill a promise. Shipping and
handling costs associated with finished goods delivered to customers are
recorded as a selling expense.
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Liability for sale of future royalties
In July 2020, we entered into the Royalty Purchase Agreement with RPI, pursuant
to which we sold to RPI the Assigned Royalty Payment. In consideration for the
sale of the Assigned Royalty Payments, RPI paid us $650.0 million in cash
consideration. The Royalty Purchase Agreement will terminate 60 days following
the earlier of the date on which Roche is no longer obligated to make any
payments of the Royalty pursuant to the SMA License Agreement and the date on
which RPI has received $1.3 billion in respect of the Assigned Royalty Payments.
The cash consideration obtained pursuant to the Royalty Purchase Agreement is
classified as debt and is recorded as "liability for sale of future
royalties-current" and "liability for sale of future royalties-noncurrent" on
our consolidated balance sheet based on the timing of the expected payments to
be made to RPI. The fair value for the liability for sale of future royalties at
the time of the transaction was based on our estimates of future royalties
expected to be paid to RPI over the life of the arrangement, which was
determined using forecasts from market data sources, which are considered Level
3 inputs. The liability will be amortized using the effective interest method
over the life of the arrangement, in accordance with the respective guidance. We
will utilize the prospective method to account for subsequent changes in the
estimated future payments to be made to RPI.
Contingent consideration from business combinations
The consideration for our business acquisitions may include future payments that
are contingent upon the occurrence of a particular event or events. The
obligations for such contingent consideration payments are recorded at fair
value on the acquisition date. The contingent consideration obligations are then
evaluated each reporting period. Changes in the fair value of contingent
consideration, other than changes due to payments, are recognized as a gain or
loss and recorded within the change in the fair value of deferred and contingent
consideration in the consolidated statements of operations. The fair value of
development and regulatory milestones are estimated utilizing a probability
adjusted, discounted cash flow approach. The discount rates are estimated
utilizing Corporate B rated bonds maturing in the years of expected payments
based on our estimated development timelines for the acquired product candidate.
The fair value of the net sales milestones and royalties is based on probability
adjusted sales estimates and estimated discount rates and utilizes an option
pricing model with Monte Carlo simulation to simulate a range of possible
payment scenarios, and the average of the payments in these scenarios is then
discounted to calculate present fair value.
Indefinite-lived intangible assets annual impairment assessment
Indefinite-lived intangible assets consist of IPR&D acquired in business
combinations. Intangible assets with indefinite lives, including IPR&D, are
tested for impairment if impairment indicators arise and, at a minimum,
annually. The indefinite-lived intangible asset impairment test consists of a
one-step analysis that compares the fair value of the intangible asset with its
carrying amount. If the carrying amount of an intangible asset exceeds its fair
value, an impairment loss is recognized in an amount equal to that excess.
Several methods may be used to determine the estimated fair value of the IPR&D.
We utilize the "income method", and use estimated future net cash flows that are
derived from projected sales revenues and estimated costs. These projections are
based on factors such as relevant market size, patent protection, and expected
pricing and industry trends. The estimated future net cash flows are then
discounted to the present value using an appropriate discount rate. The
estimated fair value is then compared to the carrying value of IPR&D. We
performed a quantitative annual impairment test for our indefinite-lived
intangible assets as of October 1, 2021 and concluded that no impairment exists
as of December 31, 2021.
For a description of our significant accounting policies, see note 2 to our
consolidated financial statements.
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Year ended December 31, 2021 compared to year ended December 31, 2020
The following table summarizes revenues and selected expense and other income
data for the year ended December 31, 2021 and 2020:
Year ended
December 31, Change
(in thousands) 2021 2020 2021 vs. 2020
Net product revenue $ 428,904 $ 333,401 $ 95,503
Collaboration revenue 55,046 42,579 $ 12,467
Royalty revenue 54,643 4,786 $ 49,857
Cost of product sales, excluding amortization
of acquired intangible assets 32,328 18,942 $ 13,386
Amortization of acquired intangible assets 54,751 36,892 $ 17,859
Research and development expense 540,684 477,643 $ 63,041
Selling, general and administrative expense 285,773 245,164 $ 40,609
Change in the fair value of deferred and
contingent consideration (500) 23,280 $ (23,780)
Settlement of deferred and contingent
consideration - 10,613 (10,613)
Interest expense, net (86,022) (56,352) $ (29,670)
Other (expense) income, net (57,875) 85,188 $ (143,063)
Income tax expense (5,561) (35,228) $ 29,667Net product revenue. Net product revenue was $428.9 million for the year ended
December 31, 2021, an increase of $95.5 million, or 29%, from net product
revenue of $333.4 million for the year ended December 31, 2020. Translarna net
product revenues were $236.0 million for the year ended December 31, 2021, an
increase of $44.1 million, or 23%, compared to $191.9 million for the year ended
December 31, 2020. These results were driven by treatment of new patients,
continued high compliance, and geographic expansion. Emflaza net product
revenues were $187.3 million for the year ended December 31, 2021, an increase
of $48.3 million, or 35%, compared to $139.0 million for the year ended December
31, 2021. These results were driven by continued new prescriptions, continued
high compliance, and more favorable access. The remaining increase of $3.1
million was due to an increase in net product sales of Tegsedi and Waylivra.
Collaboration revenue. Collaboration revenue was $55.0 million for the year
ended December 31, 2021, an increase of $12.5 million, or 29%, from
collaboration revenue of $42.6 million for the year ended December 31, 2020. The
increase is primarily related to three milestones that were triggered from Roche
in the years ended December 31, 2021. In March 2021, the first commercial sale
of Evrysdi in the EU was made. This event triggered a $20.0 million milestone
payment to us from Roche. Additionally, in June 2021, the Japanese Ministry of
Health, Labor and Welfare approved Evrysdi for the treatment of SMA in Japan. In
August 2021, the first commercial sale of Evrysdi in Japan triggered a $10.0
million milestone payment to us from Roche. In December 2021, we recorded our
first sales milestone of $25.0 million for the achievement of $500.0 million in
worldwide annual net sales from Evrysdi. Comparatively, in the year ended
December 31, 2020, the FDA approved Evrysdi for the treatment of SMA in adults
and children two months and older in August 2020. The first commercial sale of
Evrysdi in the United States was made in August 2020. This event triggered a
$20.0 million milestone payment to us from Roche. In August 2020, the EMA
accepted the MAA filed by Roche for Evrysdi for the treatment of SMA, which
triggered a $15.0 million milestone payment to us from Roche. In October 2020,
Chugai filed an NDA in Japan for Evrysdi for the treatment of SMA, which
triggered a $7.5 million milestone payment to us from Roche.
Royalty revenue. Royalty revenue was $54.6 million for the years ended December
31, 2021, an increase of $49.9 million, or over 100%, from $4.8 million for the
years ended December 31, 2020. The increase in royalty revenue was due to the
FDA approval of Evrysdi in August 2020. In accordance with the SMA License
Agreement, we are entitled to royalties on worldwide annual net sales of the
product.
Cost of product sales, excluding amortization of acquired intangible asset. Cost
of product sales, excluding amortization of acquired intangible asset, was $32.3
million for the year end December 31, 2021, an increase of $13.4 million, or
71%, from $18.9 million for the year ended December 31, 2020. Cost of product
sales consist primarily of royalty payments associated with Emflaza and
Translarna net product sales, excluding contingent payments to Marathon,
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costs associated with Emflaza and Translarna product sold during the period, and
royalty expense related to royalty revenues and collaboration milestone
revenues. The increase in cost of product sales, excluding amortization of
acquired intangible asset, is primarily due to the increases in net product
revenue, royalty revenues, and collaboration milestone revenue.
Amortization of acquired intangible asset. Amortization of acquired intangible
asset was $54.8 million for the year ended December 31, 2021, an increase of
$17.9 million, or 48%, from $36.9 million for the year ended December 31, 2020.
These amounts are related to the acquisition of all rights to Emflaza acquired
in May 2017, Marathon contingent payments, and our Waylivra and Tegsedi
intangible assets. The increase is primarily related to additional Marathon
contingent payments. The amount allocated to the Emflaza intangible asset is
amortized on a straight-line basis over its estimated useful life of
approximately seven years from the date of the completion of the acquisition of
all rights to Emflaza, the period of estimated future cash flows. The Marathon
contingent payments are amortized prospectively as incurred, straight-line, over
the remaining useful life of the Emflaza intangible asset. The Waylivra and
Tegsedi assets are amortized on a straight-line basis over their estimated
useful life of approximately ten years, respectively. Additionally, in August
2021, we made a $4.0 million milestone payment to Akcea upon regulatory approval
of Waylivra from ANVISA. In accordance with the guidance for an asset
acquisition, we recorded the milestone payment when it became payable to Akcea,
and it increased the cost basis for the Waylivra intangible asset. This payment
is being amortized to cost of product sales over the expected remaining useful
life of the Waylivra asset on a straight line basis.
Research and development expense. Research and development expense was $540.7
million for the year ended December 31, 2021, an increase of $63.0 million, or
13%, compared to $477.6 million for the year ended December 31, 2020. The
increase in research and development expenses is primarily related to increased
investment in research programs and advancement of the clinical pipeline. This
increase was partially offset by one time charges in the year ended December 31,
2020 of $53.6 million for our Censa Merger, as well as $41.4 million for our
commercial manufacturing service agreement with MassBio related to dedicated
manufacturing space for our lead gene therapy program, AADC deficiency.
Selling, general and administrative expense. Selling, general and
administrative expense was $285.8 million for the year ended December 31, 2021,
an increase of $40.6 million, or 17%, from $245.2 million for the year ended
December 31, 2020. The increase reflects our continued investment to support our
commercial activities including our expanding commercial portfolio, including an
increase in rent and related expenses associated with entering into a long term
lease for the Hopewell Facility that commenced on July 1, 2020.
Change in the fair value of deferred and contingent consideration. Change in the
fair value of deferred and contingent consideration was a gain of $0.5 million
for the year ended December 31, 2021, a change of $23.8 million, or over 100%,
from a loss of $23.3 million for the year ended December 31, 2020. The change is
related to the fair valuation of the potential future consideration to be paid
to former equityholders of Agilis as a result of our merger with Agilis which
closed in August 2018. Changes in the fair value were due to the re-calculation
of discounted cash flows for the passage of time and changes to certain other
estimated assumptions.
Settlement of deferred and contingent consideration. Settlement of deferred and
contingent consideration was $0.0 million for year ended December 31, 2021, a
decrease of $10.6 million, or 100%, from $10.6 million for the year ended
December 31, 2020. The settlement of deferred and contingent consideration for
the year ended December 31, 2020 is related to a loss upon the settlement of the
deferred and contingent consideration liabilities as a result of the Rights
Exchange Agreement with certain former equityholders of Agilis, whereby we
exchanged their pro rata share of specific future cash milestone payments in the
aggregate amount of $225.0 million for a combination of cash and equity. We paid
$36.9 million in cash and issued 2,821,176 shares of common stock in exchange
for the cancellation and forfeiture of the Participating Rightholders' rights to
receive (i) $174.0 million, in the aggregate, of potential milestone payments
based on the achievement of certain regulatory milestones and (ii) $37.6
million, in the aggregate, of $40.0 million in development milestone payments
that would have been due upon the passing of the second anniversary of the
closing of the Agilis Merger, regardless of whether the milestones are achieved.
Interest expense, net. Interest expense, net was $86.0 million for the year
ended December 31, 2021, an increase of $29.7 million, 53%, from interest
expense, net of $56.4 million for the year ended December 31, 2020. The
increase in interest expense, net was primarily due to interest expense recorded
from the liability for the sale of future royalties related
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to the Royalty Purchase Agreement, partially offset by a decrease in interest
expense recorded from the 2022 and 2026 Convertible Notes as a result of the
adoption of ASU 2020-06 and interest income from our investments.
Other (expense) income, net. Other expense, net was $57.9 million for the year
ended December 31, 2021, a change of $143.1 million, over 100%, from other
income, net of $85.2 million for the year ended December 31, 2020. The change in
other (expense) income, net resulted primarily from an unrealized foreign
exchange loss of $41.0 million from the remeasurement of our intercompany loan,
which is recorded on a non-U.S. subsidiary and denominated in U.S. dollars, and
unrealized losses on our equity investments and convertible debt security in
ClearPoint Neuro, Inc. (formerly MRI Interventions, Inc.), or ClearPoint, of
$6.1 million and $8.3 million, respectively.
Income tax expense. Income tax expense was $5.6 million for the year ended
December 31, 2021, a decrease of $29.7 million, or 84%, from income tax expense
of $35.2 million for the year ended December 31, 2020. We recorded a state
income tax provision for the year ended December 31, 2020, which is attributable
to the taxable income from the sale of our right to receive sales-based royalty
payments on Roche's worldwide net sales of Evrysdi. We also incurred income tax
expense in various foreign jurisdictions, and our foreign tax liabilities are
largely dependent upon the distribution of pre-tax earnings among these
different jurisdictions.
Year ended December 31, 2020 compared to year ended December 31, 2019
The following table summarizes revenues and selected expense and other income
data for the years ended December 31, 2020 and 2019:
Year ended
December 31, Change
(in thousands) 2020 2019 2020 vs. 2019
Net product revenue $ 333,401 $ 291,306 $ 42,095
Collaboration revenue 42,579 15,674 $ 26,905
Royalty revenue 4,786 - $ 4,786
Cost of product sales, excluding amortization
of acquired intangible assets 18,942 12,135 $ 6,807
Amortization of acquired intangible assets 36,892 27,650 $ 9,242
Research and development expense 477,643 257,452 $ 220,191
Selling, general and administrative expense 245,164 202,541 $ 42,623
Change in the fair value of deferred and
contingent consideration 23,280 48,360 $ (25,080)
Settlement of deferred and contingent
consideration 10,613 - $ 10,613
Interest expense, net (56,352) (12,491) $ (43,861)
Other income, net 85,188 13,723 $ 71,465
Income tax expense (35,228) (11,650) $ (23,578)Net product revenue. Net product revenue was $333.4 million for the year ended
December 31, 2020, an increase of $42.1 million, or 14%, from net product
revenue of $291.3 million for the year ended December 31, 2019. Translarna net
product revenues were $191.9 million for the year ended December 31, 2020, an
increase of $1.9 million, or 1%, compared to $190.0 million for the year ended
December 31, 2019. The increase in Translarna net product revenues was driven by
broader uptake due to new patients in existing geographies, geographic
expansion, and label updates. Emflaza net product revenues were $139.0 million
for the year ended December 31, 2020, an increase of $38.0 million, or 38%,
compared to $101.0 million for the year ended December 31, 2019. The increase in
Emflaza net product revenue was primarily due to increased new patient
prescriptions and higher compliance. The remaining increase was due to an
increase in net product sales of Tegsedi and the commercial launch of Waylivra
in the year ended December 31, 2020.
Collaboration revenue. Collaboration revenue was $42.6 million for the year
ended December 31, 2020, an increase of $26.9 million, over 100%, from
collaboration revenue of $15.7 million for the year ended December 31, 2019. The
increase is primarily related to three milestones that were triggered from Roche
in the years ended December 31, 2020. In August 2020, the FDA approved Evrysdi
for the treatment of SMA in adults and children two months and older. The first
commercial sale of Evrysdi in the United States was made in August 2020. This
event triggered a $20.0 million milestone
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payment to us from Roche. In August 2020, the EMA accepted the MAA filed by
Roche for Evrysdi for the treatment of SMA, which triggered a $15.0 million
milestone payment to us from Roche. In October 2020, Chugai filed an NDA in
Japan for Evrysdi for the treatment of SMA, which triggered a $7.5 million
milestone payment to us from Roche. Comparatively, in the year ended December
31, 2019, a $15.0 million milestone was triggered upon the FDA's acceptance of
the filing of the NDA for risdiplam for the treatment of SMA.
Royalty revenue. Royalty revenue was $4.8 million for the years ended December
31, 2020, an increase of $4.8 million, or 100%, from $0.0 million for the years
ended December 31, 2019. The increase in royalty revenue was due to the FDA
approval of Evrysdi in August 2020. In accordance with the SMA License
Agreement, we are entitled to royalties on worldwide annual net sales of the
product.
Cost of product sales, excluding amortization of acquired intangible asset.
Cost of product sales, excluding amortization of acquired intangible asset, was
$18.9 million for the year end December 31, 2020, an increase of $6.8 million,
or 56%, from $12.1 million for the year ended December 31, 2019. Cost of product
sales consist primarily of royalty payments associated with Emflaza and
Translarna net product sales, excluding contingent payments to Marathon, costs
associated with Emflaza and Translarna product sold during the period, and
royalty expense related to royalty revenues and collaboration milestone
revenues. The increase in cost of product sales, excluding amortization of
acquired intangible asset, is primarily due to the increases in net product
revenue, royalty revenues, and collaboration milestone revenue.
Amortization of acquired intangible asset. Amortization of acquired intangible
asset was $36.9 million for the year ended December 31, 2020, an increase of
$9.2 million, or 33%, from $27.7 million for the year ended December 31, 2019.
These amounts are related to the acquisition of all rights to Emflaza acquired
in May 2017, Marathon contingent payments, and our Waylivra and Tegsedi
intangible assets. The increase is primarily related to additional Marathon
contingent payments. The amount allocated to the Emflaza intangible asset is
amortized on a straight-line basis over its estimated useful life of
approximately seven years from the date of the completion of the acquisition of
all rights to Emflaza, the period of estimated future cash flows. The Marathon
contingent payments are amortized prospectively as incurred, straight-line, over
the remaining useful life of the Emflaza intangible asset. The Waylivra and
Tegsedi assets are amortized on a straight-line basis over their estimated
useful life of approximately ten years, respectively.
Research and development expense. Research and development expense was $477.6
million for the year ended December 31, 2020, an increase of $220.2 million, or
86%, compared to $257.5 million for the year ended December 31, 2019. The
increase in research and development expenses reflects costs associated with
advancing the gene therapy and Bio-e platforms, increased investment in research
programs, and advancement of the clinical pipeline. The increase also includes
one-time charges of $53.6 million in acquisition related and other expenses from
our acquisition of Censa pursuant to the Censa Merger Agreement and $41.4
million related to our commercial manufacturing services agreement with or
MassBio related to dedicated manufacturing space for our lead gene therapy
program, AADC deficiency.
Selling, general and administrative expense. Selling, general and
administrative expense was $245.2 million for the year ended December 31, 2020,
an increase of $42.6 million, or 21%, from $202.5 million for the year ended
December 31, 2019. The increase was primarily due to continued investment to
support our commercial activities including our expanding commercial portfolio
and rent and related expenses associated with entering into a long term lease
for the Hopewell Facility that commenced on July 1, 2020.
Change in the fair value of deferred and contingent consideration. Change in the
fair value of deferred and contingent consideration was a loss of $23.3 million
for the year ended December 31, 2020, a decrease of $25.1 million, or 52%, from
a loss of $48.4 million for the year ended December 31, 2019. The change is
related to the fair valuation of the potential future consideration to be paid
to former equityholders of Agilis as a result of our merger with Agilis which
closed in August 2018. Changes in the fair value were due to the re-calculation
of discounted cash flows for the passage of time and changes to certain other
estimated assumptions.
Settlement of deferred and contingent consideration. Settlement of deferred and
contingent consideration was $10.6 million for year ended December 31, 2020. The
settlement of deferred and contingent consideration is related to a loss upon
the settlement of the deferred and contingent consideration liabilities as a
result of the Rights Exchange Agreement
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with certain former equityholders of Agilis, whereby we exchanged their pro rata
share of specific future cash milestone payments in the aggregate amount of
$225.0 million for a combination of cash and equity. We paid $36.9 million in
cash and issued 2,821,176 shares of common stock in exchange for the
cancellation and forfeiture of the Participating Rightholders' rights to receive
(i) $174.0 million, in the aggregate, of potential milestone payments based on
the achievement of certain regulatory milestones and (ii) $37.6 million, in the
aggregate, of $40.0 million in development milestone payments that would have
been due upon the passing of the second anniversary of the closing of the Agilis
Merger, regardless of whether the milestones are achieved.
Interest expense, net. Interest expense, net was $56.4 million for the year
ended December 31, 2020, an increase of $43.9 million, over 100%, from interest
expense, net of $12.5 million for the year ended December 31, 2019. The
increase in interest expense, net was primarily due to interest expense recorded
from the liability for the sale of future royalties related to the Royalty
Purchase Agreement, interest expense recorded from the 2022 and 2026 Convertible
Notes and the Credit Agreement, partially offset by interest income from our
investments.
Other income, net. Other income, net was $85.2 million for the year ended
December 31, 2020, an increase of $71.5 million, over 100%, from other income,
net of $13.7 million for the year ended December 31, 2019. The increase in other
income, net resulted primarily from an unrealized foreign exchange gain of $54.6
million from the remeasurement of our intercompany loan, which is recorded on a
non-U.S. subsidiary and denominated in U.S. dollars, and unrealized gains on our
equity investments and convertible debt security in ClearPoint of $14.3 million
and $19.3 million, respectively. These gains were partially offset by Agilis
Rights Exchange transaction fees of $2.0 million.
Income tax expense. Income tax expense was $35.2 million for the year ended
December 31, 2020, an increase of $23.6 million, over 100%, from income tax
expense of $11.7 million for the year ended December 31, 2019. We recorded a
state income tax provision in the years ended December 31, 2020, which is
attributable to the taxable income from the sale of our right to receive
sales-based royalty payments on Roche's worldwide net sales of Evrysdi. We also
incurred income tax expense in various foreign jurisdictions, and our foreign
tax liabilities are largely dependent upon the distribution of pre-tax earnings
among these different jurisdictions.
Liquidity and capital resources
Sources of liquidity
Since inception, we have incurred significant operating losses.
As a growing commercial-stage biopharmaceutical company, we are engaging in
significant commercialization efforts for our products while also devoting a
substantial portion of our efforts on research and development related to our
products, product candidates and other programs. To date, almost all of our
product revenue has been attributable to sales of Translarna for the treatment
of nmDMD in territories outside of the United States and from Emflaza for the
treatment of DMD in the United States. Our ongoing ability to generate revenue
from sales of Translarna for the treatment of nmDMD is dependent upon our
ability to maintain our marketing authorizations in Brazil, Russia and in the
EEA and secure market access through commercial programs following the
conclusion of pricing and reimbursement terms at sustainable levels in the
member states of the EEA or through EAP programs in the EEA and other
territories. The marketing authorization requires annual review and renewal by
the European Commission following reassessment by the EMA of the benefit-risk
balance of the authorization and is subject to the specific obligation to
conduct Study 041. Our ability to generate product revenue from Emflaza will
largely depend on the coverage and reimbursement levels set by governmental
authorities, private health insurers and other third-party payors.
We have historically financed our operations primarily through the issuance and
sale of our common stock in public offerings, our "at the market offering" of
our common stock, proceeds from the Royalty Purchase Agreement, the private
placements of our preferred stock, collaborations, bank and institutional lender
debt, convertible debt financings and grants and clinical trial support from
governmental and philanthropic organizations and patient advocacy groups in the
disease areas addressed by our product candidates. We expect to continue to
incur significant expenses and operating losses for at least the next fiscal
year. The net losses we incur may fluctuate significantly from quarter to
quarter.
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In August 2015, we closed a private offering of $150.0 million in aggregate
principal amount of 2022 Convertible Notes, including the exercise by the
initial purchasers of an option to purchase an additional $25.0 million in
aggregate principal amount of the 2022 Convertible Notes. The 2022 Convertible
Notes bear cash interest payable on February 15 and August 15 of each year,
beginning on February 15, 2016. The 2022 Convertible Notes are senior unsecured
obligations of ours and will mature on August 15, 2022, unless earlier
converted, redeemed or repurchased in accordance with their terms prior to such
date. We received net proceeds from the offering of approximately
$145.4 million, after deducting the initial purchasers' discounts and
commissions and the estimated offering expenses payable by us.
As of February 15, 2022, until the close of business on the business day
immediately preceding the maturity date, holders may convert their 2022
Convertible Notes at any time. Upon conversion, we will pay or deliver, as the
case may be, cash, shares of our common stock or any combination thereof at our
election.
The conversion rate for the 2022 Convertible Notes was initially, and remains,
17.7487 shares of our common stock per $1,000 principal amount of the 2022
Convertible Notes, which is equivalent to an initial conversion price of
approximately $56.34 per share of our common stock.
We were not permitted to redeem the 2022 Convertible Notes prior to August 20,
2018. As of August 20, 2018, we may redeem for cash all or any portion of the
2022 Convertible Notes, at our option, on or after August 20, 2018 if the last
reported sale price of our common stock has been at least 130% of the conversion
price then in effect on the last trading day of, and for at least 19 other
trading days (whether or not consecutive) during, any 30 consecutive trading day
period ending on, and including, the trading day immediately preceding the date
on which we provide notice of redemption, at a redemption price equal to 100% of
the principal amount of the 2022 Convertible Notes to be redeemed, plus accrued
and unpaid interest to, but excluding, the redemption date. No sinking fund is
provided for the 2022 Convertible Notes, which means that we are not required to
redeem or retire the 2022 Convertible Notes periodically. There have been no
redemptions to date.
If we undergo a "fundamental change" (as defined in the Indenture governing the
2022 Convertible Notes Indenture), subject to certain conditions, holders of the
2022 Convertible Notes may require us to repurchase for cash all or part of
their 2022 Convertible Notes at a repurchase price equal to 100% of the
principal amount of the 2022 Convertible Notes to be repurchased, plus accrued
and unpaid interest to, but excluding, the fundamental change repurchase date.
The 2022 Convertible Notes represent senior unsecured obligations and will rank
senior in right of payment to our future indebtedness that is expressly
subordinated in right of payment to the notes, equal in right of payment to our
existing and future unsecured indebtedness that is not so subordinated,
effectively junior in right of payment to any of our secured indebtedness to the
extent of the value of the assets securing such indebtedness, and structurally
subordinated to all existing and future indebtedness and other liabilities
(including trade payables) incurred by our subsidiaries. The 2022 Convertible
Notes Indenture contains customary events of default with respect to the 2022
Convertible Notes, including that upon certain events of default (including our
failure to make any payment of principal or interest on the 2022 Convertible
Notes when due and payable) occurring and continuing, the 2022 Convertible
Notes Trustee by notice to us, or the holders of at least 25% in principal
amount of the outstanding 2022 Convertible Notes by notice to us and the 2022
Convertible Notes Trustee, may, and the 2022 Convertible Notes Trustee at the
request of such holders (subject to the provisions of the 2022 Convertible
Notes Indenture) will, declare 100% of the principal of and accrued and unpaid
interest, if any, on all the 2022 Convertible Notes to be due and payable. In
case of certain events of bankruptcy, insolvency or reorganization, involving us
or a significant subsidiary, 100% of the principal of and accrued and unpaid
interest on the 2022 Convertible Notes will automatically become due and
payable. Upon such a declaration of acceleration, such principal and accrued and
unpaid interest, if any, will be due and payable immediately.
In January 2019 and February 2019, we closed an underwritten public offering of
7,563,725 shares of our common stock and received net proceeds of approximately
$224.2 million. In August 2019, we entered into the Sales Agreement, pursuant to
which, we may offer and sell shares of our common stock, having an aggregate
offering price of up to $125.0 million from time to time through the Sales
Agents by any method that is deemed to be an "at the market offering" as defined
in Rule 415(a)(4) promulgated under the Securities Act. In September 2019, we
closed an underwritten public offering of 2,475,248 shares of our common stock
and received net proceeds of $97.0 million. See "Item 7. Management's
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Discussion and Analysis of Financial Condition and Results of
Operations-Overview-Funding" for additional information regarding the
transactions described in this paragraph.
In September 2019, we issued $287.5 million aggregate principal amount of 2026
Convertible Notes, which included an option to purchase up to an additional
$37.5 million in aggregate principal amount of the 2026 Convertible Notes, which
was exercised in full by the initial purchasers. The 2026 Convertible Notes bear
cash interest at a rate of 1.50% per year, payable semi-annually on March 15 and
September 15 of each year, beginning on March 15, 2020. The 2026 Convertible
Notes will mature on September 15, 2026, unless earlier repurchased or
converted. We received net proceeds of $279.3 million after deducting the
initial purchasers' discounts and commissions and the offering expenses payable
by us.
Holders may convert their 2026 Convertible Notes at their option at any time
prior to the close of business on the business day immediately
preceding March 15, 2026 only under the following circumstances: (1) during any
calendar quarter commencing on or after December 31, 2019 (and only during such
calendar quarter), if the last reported sale price of our common stock for at
least 20 trading days (whether or not consecutive) during a period
of 30 consecutive trading days ending on the last trading day of the immediately
preceding calendar quarter is greater than or equal to 130% of the conversion
price on each applicable trading day; (2) during the five business day period
after any five consecutive trading day period, or the measurement period, in
which the trading price (as defined in the 2026 Convertible Notes Indenture) per
$1,000 principal amount of 2026 Convertible Notes for each trading day of the
measurement period was less than 98% of the product of the last reported sale
price of our common stock and the conversion rate on each such trading day;
(3) during any period after we have issued notice of redemption until the close
of business on the scheduled trading day immediately preceding the relevant
redemption date; or (4) upon the occurrence of specified corporate events. On or
after March 15, 2026, until the close of business on the business day
immediately preceding the maturity date, holders may convert their 2026
Convertible Notes at any time, regardless of the foregoing circumstances. Upon
conversion, we will pay or deliver, as the case may be, cash, shares of our
common stock or any combination thereof at our election.
The conversion rate for the 2026 Convertible Notes was initially, and remains,
19.0404 shares of our common stock per $1,000 principal amount of the 2026
Convertible Notes, which is equivalent to an initial conversion price of
approximately $52.52 per share of our common stock. The conversion rate may be
subject to adjustment in some events but will not be adjusted for any accrued
and unpaid interest.
We are not permitted to redeem the 2026 Convertible Notes prior to September 20,
2023. We may redeem for cash all or any portion of the 2026 Convertible Notes,
at our option, if the last reported sale price of its common stock has been at
least 130% of the conversion price then in effect on the last trading day of,
and for at least 19 other trading days (whether or not consecutive) during, any
30 consecutive trading day period ending on, and including, the trading day
immediately preceding the date on which we provide notice of redemption, at a
redemption price equal to 100% of the principal amount of the 2026 Convertible
Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the
redemption date. No sinking fund is provided for the 2026 Convertible Notes,
which means that we are not required to redeem or retire the 2026 Convertible
Notes periodically.
If we undergo a "fundamental change" (as defined in the 2026 Convertible
Notes Indenture), subject to certain conditions, holders of the 2026 Convertible
Notes may require us to repurchase for cash all or part of their 2026
Convertible Notes at a repurchase price equal to 100% of the principal amount of
the 2026 Convertible Notes to be repurchased, plus accrued and unpaid interest
to, but excluding, the fundamental change repurchase date.
The 2026 Convertible Notes represent senior unsecured obligations and will rank
senior in right of payment to our future indebtedness that is expressly
subordinated in right of payment to the notes, equal in right of payment to our
existing and future unsecured indebtedness that is not so subordinated,
effectively junior in right of payment to any of our secured indebtedness to the
extent of the value of the assets securing such indebtedness, and structurally
subordinated to all existing and future indebtedness and other liabilities
(including trade payables) incurred by our subsidiaries. The 2026 Convertible
Notes Indenture contains customary events of default with respect to the 2026
Convertible Notes, including that upon certain events of default (including our
failure to make any payment of principal or interest on the 2026 Convertible
Notes when due and payable) occurring and continuing, the 2026 Convertible
Notes Trustee by notice to us, or the holders
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of at least 25% in principal amount of the outstanding 2026 Convertible Notes by
notice to us and the Convertible Notes Trustee, may, and the 2026 Convertible
Notes Trustee at the request of such holders (subject to the provisions of the
2026 Convertible Notes Indenture) will, declare 100% of the principal of and
accrued and unpaid interest, if any, on all the 2026 Convertible Notes to be due
and payable. In case of certain events of bankruptcy, insolvency or
reorganization, involving us or a significant subsidiary, 100% of the principal
of and accrued and unpaid interest on the 2026 Convertible Notes will
automatically become due and payable. Upon such a declaration of acceleration,
such principal and accrued and unpaid interest, if any, will be due and payable
immediately.
In July 2020, we entered into the Royalty Purchase Agreement. Pursuant to the
Royalty Purchase Agreement, we sold to RPI the Assigned Royalty Payment in
consideration for $650.0 million. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations-Overview-Funding" for
additional information regarding this transaction.
Cash flows
As of December 31, 2021, we had cash and cash equivalents and marketable
securities of $773.4 million.
The following table provides information regarding our cash flows and our
capital expenditures for the periods indicated.
Years ended
December 31,
(in thousands) 2021 2020 2019
Cash (used in) provided by:
Operating activities $ (251,332) $ (194,071) $ (98,639)
Investing activities $ 219,182 $ (561,548) $ (387,237)
Financing activities $ 20,877 $ 668,715 $ 613,209
Net cash used in operating activities was $251.3 million, $194.1 million, and
$98.6 million for the years ended December 31, 2021, 2020, and 2019,
respectively. The cash used in operating activities primarily related to
supporting clinical development, including the manufacture of drug product,
commercial activities for Emflaza and Translarna, and costs associated with the
expansion of our international infrastructure for the years ended December 31,
2021, 2020, and 2019.
Net cash provided by investing activities was $219.2 million for the year ended
December 31, 2021. Net cash used in investing activities was $561.5 million and
$387.2 million for the years ended December 31, 2020 and 2019, respectively. The
cash provided by investing activities for the year ended December 31, 2021 was
primarily related to net sales and redemptions of marketable securities. The
cash used in investing activities for the year ended December 31, 2020 was
primarily related to purchases of marketable securities, the acquisition of
product rights, purchases of fixed assets, and our purchase of convertible debt
security, partially offset by net sales and redemptions of marketable
securities. The cash used in investing activities for the year ended
December 31, 2019 was primarily related to purchases of marketable securities,
the acquisition of product rights, purchases of fixed assets, and our Equity
Investment, partially offset by net sales and redemptions of marketable
securities.
Net cash provided by financing activities was $20.9 million, $668.7 million, and
$613.2 million for the years ended December 31, 2021, 2020 and 2019,
respectively. The cash provided by financing activities for the year ended
December 31, 2021 is primarily attributable to the exercise of options, and
issuance of stock under our Employee Stock Purchase Plan, or ESPP, offset by
payments of finance lease principal. Net cash provided by financing activities
for the year ended December 31, 2020 is primarily attributable to proceeds from
the Royalty Purchase Agreement, net proceeds received from our "at the market
offering" of our common stock, the exercise of options, and issuance of stock
under our ESPP, partially offset by repayment on our senior secured term loan,
payments on deferred consideration obligation, and payments of finance lease
principal. Net cash provided by financing activities for the year ended
December 31, 2019 is primarily attributable to net proceeds received from our
public stock offerings, net proceeds received
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from our "at the market offering" of our common stock, net proceeds received
from our convertible notes offering, the exercise of options, and issuance of
stock under our ESPP, partially offset by repayment on our senior secured term
loan.
Funding requirements
We anticipate that our expenses will continue to increase in connection with our
commercialization efforts in the United States, the EEA, Latin America and other
territories, including the expansion of our infrastructure and corresponding
sales and marketing, legal and regulatory, distribution and manufacturing and
administrative and employee-based expenses. In addition to the foregoing, we
expect to continue to incur significant costs in connection with the research
and development of our splicing, gene therapy, Bio-e, metabolic and oncology
programs and our studies of emvododstat for COVID-19 as well as studies in our
products for maintaining authorizations, including Study 041, label extensions
and additional indications. In addition, we may incur substantial costs in
connection with our efforts to advance our regulatory submissions. We continue
to seek marketing authorization for Translarna for the treatment of nmDMD in
territories that we do not currently have marketing authorization in. We
submitted an MAA to the EMA for the treatment of AADC deficiency with PTC-AADC
in the EEA and we expect an opinion from the CHMP in April 2022. We are
preparing a BLA for PTC-AADC for the treatment of AADC deficiency in the United
States and we expect to submit a BLA to the FDA in the second quarter of 2022.
We filed for marketing authorization for Waylivra with ANVISA for the treatment
of FPL and we expect a regulatory decision on approval from ANVISA in the second
half of 2022. These efforts may significantly impact the timing and extent of
our commercialization expenses.
In addition, our expenses will increase if and as we:
? seek to satisfy contractual and regulatory obligations we assumed in connection
with the Agilis Merger;
? seek to satisfy contractual and regulatory obligations in conjunction with the
Tegsedi-Waylivra Agreement;
? satisfy contractual and regulatory obligations that we assumed through our
other acquisitions and collaborations;
? execute our commercialization strategy for our products and product candidates
that may receive marketing authorization;
are required to complete any additional clinical trials, non-clinical studies
? or Chemistry, Manufacturing and Controls, or CMC, assessments or analyses in
order to advance Translarna for the treatment of nmDMD in the United States or
elsewhere;
? utilize the Hopewell Facility to manufacture program materials for certain of
our gene therapy product candidates;
initiate or continue the research and development of our splicing, gene
? therapy, Bio-e, metabolic and oncology programs and our studies of emvododstat
for COVID-19 as well as studies in our products for maintaining authorizations,
including Study 041, label extensions and additional indications;
? seek to discover and develop additional product candidates;
? seek to expand and diversify our product pipeline through strategic
transactions;
? maintain, expand and protect our intellectual property portfolio; and
add operational, financial and management information systems and personnel,
? including personnel to support our product development and commercialization
efforts.
We believe that our cash flows from product sales, together with existing cash
and cash equivalents, including our offerings of the Convertible Notes, public
offerings of common stock, our "at the market offering" of our common stock,
proceeds from the Royalty Purchase Agreement and marketable securities, will be
sufficient to fund our operating expenses
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and capital expenditure requirements for at least the next twelve months. We
have based this estimate on assumptions that may prove to be wrong, and we could
use our capital resources sooner than we currently expect.
Our future capital requirements will depend on many factors, including:
? our ability to commercialize and market our products and product candidates
that may receive marketing authorization;
our ability to negotiate, secure and maintain adequate pricing, coverage and
? reimbursement terms, on a timely basis, with third-party payors for our
products and products candidates;
our ability to maintain the marketing authorization for our products, including
in the EEA for Translarna for the treatment of nmDMD and whether the EMA
? determines on an annual basis that the benefit-risk balance of Translarna
supports renewal of our marketing authorization in the EEA, on the current
approved label;
? the costs, timing and outcome of Study 041;
the costs, timing and outcome of our efforts to advance Translarna for the
treatment of nmDMD in the United States, including, whether we will be required
? to perform additional clinical trials, non-clinical studies or CMC assessments
or analyses at significant cost which, if successful, may enable FDA review of
an NDA re-submission by us and, ultimately, may support approval of Translarna
for nmDMD in the United States;
? unexpected decreases in revenue or increase in expenses resulting from the
COVID-19 pandemic;
? our ability to maintain orphan exclusivity in the United States for Emflaza;
? our ability to successfully complete all post-marketing requirements imposed by
regulatory agencies with respect to our products;
the progress and results of activities under our splicing, gene therapy, Bio-e,
? metabolic and oncology programs and our studies of emvododstat for COVID-19 as
well as studies in our products for maintaining authorizations, label
extensions and additional indications;
the scope, costs and timing of our commercialization activities, including
product sales, marketing, legal, regulatory, distribution and manufacturing,
? for any of our products and for any of our other product candidates that may
receive marketing authorization or any additional territories in which we
receive authorization to market Translarna;
the costs, timing and outcome of regulatory review of our splicing, gene
? therapy, Bio-e, metabolic and oncology programs and our studies of emvododstat
for COVID-19 and Translarna in other territories;
? our ability to utilize the Hopewell Facility to manufacture program materials
for certain of our gene therapy product candidates;
? our ability to satisfy our obligations under the indentures governing the
Convertible Notes;
? the timing and scope of growth in our employee base;
the scope, progress, results and costs of preclinical development, laboratory
? testing and clinical trials for our other product candidates, including those
in our splicing, gene therapy, Bio-e, metabolic and oncology programs;
? revenue received from commercial sales of our products or any of our product
candidates;
our ability to obtain additional and maintain existing reimbursed named patient
? and cohort EAP programs for Translarna for the treatment of nmDMD on adequate
terms, or at all;
the ability and willingness of patients and healthcare professionals to access
? Translarna through alternative means if pricing and reimbursement negotiations
in the applicable territory do not have a positive outcome;
the costs of preparing, filing and prosecuting patent applications,
? maintaining, and protecting our intellectual property rights and defending
against intellectual property-related claims;
the extent to which we acquire or invest in other businesses, products, product
candidates, and technologies, including the success of any acquisition,
? in-licensing or other strategic transaction we may pursue, and the costs of
subsequent development requirements and commercialization efforts, including
with respect to our acquisitions of Emflaza, Agilis, our Bio-E platform and
Censa and our licensing of Tegsedi and Waylivra; and
our ability to establish and maintain collaborations, including our
? collaborations with Roche and the SMA Foundation, and our ability to obtain
research funding and achieve milestones under these agreements.
With respect to our outstanding 2022 Convertible Notes, cash interest payments
are payable on a semi-annual basis in arrears, which require total funding of
$4.5 million annually. The 2022 Convertible Notes will mature on August 15, 2022
and we will be required to pay any outstanding principal amount of the 2022
Convertible Notes at that time, unless
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earlier converted, redeemed or repurchased in accordance with their terms prior
to such date. As of February 15, 2022, until the close of business on the
business day immediately preceding the maturity date, holders may convert their
2022 Convertible Notes at any time. Upon conversion, we will pay or deliver, as
the case may be, cash, shares of our common stock or any combination thereof at
our election. With respect to our outstanding 2026 Convertible Notes, cash
interest payments are payable on a semi-annual basis in arrears, which will
require total funding of $4.3 million annually.
In addition, we expect to pay Marathon Pharmaceuticals, LLC (now known as
Complete Pharma Holdings, LLC), or Marathon, a single $50.0 million sales-based
milestone in connection with Emflaza sales in 2022. We also expect to pay the
former equityholders of Agilis an aggregate of $70.0 million upon the
achievement of certain development and regulatory milestones in 2022 relating to
PTC-AADC.
We also have certain significant contractual obligations and commercial
commitments that require funding. We lease office space for our principal office
in South Plainfield, New Jersey and we occupy under leases that expire in 2024,
with two consecutive five-year renewal options to renew the leases after 2024
and at 4041 Hadley Road, South Plainfield New Jersey that we occupy under a
lease that will expire in May 2022. Additionally, we entered into a lease
agreement for approximately 103,000 square feet of laboratory and office space
in Bridgewater, New Jersey. The rental term for such facility commenced on May
1, 2020 with an initial term of seven years and two consecutive five year
renewal periods at our option. We also have significant lease obligations that
stem from our lease of office, manufacturing, and laboratory space in Hopewell,
New Jersey. The rental term for such facility commenced on July 1, 2020, with an
initial term of fifteen years and two consecutive 10-year renewal periods at our
option. In addition, we lease office space, vehicles and equipment in various
other locations in the U.S. and other countries for our employees and
operations. We have a total of $130.8 million in obligations that stem from our
operating leases.
We have a total of $33.0 million in obligations that stem from a commercial
manufacturing services agreement entered into with MassBio on June 19, 2020, for
a term of 12.5 years. Pursuant to the terms of the agreement, MassBio agreed to
provide us with four dedicated rooms for our PTC-AADC program.
Under an Exclusive License and Supply Agreement, or the Faes Agreement,
with Faes Farma, S.A., or Faes, we are required to pay royalties as a percentage
of or as a fixed payment with respect to net product sales by us allocable to
the Emflaza oral suspension product. We are required to pay Faes an annual
minimum royalty during the first seven calendar years with a fixed percentage
royalty during the remainder of the Faes Agreement term. The minimum royalty
based on the euro to U.S. dollar exchange rate as of December 31, 2021 is $3.4
million, with the last minimum royalty payment due in 2023.
Under various agreements, we will be required to pay royalties and milestone
payments upon the successful development and commercialization of products,
including the following agreements with The Wellcome Trust Limited, or Wellcome
Trust, and the SMA Foundation.
We have entered into funding agreements with Wellcome Trust for the research and
development of small molecule compounds in connection with our oncology platform
and antibacterial program. As we have discontinued development under our
antibacterial program, we do not expect that milestone and royalty payments from
us to Wellcome Trust will apply under that agreement. Under our oncology
platform funding agreement, to the extent that we develop and commercialize
program intellectual property, excluding emvododstat, on a for-profit basis
ourselves or in collaboration with a partner (provided we retain overall control
of worldwide commercialization), we may become obligated to pay to Wellcome
Trust development and regulatory milestone payments and single-digit royalties
on sales of any research program product. Our obligation to pay such royalties
would continue on a country-by-country basis until the longer of the expiration
of the last patent in the program intellectual property in such country covering
the research program product and the expiration of market exclusivity of such
product in such country. We made the first development milestone payment of
$0.8 million to Wellcome Trust under the oncology platform funding agreement
during the second quarter of 2016. Additional development and regulatory
milestone payments of up to an aggregate of $22.4 million may become payable by
us under this agreement. For example, in the event a Phase 2 clinical study of a
research program candidate, such as unesbulin, is commenced, a milestone payment
of $2.5 million would become payable by us to Wellcome Trust upon the earlier to
occur of the first dose administered to the last patient enrolled in the study
or the termination of dosing of all patients in the study. We expect to initiate
a registration-directed Phase 2/3 trial of unesbulin for the treatment of
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LMS in the second quarter of 2022 and we expect to initiate a
registration-directed Phase 2 trial of unesbulin for the treatment of DIPG in
the third quarter of 2022.
We have also entered into a sponsored research agreement with the SMA Foundation
in connection with our spinal muscular atrophy program. We may become obligated
to pay the SMA Foundation single-digit royalties on worldwide net product sales
of any collaboration product that we successfully develop and subsequently
commercialize or, with respect to collaboration products we outlicense,
including Evrysdi, a specified percentage of certain payments we receive from
our licensee. We are not obligated to make such payments unless and until annual
sales of a collaboration product exceed a designated threshold. Our obligation
to make such payments would end upon our payment to the SMA Foundation of an
aggregate of $52.5 million.
Additionally, we have employment agreements with certain employees which require
the funding of a specific level of payments, if certain events, such as a change
in control or termination without cause, occur. Furthermore, since we are a
public company, we have incurred and expect to continue to incur additional
costs associated with operating as such, including significant legal,
accounting, investor relations and other expenses.
We have never been profitable and we will need to generate significant revenues
to achieve and sustain profitability, and we may never do so. We may need to
obtain substantial additional funding in connection with our continuing
operations. Until such time, if ever, as we can generate substantial product
revenues, we expect to finance our cash needs primarily through a combination of
equity offerings, debt financings, collaborations, strategic alliances, grants
and clinical trial support from governmental and philanthropic organizations and
patient advocacy groups in the disease areas addressed by our product and
product candidates and marketing, distribution or licensing arrangements.
Adequate additional financing may not be available to us on acceptable terms, or
at all. To the extent that we raise additional capital through the sale of
equity or convertible debt securities, our shareholders ownership interest will
be diluted, and the terms of these securities may include liquidation or other
preferences that adversely affect the rights of our common stockholders. Debt
financing, if available, 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 collaborations, strategic alliances or marketing,
distribution or licensing arrangements with third parties, we may have to
relinquish valuable rights to our technologies, future revenue streams, research
programs or product candidates or to grant licenses on terms that may not be
favorable to us.
If we are unable to raise additional funds through equity, debt or other
financings when needed or on attractive terms, we may be required to delay,
limit, reduce or terminate our product development or commercialization efforts
or grant rights to develop and market product candidates that we would otherwise
prefer to develop and market ourselves.
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PTC THERAPEUTICS, INC. 
