SAREPTA THERAPEUTICS, INC. This section should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the section contained in our Annual Report on Form 10-K for the year endedDecember 31, 2020 under the caption "Part II-Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations". This discussion contains certain forward-looking statements, which are often identified by words such as "believe," "anticipate," "expect," "intend," "plan," "will," "may," "estimate," "could," "continue," "ongoing," "predict," "potential," "likely," "seek" and other similar expressions, as well as variations or negatives of these words. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements include, but are not limited to:
• the expected or potential impact of the ongoing COVID-19 pandemic on our
business, including our commercial sales, ongoing and planned clinical
trials, manufacturing and operations;
• our belief that our proprietary technology platforms and collaborations
can be used to develop potential therapeutic candidates to treat a broad
range of diseases;
• our expectation that our partnerships with manufacturers will support
our clinical and commercial manufacturing capacity for our
micro-dystrophin Duchenne muscular dystrophy gene therapy programs and
Limb-girdle muscular dystrophy programs, while also acting as a
manufacturing platform for potential future gene therapy programs, and
our belief that our current network of manufacturing partners are able
to fulfil the requirements of our commercial plan;
• our plan to continue building out our network for commercial
distribution in jurisdictions in which our products are approved;
• estimated timelines and milestones for 2021 and beyond, including
discussing with the
for commencing Part B of Study 5051-201 in 2021, announcing additional
results from Part 2 of Study SRP-9001-102 in the first quarter of 2022,
initiating our pivotal trial (Study 301) for SRP-9001 in 2021,
completing GMP runs for SRP-9003 in 2021, and meeting with the FDA in
2021 to discuss our pivotal trial for SRP-9003;
• our plan to expand our pipeline through internal research and
development and through strategic transactions;
• the timely completion and satisfactory outcome of our post-marketing
requirements and commitments, including verification of a clinical
benefit for our products in confirmatory trials;
• our plan to evaluate future engagement with the European Medicines
Agency (the "EMA") on potential next steps for EMA approval of our
products;
• our ability to further secure long-term supply of our commercial
products and our product candidates to satisfy our planned commercial,
early access programs ("EAP") and clinical needs;
• the possible impact of regulations and regulatory decisions by the FDA
and other regulatory agencies on our business, as well as the
development of our product candidates and our financial and contractual
obligations;
• the possible impact of any competing products on the commercial success
of our products and our product candidates and our ability to compete
against such products;
• our ability to enter into research, development or commercialization
alliances with universities, hospitals, independent research centers,
non-profit organizations, pharmaceutical and biotechnology companies and
other entities for specific molecular targets or selected disease
indications and our ability to selectively pursue opportunities to
access certain intellectual property rights that complement our internal
portfolio through license agreements or other arrangements;
• our expectations regarding the potential benefits of the partnership,
licensing and/or collaboration arrangements and other strategic
arrangements and transactions we have entered into or may enter into in
the future; our plans and ability to file and progress to issue
additional patent applications to enhance and protect our new and
existing technologies and programs;
• our estimates regarding how long our currently available cash and cash
equivalents will be sufficient to finance our operations and business
plans and statements about our future capital needs;
• our estimates regarding future revenues, research and development
expenses, other expenses, capital requirements and payments to third
parties;
19
--------------------------------------------------------------------------------
• our expectation regarding the impact of environmental laws and
regulations on our business; and
• our beliefs and expectations regarding milestone, royalty or other
payments that could be due to third parties under existing agreements.
We undertake no obligation to update any of the forward-looking statements contained in this Quarterly Report on Form 10-Q after the date of this report, except as required by law or the rules and regulations of theU.S. Securities and Exchange Commission (the "SEC"). We caution readers not to place undue reliance on forward-looking statements. Our actual results could differ materially from those discussed in this Quarterly Report on Form 10-Q. The forward-looking statements contained in this Quarterly Report on Form 10-Q, and other written and oral forward-looking statements made by us from time to time, are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements, including the risks, uncertainties and assumptions identified under the heading "Risk Factors" in this Quarterly Report on Form 10-Q.
Overview
We are a commercial-stage biopharmaceutical company focused on helping patients
through the discovery and development of unique RNA-targeted therapeutics, gene
therapy and other genetic therapeutic modalities for the treatment of rare
diseases. Applying our proprietary, highly-differentiated and innovative
technologies, and through collaborations with our strategic partners, we are
developing potential therapeutic candidates for a broad range of diseases and
disorders, including Duchenne muscular dystrophy ("DMD"), Limb-girdle muscular
dystrophies ("LGMDs"), and other neuromuscular and central nervous system
("CNS") related disorders.
We commercialize three products that were approved by the FDA: EXONDYS 51
(eteplirsen) Injection ("EXONDYS 51"), was granted accelerated approval by the
FDA on September 19, 2016 . EXONDYS 51 is indicated for the treatment of DMD in
patients who have a confirmed mutation of the DMD gene that is amenable to exon
51 skipping. EXONDYS 51 uses our phosphorodiamidate morpholino oligomer ("PMO")
chemistry and exon-skipping technology to skip exon 51 of the dystrophin gene.
VYONDYS 53 (golodirsen) Injection ("VYONDYS 53"), was granted accelerated
approval by the FDA on December 12, 2019 . VYONDYS 53 is indicated for the
treatment of DMD in patients who have a confirmed mutation of the DMD gene that
is amenable to exon 53 skipping. VYONDYS 53 uses our PMO chemistry and
exon-skipping technology to skip exon 53 of the dystrophin gene. AMONDYS 45
(casimersen) Injection ("AMONDYS 45"), was granted accelerated approval by the
FDA on February 25, 2021 . AMONDYS 45 is indicated for the treatment of DMD in
patients who have a confirmed mutation of the DMD gene that is amenable to exon
45 skipping. AMONDYS 45 uses our PMO chemistry and exon-skipping technology to
skip exon 45 of the dystrophin gene.
We are in the process of conducting various EXONDYS 51, VYONDYS 53 and AMONDYS
45 clinical trials, including studies that are required to comply with our
post-marketing FDA requirements/commitments to verify and describe the clinical
benefit of these products.
A summary description of our main product candidates, including those in collaboration with our strategic partners, is as follows:
• SRP-5051 uses our next-generation chemistry platform, PPMO, and our
exon-skipping technology to skip exon 51 of the dystrophin gene.
SRP-5051, a peptide conjugated PMO, is designed to bind to exon 51 of
dystrophin pre-mRNA, resulting in exclusion of this exon during mRNA
processing in patients with genetic mutations that are amenable to exon
51 skipping. Exon skipping is intended to promote the production of an
internally truncated but functional dystrophin protein. In the fourth
quarter of 2017, we commenced a first-in-human, single ascending dose,
study for the treatment of DMD in patients who are amenable to exon 51
skipping. In 2019, we commenced Study 5051-201. In December 2020 , weannounced an interim analysis on clinical results from the 10 mg/kg and
20 mg/kg dose cohorts of Part A of Study 5051-201. In
announced results from the 30 mg/kg cohort of Part A of Study 5051-201.
We will discuss with the FDA the path for commencing Part B of Study
5051-201 in 2021.
20
--------------------------------------------------------------------------------
• SRP-9001 (DMD, micro-dystrophin gene therapy program), aims to express
micro-dystrophin - a smaller but functional version of dystrophin. A
unique, engineered micro-dystrophin is used because naturally-occurring
dystrophin is too large to fit in an AAV vector. In the fourth quarter
of 2017, an investigational new drug ("IND") application for the
micro-dystrophin gene therapy program was cleared by the FDA, and a
Phase 1/2a clinical trial in individuals with DMD was initiated. Inresults from the Phase 1/2a clinical trial in four individuals with DMD
enrolled in the trial. In
and creatine kinase ("CK") data from baseline from these four
individuals, and twelve-month CK data from baseline from one of these
individuals. In June 2020 , we announced that functional, safety and
tolerability data at twelve-months from baseline from these four
individuals had been published in JAMA Neurology. In
presented functional, safety and tolerability data at 24 months from
these four individuals. In the fourth quarter of 2018, we commenced a
randomized, double-blind, placebo-controlled trial of SRP-9001 with the
goal to establish the functional benefits of micro-dystrophin
expressions (Study 102). We have dosed all 41 participants in that trial
and are dosing participants in the crossover phase of the study. In
January 2021 , we released top-line results for Part 1 of Study 102 (the
48-week assessment of 41 participants) and interim expression resultsfrom Part 2 of Study 102 (the crossover phase). We expect additional
results from Part 2 of Study 102 in the first quarter of 2022. We have
completed dosing in the first cohort in Study 103, an open-label studyevaluating the safety and expression of commercially representative
material for SRP-9001. In
safety results from the first 11 participants enrolled in Study 103. We
plan to initiate our pivotal trial (Study 301) in 2021.
• SRP-9003 (LGMD, gene therapy program). We are developing gene therapy
programs for various forms of LGMDs. The most advanced of our LGMD
product candidates, SRP-9003, is designed to transfer a gene that codesfor and restores beta-sarcoglycan protein with the goal of restoring the
dystrophin associated protein complex. It utilizes the AAVrh.74 vector
system, the same vector used in the micro-dystrophin gene therapy
program. A Phase 1/2a trial of SRP-9003 was commenced in the fourth
quarter of 2018. In
biopsy data from the first three-patient low-dose cohort dosed in the
SRP-9003 trial, and in
functional data from these three patients. We have recently dosed one
additional cohort of three patients at a higher dose per the study
protocol. In
three clinical trial participants in the high-dose cohort measured at 60
days, and one-year functional data from three clinical trial
participants in the low-dose cohort. In
six-month functional data from three clinical trial participants in the
high-dose cohort, and eighteen-month functional data from three clinical
trial participants in the low-dose cohort. In
24-month functional and expression data from the three clinical trial
participants in the low-dose cohort and twelve-month functional datafrom the three clinical trial participants in the high-dose cohort. We
expect to complete GMP runs for SRP-9003 in 2021. We also plan to meet
with the FDA in 2021 to discuss our pivotal trial.
Our pipeline includes more than 40 programs in various stages of pre-clinical
and clinical development, reflecting our multifaceted approach and expertise in
precision genetic medicine to make a profound difference in the lives of
patients suffering from rare diseases.
Manufacturing, Supply and Distribution
We have developed proprietary state-of-the-art Chemistry, Manufacturing and
Controls ("CMC") and manufacturing capabilities that allow synthesis and
purification of our products and product candidates to support both clinical
development as well as commercialization. Our current main focus in
manufacturing is to continue scaling up production of our PMO-based therapies
and optimizing manufacturing for PPMO and gene therapy-based product candidates.
We have entered into certain manufacturing and supply arrangements with
third-party suppliers which will in part utilize these capabilities to support
production of certain of our product candidates and their components. In 2017,
we opened a facility in Andover, Massachusetts , which significantly enhanced our
research and development manufacturing capabilities. However, we currently do
not have internal large-scale Good Manufacturing Practices ("GMP") manufacturing
capabilities to produce our products and product candidates for commercial
and/or clinical use. For our current and future manufacturing needs, we have
entered into supply agreements with specialized contract manufacturing
organizations (each a "CMO") to produce custom raw materials, the active
pharmaceutical ingredients ("APIs"), drug product and finished goods for our
products and product candidates for both commercial and clinical use. All of our
CMO partners have extensive technical expertise, GMP experience and experience
manufacturing our specific technology.
For our commercial DMD program, we have worked with our existing CMOs to
increase product capacity from mid-scale to large-scale. While there are a
limited number of companies that can produce raw materials and APIs in the
quantities and with the quality and purity that we require for our commercial
products, based on our diligence to date, we believe our current network of CMOs
are able to fulfill these requirements, and are capable of expanding capacity as
needed. Additionally, we have, and will
21
--------------------------------------------------------------------------------
continue to evaluate further relationships with additional suppliers to increase
overall capacity as well as further reduce risks associated with reliance on a
limited number of suppliers for manufacturing.
Our commercial products are distributed in the U.S. through a limited network of
home infusion specialty pharmacy providers that deliver the medication to
patients and a specialty distributor that distributes our products to hospitals
and hospital outpatient clinics. With respect to the pre-commercial distribution
of our products to patients outside of the U.S. , we have contracted with third
party distributors and service providers to distribute our products in certain
countries through our EAPs. We plan to continue building out our network for
commercial distribution in jurisdictions in which our products are approved.
Our gene therapy manufacturing capabilities have been greatly enhanced through
partnerships with Thermo Fisher Scientific Inc. ("Thermo"), Catalent, Inc.
("Catalent") and Aldevron LLC ("Aldevron"). We have adopted a hybrid development
and manufacturing strategy in which we are building internal manufacturing
expertise relative to all aspects of AAV-based manufacturing, including gene
therapy and gene editing supply, while closely partnering with first-in-class
manufacturing partners to expedite development and commercialization of our gene
therapy programs. We expect that our partnerships with Thermo and Catalent will
support our clinical and commercial manufacturing capacity for our
micro-dystrophin DMD gene therapy programs and LGMD programs, while also acting
as a manufacturing platform for potential future gene therapy programs. The
collaboration integrates process development, clinical production and testing,
and commercial manufacturing. Aldevron is expected to provide GMP-grade plasmid
for our SRP-9001 micro-dystrophin DMD gene therapy program and LGMD programs, as
well as plasmid source material for future gene therapy programs, such as
Charcot-Marie-Tooth ("CMT") and other neuromuscular and CNS related disorders.
Manufacturers and suppliers of our commercial products and product candidates
are subject to the FDA's current GMP ("cGMP") requirements and other rules and
regulations prescribed by foreign regulatory authorities. We depend on our
third-party partners for continued compliance with cGMP requirements and
applicable foreign standards.
Cash, Cash Equivalents and Investments
As ofJune 30, 2021 , we had approximately$1,736.6 million of cash, cash equivalents and investments, consisting of$1,697.3 million of cash and cash equivalents,$30.0 million of short-term investments, and$9.3 million of long-term restricted cash and investments. We believe that our balance of cash, cash equivalents and investments is sufficient to fund our current operational plan for at least the next twelve months. The likelihood of our long-term success must be considered in light of the expenses, difficulties and delays frequently encountered in the development and commercialization of new pharmaceutical products, competitive factors in the marketplace, the risks associated with government sponsored programs and the complex regulatory environment in which we operate.
COVID-19 Pandemic
The COVID-19 pandemic has presented a substantial public health and economic
challenge around the world. Our business operations and financial condition and
results have been impacted to varying degrees, and we expect the impact will
continue in future quarters.
We are continuing to assess the potential impact of the COVID-19 pandemic on our
business, operations and financial condition and results. Despite careful
tracking and planning, however, we are unable to accurately predict the extent
of the impact of the pandemic on our business, results of operations and
financial condition due to the uncertainty of future developments. The full
extent to which the COVID-19 pandemic will directly or indirectly impact our
business, results of operations and financial condition will depend on future
developments that are highly uncertain and cannot be accurately predicted,
including new information that may emerge concerning COVID-19, the actions taken
to contain it or treat its impact and the economic impact on local, regional,
national and international markets. For additional information on the various
risks posed by the COVID-19 pandemic, refer to the Risk Factors of this
Quarterly Report on Form 10-Q.
22--------------------------------------------------------------------------------
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements included elsewhere in this report. The preparation of our unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in theU.S. requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities for the periods presented. Some of these judgments can be subjective and complex and, consequently, actual results may differ from these estimates. We believe that the estimates and judgments upon which we rely are reasonable based upon historical experience and information available to us at the time that we make these estimates and judgments. To the extent there are material differences between these estimates and actual results, our unaudited condensed consolidated financial statements will be affected. Although we believe that our judgments and estimates are appropriate, actual results may differ from these estimates.
We believe the following accounting policies to be the most critical to the judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements:
• revenue recognition; • inventory; and • income tax. Aside from the removal of valuation of product options as a critical accounting policy as ofJanuary 1, 2021 , there have been no changes to our critical accounting policies and significant estimates as detailed in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . 23
--------------------------------------------------------------------------------
Results of Operations for the Three and Six Months Ended
The following tables set forth selected unaudited condensed consolidated statements of operations data for each of the periods indicated:
For the Three Months Ended
June 30,
2021 2020 Change Change
(in thousands, except per share amounts) $ %
Revenues:
Products, net $ 141,839 $ 111,344 $ 30,495 27 %
Collaboration 22,250 26,019 (3,769 ) (14 )%
Total revenues 164,089 137,363 26,726 19 %
Cost and expenses:
Cost of sales (excluding
amortization of in-licensed
rights) 19,515 13,341 6,174 46 %
Research and development 239,622 188,522 51,100 27 %
Selling, general and
administrative 72,347 73,688 (1,341 ) (2 )%
Amortization of in-licensed rights 179 165 14 8 %
Total cost and expenses 331,663 275,716 55,947 20 %
Operating loss (167,574 ) (138,353 ) (29,221 ) 21 %
Other income (loss):
Gain from sale of Priority Review
Voucher 102,000 - 102,000 NM*
Other expense, net (16,185 ) (12,447 ) (3,738 ) 30 %
Total other income (loss) 85,815 (12,447 ) 98,262 NM*
Loss before income tax (benefit)
expense (81,759 ) (150,800 ) 69,041 (46 )%
Income tax (benefit) expense (354 ) 20 (374 ) NM*
Net loss $ (81,405 ) $ (150,820 ) $ 69,415 (46 )%
Net loss per share - basic and
diluted (1.02 ) (1.93 ) $ 0.91 (47 )%
For the Six Months Ended
June 30,
2021 2020 Change Change
(in thousands, except per share amounts) $ %
Revenues:
Products, net $ 266,765 $ 211,792 $ 54,973 26 %
Collaboration 44,255 39,245 5,010 13 %
Total revenues 311,020 251,037 59,983 24 %
Costs and expenses:
Cost of sales (excluding
amortization of in-licensed
rights) 41,861 25,963 15,898 61 %
Research and development 434,771 324,666 110,105 34 %
Selling, general and
administrative 143,478 156,456 (12,978 ) (8 )%
Settlement and license charges 10,000 - 10,000 NM*
Amortization of in-licensed rights 349 331 18 5 %
Total cost and expenses 630,459 507,416 123,043 24 %
Operating loss (319,439 ) (256,379 ) (63,060 ) 25 %
Other income (loss):
Gain from sale of Priority Review
Voucher 102,000 108,069 (6,069 ) (6 )%
Other expense, net (31,713 ) (19,867 ) (11,846 ) 60 %
Total other income (loss) 70,287 88,202 (17,915 ) (20 )%
Loss before income tax (benefit)
expense (249,152 ) (168,177 ) (80,975 ) 48 %
Income tax (benefit) expense (497 ) 135 (632 ) NM*
Net loss $ (248,655 ) $ (168,312 ) $ (80,343 ) 48 %
Net loss per share - basic and
diluted $ (3.12 ) $ (2.18 ) $ (0.94 ) 43 %
* NM = Not Meaningful
24
--------------------------------------------------------------------------------
Revenues
Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from Medicaid rebates, governmental chargebacks includingPublic Health Services chargebacks, prompt pay discounts, co-pay assistance and distribution fees. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if no payments are required of us) or a current liability (if a payment is required of us). Our estimates take into consideration current contractual and statutory requirements. The amount of variable consideration included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received or paid may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and net loss in the period such variances become known. Net product revenues for our products for the three and six months endedJune 30, 2021 increased by$30.5 million and$55.0 million , respectively, compared with the three and six months endedJune 30, 2020 . These increases primarily reflect increasing demand for our products in theU.S. and the commercial launch of AMONDYS 45. Collaboration revenue relates primarily to our collaboration arrangement withF. Hoffman-La Roche Ltd. For the three and six months endedJune 30, 2021 , we recognized$22.3 million and$44.3 million of collaboration revenue, respectively. For the three and six months endedJune 30, 2020 , we recognized$26.0 million and$39.2 million of collaboration revenue, respectively. For more information, please read Note 3, Collaboration and License Agreements within our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
Cost of Sales (excluding amortization of in-licensed rights)
Our cost of sales (excluding amortization of in-licensed rights) primarily consists of royalty payments toBioMarin Pharmaceuticals, Inc. ("BioMarin") and theUniversity of Western Australia ("UWA"), inventory costs that relate to sales of our products and the related overhead costs. Prior to receiving regulatory approval for EXONDYS 51, VYONDYS 53, and AMONDYS 45 by the FDA inSeptember 2016 ,December 2019 , andFebruary 2021 , respectively, we expensed such manufacturing and material costs as research and development expenses. For AMONDYS 45 sold in the three and six months endedJune 30, 2021 , and VYONDYS 53 sold in the three and six months endedJune 30, 2020 , the majority of related manufacturing costs incurred had previously been expensed as research and development expenses, as such costs were incurred prior to the FDA approval of the products. For VYONDYS 53 sold in the three and six months endedJune 30, 2021 , and EXONDYS 51 sold in the three and six months endedJune 30, 2021 and 2020, only part of the related manufacturing costs incurred had previously been expensed as research and development expenses. If product related costs had not previously been expensed as research and development expenses prior to receiving FDA approval, the incremental inventory costs related to our products sold would have been approximately$14.2 million and$11.4 million for the six months endedJune 30, 2021 and 2020, respectively. The following tables summarize the components of our cost of sales for each of the periods indicated: For the Three Months Ended June 30, 2021 2020 Change Change (in thousands) $ % Inventory costs related to products sold$ 10,309 $ 6,288 $ 4,021 64 % Royalty payments 9,206 7,053 2,153 31 % Total cost of sales$ 19,515 $ 13,341 $ 6,174 46 %
The cost of sales for the three months ended
• $4.0 million increase in inventory costs related to products sold
primarily as a result of increasing demand for our products; and
• $2.2 million increase in royalty payments to BioMarin and UWA also
reflects increasing demand for our products.
For the Six Months Ended
June 30,
2021 2020 Change Change
(in thousands) $ %
Inventory costs related to products sold
$ 12,129 97 % Royalty payments 17,223 13,454 3,769 28 % Total cost of sales$ 41,861 $ 25,963 $ 15,898 61 % 25
--------------------------------------------------------------------------------
The cost of sales for the six months ended
• $12.1 million increase in inventory costs related to products sold
primarily as a result of increasing demand for our products as well as
write-offs of certain batches of our products not meeting our quality
specifications for the six months ended June 30, 2021 , with no similar
activity for the six months ended June 30, 2020 ; and
•
increasing demand for our products.
Research and Development Expenses
Research and development expenses consist of costs associated with research activities as well as costs associated with our product development efforts, conducting pre-clinical trials, clinical trials and manufacturing activities. Direct research and development expenses associated with our programs include clinical trial site costs, clinical manufacturing costs, costs incurred for consultants, up-front fees and milestones paid to third parties in connection with technologies that have not reached technological feasibility and do not have an alternative future use, and other external services, such as data management and statistical analysis support, and materials and supplies used in support of clinical programs. Indirect costs of our clinical programs include salaries, stock-based compensation and allocation of our facility- and technology-related costs. Research and development expenses represent a substantial percentage of our total operating expenses. We do not maintain or evaluate and, therefore, do not allocate internal research and development costs on a project-by-project basis. As a result, a significant portion of our research and development expenses are not tracked on a project-by-project basis, as the costs may benefit multiple projects.
The following tables summarize our research and development expenses by project for each of the periods indicated:
For the Three Months Ended
June 30,
2021 2020 Change Change
(in thousands) $ %
Micro-dystrophin $ 94,236 $ 60,279 $ 33,957 56 %
Other gene therapies 35,995 29,937 6,058 20 %
Up-front and milestone expenses 31,677 12,750 18,927 148 %
PPMO platform 11,407 7,499 3,908 52 %
Eteplirsen (exon 51) 10,568 6,325 4,243 67 %
Casimersen (exon 45) 6,300 23,991 (17,691 ) (74 )%
Golodirsen (exon 53) 5,785 5,219 566 11 %
Collaboration cost-sharing 578 1,667 (1,089 ) (65 )%
Other projects 4,141 1,822 2,319 127 %
Internal research and development expenses 56,960 47,785 9,175 19 %
Roche collaboration reimbursement (18,025 ) (8,752 ) (9,273 ) 106 %
Total research and development expenses $ 239,622 $ 188,522 $ 51,100 27 %
For the Six Months Ended
June 30,
2021 2020 Change Change
(in thousands) $ %
Micro-dystrophin $ 153,609 $ 104,348 $ 49,261 47 %
Other gene therapies 69,950 45,133 24,817 55 %
Up-front, milestone, and other expenses 35,677 21,283 14,394 68 %
PPMO platform 20,497 11,027 9,470 86 %
Casimersen (exon 45) 19,801 33,806 (14,005 ) (41 )%
Golodirsen (exon 53) 19,279 21,072 (1,793 ) (9 )%
Eteplirsen (exon 51) 17,078 12,135 4,943 41 %
Collaboration cost-sharing 6,778 4,309 2,469 57 %
Other projects 8,778 2,791 5,987 215 %
Internal research and development expenses 114,477 93,958
20,519 22 %
Roche collaboration reimbursement (31,153 ) (25,196 ) (5,957 ) 24 %
Total research and development expenses
$ 110,105 34 % 26
--------------------------------------------------------------------------------
The following tables summarize our research and development expenses by category for each of the periods indicated:
For the Three Months Ended
June 30,
2021 2020 Change Change
(in thousands) $ %
Manufacturing expenses $ 119,769 $ 103,132 $ 16,637 16 %
Up-front and milestone expenses 31,677 12,750 18,927 148 %
Compensation and other personnel expenses 28,697 26,606 2,091 8 %
Clinical trial expenses 25,978 16,194 9,784 60 %
Facility- and technology-related expenses 16,914 12,883 4,031 31 %
Stock-based compensation 12,860 11,140 1,720 15 %
Pre-clinical expenses 5,746 2,586 3,160 122 %
Professional services 3,168 4,014 (846 ) (21 )%
Collaboration cost-sharing 578 1,667 (1,089 ) (65 )%
Research and other 12,260 6,302 5,958 95 %
Roche collaboration reimbursement (18,025 ) (8,752 ) (9,273 ) 106 %
Total research and development expenses $ 239,622 $ 188,522 $ 51,100 27 %
Research and development expenses for the three months ended
• $16.6 million increase in manufacturing expenses primarily due to a
continuing ramp-up of our gene therapy programs;
•
to a
and a $3.0 million expense incurred as a result of a milestone
achievement in a research and license agreement during the three months
ended June 30, 2021 , offset by $12.0 million of up-front payments as aresult of the execution of certain research and license agreements
during the same period of 2020;
•
primarily due to a net increase in headcount;
• $9.8 million increase in clinical trial expenses primarily due toincreased patient enrollment for our ESSENCE and MOMENTUM programs as
well as certain start-up activities for our SRP-9001 micro-dystrophin
program;
•
to our continuing expansion efforts;
•
driven by increases in headcount and changes in stock price;
• $3.2 million increase in pre-clinical expenses primarily due to an
increase of toxicology studies in our PPMO platforms;
•
micro-dystrophin drug candidate;
• $6.0 million increase in research and other primarily driven by an
increase in sponsored research with academic institutions during the
three months ended June 30, 2021 ; and
• $9.3 million increase in the offset to expense associated with acollaboration reimbursement from Roche primarily due to continuing
development of our SRP-9001 micro-dystrophin gene therapy.
27
--------------------------------------------------------------------------------
For the Six Months Ended
June 30,
2021 2020 Change Change
(in thousands) $ %
Manufacturing expenses $ 209,090 $ 165,396 $ 43,694 26 %Compensation and other personnel expenses 58,893 52,725
6,168 12 %
Clinical trial expenses 54,569 34,750 19,819 57 %
Up-front, milestone, and other expenses 35,677 21,283 14,394 68 %
Facility- and technology-related expenses 34,100 26,134
7,966 30 %
Stock-based compensation 23,986 20,389 3,597 18 %
Pre-clinical expenses 10,982 3,228 7,754 240 %
Collaboration cost-sharing 6,778 4,309 2,469 57 %
Professional services 5,816 8,514 (2,698 ) (32 )%
Research and other 26,033 13,134 12,899 98 %
Roche collaboration reimbursement (31,153 ) (25,196 ) (5,957 ) 24 %
Total research and development expenses
$ 110,105 34 %
Research and development expenses for the six months ended
•
continuing ramp-up of our gene therapy programs;
•
primarily due to a net increase in headcount;
• $19.8 million increase in clinical trial expenses primarily due toincreased patient enrollment for our ESSENCE and MOMENTUM programs as
well as certain start-up activities for our SRP-9001 micro-dystrophin
program;
•
primarily due to a
to Nationwide and
milestone achievements in certain research and license agreements during
the six months ended
related to sublicense payments accrued to Nationwide and
of up-front payments as a result of the execution of certain research
and license agreements during the same period of 2020;
•
to our continuing expansion efforts;
•
driven by increases in headcount and changes in stock price;
• $7.8 million increase in pre-clinical expenses primarily due to an
increase of toxicology studies in our PPMO platforms;
•
micro-dystrophin drug candidate;
•
a decrease in reliance on third-party research and development
contractors;
• $12.9 million increase in research and other primarily driven by an
increase in sponsored research with academic institutions during the six
months ended June 30, 2021 ; and
• $6.0 million increase in the offset to expense associated with a
collaboration reimbursement from Roche primarily due to continuing
development of our SRP-9001 micro-dystrophin gene therapy.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of salaries, benefits,
stock-based compensation and related costs for personnel in our executive,
finance, legal, information technology, business development, human resources,
commercial and other general and administrative functions. Other general and
administrative expenses include an allocation of our facility- and
technology-related costs and professional fees for legal, consulting and
accounting services.
28--------------------------------------------------------------------------------
The following tables summarize selling, general and administrative expenses by category for each of the periods indicated:
For the Three Months Ended
June 30,
2021 2020 Change Change
(in thousands) $ %
Compensation and other personnel
expenses $ 26,225 $ 26,924 $ (699 ) (3 )%
Professional services 20,039 20,662 (623 ) (3 )%
Stock-based compensation 16,109 16,476 (367 ) (2 )%
Facility- and technology-related
expenses 7,527 7,186 341 5 %
Other 2,436 2,599 (163 ) (6 )%
Roche collaboration reimbursement 11 (159 ) 170 (107 )%
Total selling, general and
administrative expenses $ 72,347 $ 73,688 $ (1,341 ) (2 )%
Selling, general and administrative expenses for the three months ended June 30,
2021 decreased by $1.3 million , or 2%, compared with the three months ended June
30, 2020 . This was primarily driven by the following:
•
primarily due to a change in headcount period over period; and
•
a decrease in reliance on third-party selling, general and
administrative contractors.
For the Six Months Ended
June 30,
2021 2020 Change Change
(in thousands) $ %
Compensation and other personnel
expenses $ 54,354 $ 53,716 $ 638 1 %
Professional services 35,557 51,786 (16,229 ) (31 )%
Stock-based compensation 33,491 31,251 2,240 7 %
Facility- and technology-related
expenses 14,877 14,236 641 5 %
Other 5,422 5,626 (204 ) (4 )%
Roche collaboration reimbursement (223 ) (159 ) (64 ) 40 %
Total selling, general and
administrative expenses $ 143,478 $ 156,456 $ (12,978 ) (8 )%
Selling, general and administrative expenses for the six months ended June 30,
2021 decreased by $13.0 million , or 8%, compared with the six months ended June
30, 2020 . This was primarily driven by the following:
•
a decrease in reliance on third-party selling, general and
administrative contractors, as well as a transaction fee for the Roche
transaction incurred during the six months ended June 30, 2020 , with no
similar activity incurred during the six months ended June 30, 2021 ; and
• $2.2 million increase in stock-based compensation primarily due to
changes in stock price.
Settlement and License Charges
InFebruary 2021 , we recognized a$10.0 million settlement charge related to contingent settlement payments toBioMarin as a result of the approval of AMONDYS 45 inthe United States . This was a result of a settlement and license agreement withBioMarin executed inJuly 2017 . There was no such expense recognized during the same period of 2020.
Amortization of In-licensed Rights
Amortization of in-licensed rights relates to the agreements we entered into withBioMarin and UWA inJuly 2017 andApril 2011 , respectively. We recorded an in-licensed right asset of approximately$6.6 million in 2017 as a result of the settlement and license agreements withBioMarin . Additionally, following the first sale of EXONDYS 51 inSeptember 2016 , VYONDYS 53 inDecember 2019 and AMONDYS 45 inFebruary 2021 , we recorded an in-licensed right asset of$1.0 million ,$0.5 million and$0.5 million , respectively, related to the license agreement with UWA. Each in-licensed right is being amortized on a straight-line basis over the life of the patent from the first commercial sale of each product. For both the three months endedJune 30, 2021 and 2020, we recorded amortization of in-licensed rights of approximately$0.2 million . For both the six months endedJune 30, 2021 and 2020, we recorded amortization of in-licensed rights of approximately$0.3 million . 29
--------------------------------------------------------------------------------
Other expense, net
Other expense, net, primarily consists of interest income on our cash, cash equivalents and investments, interest expense on our debt facilities, amortization of investment discount, and unrealized gain or loss from our investment in Lysogene. Our cash equivalents and investments consist of money market funds, government and government agency debt securities, and certificates of deposit. Interest expense includes interest accrued on our convertible notes and term loan. For the three and six months endedJune 30, 2021 , other expense, net, increased by approximately$3.7 million and$11.8 million compared with the three and six months endedJune 30, 2020 . The increase primarily reflected an increase in interest expense incurred on our term loan debt facilities due to an increase in the outstanding balance partially offset by a reduction of interest expense incurred on our convertible debt related to the adoption of ASU 2020-06, as well as a decrease in interest income and the amortization of investment discounts due to the investment mix of the Company's investment portfolio. As a result of the adoption of ASU 2020-06, interest expense was reduced by$5.5 million and$11.0 million for the three and six months endedJune 30, 2021 , respectively.
Gain from sale of Priority Review Voucher
InFebruary 2021 , we entered into an agreement to sell the rare pediatric disease Priority Review Voucher ("PRV") we received from the FDA in connection with the approval of AMONDYS 45. Following the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, inApril 2021 , we completed our sale of the PRV and received proceeds of$102.0 million , with no commission costs, which was recorded as a gain from sale of the PRV as it did not have a carrying value at the time of the sale. InFebruary 2020 , we entered into an agreement to sell the rare pediatric disease PRV we received from the FDA in connection with the approval of VYONDYS 53. Following the early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, inMarch 2020 , we completed our sale of the PRV and received proceeds of$108.1 million , net of commission, which was recorded as a gain from sale of the PRV as it did not have a carrying value at the time of the sale.
Income tax (benefit) expense
Income tax benefit for the three and six months endedJune 30, 2021 was approximately$0.4 million and$0.5 million , respectively. Income tax expense for the three and six months endedJune 30, 2020 was less than$0.1 million and approximately$0.1 million , respectively. Income tax (benefit) expense for all periods presented relates to state taxes.
Liquidity and Capital Resources
The following table summarizes our financial condition for each of the periods
indicated:
As of As of
June 30, December 31,
2021 2020 Change Change
(in thousands) $ %
Financial assets:
Cash and cash equivalents $ 1,697,275 $ 1,502,648 $ 194,627 13 %
Short-term investments 30,000 435,923 (405,923 ) (93 )%
Restricted cash and investments 9,315 9,315 - (- )%
Total cash, cash equivalents and investments $ 1,736,590 $ 1,947,886 $ (211,296 ) (11 )%
Borrowings:
Term loan $ 530,376 $ 527,731 $ 2,645 1 %
Convertible debt 562,609 464,762 97,847 21 %
Total borrowings $ 1,092,985 $ 992,493 $ 100,492 10 %
Working capital
Current assets $ 2,265,217 $ 2,485,196 $ (219,979 ) (9 )%
Current liabilities 425,022 416,026 8,996 2 %
Total working capital $ 1,840,195 $ 2,069,170 $ (228,975 ) (11 )%
30
-------------------------------------------------------------------------------- For the periods endedJune 30, 2021 andDecember 31, 2020 , our principal sources of liquidity were primarily derived from our collaboration arrangement with Roche, net proceeds from sale of the PRV, product sales of our products and net proceeds for debt financing. Our principal uses of cash are research and development expenses, selling, general and administrative expenses, investments, capital expenditures, business development transactions and other working capital requirements. The changes in our total borrowings reflect the adoption of ASU 2020-06 as ofJanuary 1, 2021 , which resulted in the convertible debt being accounted for as a single liability measured at its amortized cost. For more information on the adoption and impact of ASU 2020-06, please read Note 11, Indebtedness. The changes in our working capital primarily reflect use of cash in operating activities.
Our future expenditures and capital requirements may be substantial and will depend on many factors, including but not limited to the following:
• our ability to continue to generate revenues from sales of EXONDYS 51,
VYONDYS 53, AMONDYS 45 and potential future products;
• the timing and costs associated with our expansion efforts;
• the timing and costs of building out our manufacturing capabilities;
• the timing of advanced payments related to our future inventory
commitments and manufacturing obligations;
• the timing and costs associated with our clinical trials and
pre-clinical trials;
• the attainment of milestones and our obligations to make milestone
payments to Myonexus' selling shareholders StrideBio, BioMarin ,
Lysogene, Lacerta, Nationwide, UWA and other institutions;
• repayment of outstanding debt; and
• the costs of filing, prosecuting, defending and enforcing patent claims
and our other intellectual property rights.
Our cash requirements are expected to continue to increase as we advance our
research, development and commercialization programs and we expect to seek
additional financings primarily from, but not limited to, the sale and issuance
of equity, debt financing, the licensing or sale of our technologies or
additional government contracts. We cannot provide assurances that financing
will be available when and as needed or that, if available, the financings will
be on favorable or acceptable terms. If we are unable to obtain additional
financing when and if we require, this would have a material adverse effect on
our business and results of operations. To the extent we issue additional equity
securities, our existing stockholders could experience substantial dilution.
Cash Flows
For the Six Months Ended
June 30,
2021 2020 Change Change
(in thousands) $ %
Cash (used in) provided by
Operating activities $ (289,517 ) $ 520,187 $ (809,704 ) (156 )%
Investing activities 477,725 (51,905 ) 529,630 NM*
Financing activities 6,419 336,597
(330,178 ) (98 )%
Increase in cash and cash equivalents
* NM = Not Meaningful Operating Activities Cash used in operating activities was$289.5 million for the six months endedJune 30, 2021 . Cash provided by operating activities for the six months endedJune 30, 2020 was$520.2 million . The unfavorable change was primarily driven by the following items:
•
the PRV, primarily driven by an increase in research and development
expense, offset by increases in net product revenues and collaboration
revenue and a decrease in selling, general and administrative expense;
and
31
--------------------------------------------------------------------------------
•
result of the collaboration arrangement with Roche being executed during
the six months ended
six months ended
The decreases were partially offset by:
•
•
excluding deferred revenue.
Investing Activities
Cash provided by investing activities was$477.7 million for the six months endedJune 30, 2021 . Cash used in investing activities was$51.9 million for the six months endedJune 30, 2020 . The favorable change was primarily driven by the following:
•
during the six months ended
•
six months ended
The changes were partially offset by:
•
available-for-sale securities during the six months ended
and
•
the six months ended
Financing Activities
Cash provided by financing activities decreased by$330.2 million for the six months endedJune 30, 2021 compared with the six months endedJune 30, 2020 , primarily driven by the following:
•
stock to Roche;
•
purchase of stock under our Employee Stock Purchase Program; and
•
equity awards.
Off-Balance Sheet Arrangements
During the periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for another contractually narrow or limited purpose.
Contractual Payment Obligations
In our continuing operations, we have entered into long-term contractual arrangements from time to time for our facilities, the provision of goods and services, and acquisition of technology access rights, among others. The following table presents contractual obligations arising from these arrangements as ofJune 30, 2021 : Payment Due by Period Less Than More than Total 1 Year 1 - 3 Years 3 - 5 Years 5 Years (in thousands) Debt obligations (1)$ 1,292,817 $ 55,949 $ 350,636 $ 886,232 $ - Lease obligations (2) 52,892 13,445 24,077 15,370 - Manufacturing obligations (3) 1,429,765 695,688 360,673 193,723 179,681 Total contractual obligations and contingencies$ 2,775,474 $ 765,082 $ 735,386 $ 1,095,325 $ 179,681 (1) Interest is included.
(2) Lease obligations only include real estate leases. The leases embedded in
certain supply agreements are included in the manufacturing obligations.
32
--------------------------------------------------------------------------------(3) Manufacturing obligations include agreements to purchase goods and services
that are enforceable and legally binding or subject to cancellation fees and
that specify all significant terms. Manufacturing obligations relate
primarily to our commercialization of EXONDYS 51, VYONDYS 53 and AMONDYS 45,
and clinical programs for DMD as well as our gene therapy programs.
Milestone Obligations
For product candidates that are currently in various research and development stages, we may be obligated to make up to$3.9 billion of future development, regulatory, commercial and up-front royalty and sales milestone payments associated with our license and collaboration agreements. Payments under these agreements generally become due and payable upon achievement of certain development, regulatory or commercial milestones. Because the achievement of these milestones is not probable, and payment is not required as ofJune 30, 2021 , such contingencies have not been recorded in our unaudited condensed consolidated financial statements. Amounts related to contingent milestone payments are not yet considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory approval and sales milestones.
Recent Accounting Pronouncements
For additional information, please read Note 2, Summary of Significant Accounting Policies and Recent Accounting Pronouncements of the unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.
© Edgar Online, source
