SEC Filing | Sarepta Therapeutics, Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-14895

SAREPTA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)


Delaware		93-0797222
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

215 First Street, Suite 415 Cambridge, MA		02142
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (617) 274-4000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, $0.0001 par value per share	SRPT	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Common Stock with $0.0001 par value		87,500,961
(Class)		(Outstanding as of April 29, 2022)

SAREPTA THERAPEUTICS, INC.

FORM 10-Q

INDEX


		Page
PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets — As of March 31, 2022 and December 31, 2021	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss — For the Three Months Ended March 31, 2022 and 2021	4

	Condensed Consolidated Statements of Stockholders’ Equity — For the Three Months Ended March 31, 2022 and 2021	5

	Condensed Consolidated Statements of Cash Flows — For the Three Months Ended March 31, 2022 and 2021	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30

Item 4.	Controls and Procedures	30

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68

Item 3.	Defaults Upon Senior Securities	68

Item 4.	Mine Safety Disclosures	69

Item 5.	Other Information	69

Item 6.	Exhibits	69

Exhibits		70

Signatures		71

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

SAREPTA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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


	As of March 31, 2022			As of December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	1,233,877		$	2,115,869
Short-term investments		779,548			—
Accounts receivable		178,194			152,990
Inventory		198,997			186,212
Other current assets		140,331			149,028
Total current assets		2,530,947			2,604,099
Property and equipment, net		187,248			191,156
Intangible assets, net		13,328			14,239
Right of use assets		45,982			45,531
Other non-current assets		278,649			292,949
Total assets	$	3,056,154		$	3,147,974

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	54,007		$	76,741
Accrued expenses		293,908			271,697
Deferred revenue, current portion		89,244			89,244
Other current liabilities		17,803			15,051
Total current liabilities		454,962			452,733
Long-term debt		1,098,847			1,096,876
Lease liabilities, net of current portion		38,620			41,512
Deferred revenue, net of current portion		552,239			574,244
Contingent consideration		43,600			43,600
Other non-current liabilities		11,000			11,000
Total liabilities		2,199,268			2,219,965
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 3,333,333 shares authorized; none issued and outstanding		—			—
Common stock, $0.0001 par value, 198,000,000 shares authorized; 87,495,607 and 87,126,974 issued and outstanding at March 31, 2022, and December 31, 2021, respectively		9			9
Additional paid-in capital		4,168,956			4,134,768
Accumulated other comprehensive loss, net of tax		(306	)		(20	)
Accumulated deficit		(3,311,773	)		(3,206,748	)
Total stockholders’ equity		856,886			928,009
Total liabilities and stockholders’ equity	$	3,056,154		$	3,147,974

See accompanying notes to unaudited condensed consolidated financial statements.

SAREPTA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited, in thousands, except per share amounts)


	For the Three Months Ended March 31,
	2022			2021
Revenues:
Products, net	$	188,825		$	124,926
Collaboration		22,005			22,005
Total revenues		210,830			146,931

Cost and expenses:
Cost of sales (excluding amortization of in-licensed rights)		31,443			22,346
Research and development		194,250			195,149
Selling, general and administrative		71,840			71,131
Settlement and license charges		—			10,000
Amortization of in-licensed rights		178			170
Total cost and expenses		297,711			298,796
Operating loss		(86,881	)		(151,865	)

Other loss, net:
Other expense, net		(17,265	)		(15,528	)
Total other loss, net		(17,265	)		(15,528	)

Loss before income tax expense (benefit)		(104,146	)		(167,393	)
Income tax expense (benefit)		879			(143	)
Net loss		(105,025	)		(167,250	)

Other comprehensive loss:
Unrealized losses on investments, net of tax		(286	)		(6	)
Total other comprehensive loss		(286	)		(6	)
Comprehensive loss	$	(105,311	)	$	(167,256	)

Net loss per share - basic and diluted	$	(1.20	)	$	(2.10	)

Weighted average number of shares of common stock used in computing basic and diluted net loss per share		87,253			79,454

See accompanying notes to unaudited condensed consolidated financial statements.

SAREPTA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands)


							Accumulated
					Additional		Other						Total
	Common Stock				Paid-In		Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital		Loss			Deficit			Equity
Balance at December 31, 2021		87,127	$	9	$	4,134,768	$	(20	)	$	(3,206,748	)	$	928,009
Exercise of options for common stock		18		—		997		—			—			997
Vest of restricted stock units/awards		289		—		—		—			—			—
Issuance of common stock under employee stock purchase plan		62		—		3,993		—			—			3,993
Stock-based compensation		—		—		29,198		—			—			29,198
Unrealized losses from available-for-sale securities, net of tax		—		—		—		(286	)		—			(286	)
Net loss		—		—		—		—			(105,025	)		(105,025	)
Balance at March 31, 2022		87,496	$	9	$	4,168,956	$	(306	)	$	(3,311,773	)	$	856,886


								Accumulated
					Additional			Other						Total
	Common Stock				Paid-In			Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital			Income (Loss)			Deficit			Equity
Balance at December 31, 2020		79,374	$	8	$	3,609,877		$	3		$	(2,848,129	)	$	761,759
Cumulative effect of accounting change to adopt ASU 2020-06		—		—		(156,953	)		—			60,161			(96,792	)
Exercise of options for common stock		108		—		4,683			—			—			4,683
Vest of restricted stock units/awards		204		—		—			—			—			—
Issuance of common stock under employee stock purchase plan		62		—		4,543			—			—			4,543
Stock-based compensation		—		—		28,508			—			—			28,508
Unrealized losses from available-for-sale securities, net of tax		—		—		—			(6	)		—			(6	)
Net loss		—		—		—			—			(167,250	)		(167,250	)
Balance at March 31, 2021		79,748	$	8	$	3,490,658		$	(3	)	$	(2,955,218	)	$	535,445

See accompanying notes to unaudited condensed consolidated financial statements.

SAREPTA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	For the Three Months Ended March 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(105,025	)	$	(167,250	)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation and amortization		10,719			8,930
Reduction in the carrying amounts of the right of use assets		3,655			2,220
Non-cash interest expense		1,957			1,816
Stock-based compensation		29,198			28,508
Other		1,838			2,692
Changes in operating assets and liabilities, net:
Net increase in accounts receivable		(25,204	)		(16,863	)
Net increase in inventory		(4,687	)		(8,372	)
Net decrease in other assets		13,401			34,915
Net decrease in deferred revenue		(22,005	)		(22,005	)
Net decrease in accounts payable, accrued expenses, lease liabilities and other liabilities		(5,022	)		(44,962	)
Net cash used in operating activities		(101,175	)		(180,371	)

Cash flows from investing activities:
Purchase of property and equipment		(5,551	)		(21,149	)
Purchase of available-for-sale securities		(779,770	)		(29,989	)
Maturity and sale of available-for-sale securities		—			210,000
Other		(486	)		(2,196	)
Net cash (used in) provided by investing activities		(785,807	)		156,666

Cash flows from financing activities:
Proceeds from exercise of stock options and purchase of stock under the Employee Stock Purchase Program		4,990			9,226
Taxes paid related to net share settlement of equity awards		—			(6,333	)
Net cash provided by financing activities		4,990			2,893

Decrease in cash, cash equivalents and restricted cash		(881,992	)		(20,812	)

Cash, cash equivalents and restricted cash:
Beginning of period		2,125,523			1,511,713
End of period	$	1,243,531		$	1,490,901

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	1,233,877		$	1,481,836
Restricted cash in other assets		9,654			9,065
Total cash, cash equivalents and restricted cash	$	1,243,531		$	1,490,901

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	11,688		$	11,688
Supplemental schedule of non-cash investing activities and financing activities:
Intangible assets and property and equipment included in accounts payable and accrued expenses	$	4,415		$	5,729
Lease liabilities arising from obtaining right of use assets	$	4,106		$	901
Lease liabilities terminated	$	—		$	19,967

See accompanying notes to unaudited condensed consolidated financial statements.

SAREPTA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND NATURE OF BUSINESS

Sarepta Therapeutics, Inc. (together with its wholly-owned subsidiaries, “Sarepta” or the “Company”) is a commercial-stage biopharmaceutical company focused on helping patients through the discovery and development of unique RNA-targeted therapeutics, gene therapy and other genetic therapeutic modalities for the treatment of rare diseases. Applying its proprietary, highly-differentiated and innovative technologies, and through collaborations with its strategic partners, the Company is developing potential therapeutic candidates for a broad range of diseases and disorders, including Duchenne muscular dystrophy (“Duchenne”), Limb-girdle muscular dystrophies (“LGMDs”) and other neuromuscular and central nervous system (“CNS”) disorders.

The Company's products in the U.S., EXONDYS 51 (eteplirsen) Injection (“EXONDYS 51”), VYONDYS 53 (golodirsen) Injection (“VYONDYS 53”) and AMONDYS 45 (casimersen) Injection (“AMONDYS 45”), were granted accelerated approval by the U.S. Food and Drug Administration (the “FDA”) on September 19, 2016, December 12, 2019 and February 25, 2021, respectively. Indicated for the treatment of Duchenne in patients who have a confirmed mutation of the dystrophin gene that is amenable to exon 51, exon 53 and exon 45 skipping, respectively, EXONDYS 51, VYONDYS 53 and AMONDYS 45 use the Company’s phosphorodiamidate morpholino oligomer (“PMO”) chemistry and exon-skipping technology to skip exon 51, exon 53 and exon 45 of the dystrophin gene. Exon skipping is intended to promote the production of an internally truncated but functional dystrophin protein.

As of March 31, 2022, the Company had approximately $2,023.1 million of cash, cash equivalents, restricted cash and investments, consisting of $1,233.9 million of cash and cash equivalents, $779.5 million of short-term investments and $9.7 million of long-term restricted cash. The Company believes that its balance of cash, cash equivalents, restricted cash and investments as of the date of the issuance of this report is sufficient to fund its current operational plan for at least the next twelve months, though it may pursue raising additional cash resources through public or private debt and equity financings, seek funded research and development arrangements and additional government contracts and establish collaborations with or license its technology to other companies.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), reflect the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions between and among its consolidated subsidiaries have been eliminated. Management has determined that the Company operates in one segment: discovering, developing, manufacturing and delivering therapies to patients with rare diseases.

In the opinion of the Company’s management, all adjustments of a normal recurring nature necessary for a fair presentation have been reflected. Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. GAAP, but that is not required for interim reporting purposes, has been omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2021 which are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission on March 1, 2022. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year.

Estimates and Uncertainties

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of accounts receivable from customers, cash held at financial institutions and cash equivalents and investments.

As of March 31, 2022, the majority of the Company’s accounts receivable arose from product sales in the U.S. and all customers have standard payment terms that generally require payment within 60 to 91 days. Outside of the U.S., the majority of the Company’s customers have payment terms ranging between 45 and 150 days. Three individual customers accounted for 48%, 36% and 8% of net product revenues for the three months ended March 31, 2022 and 49%, 40% and 7% of net product revenues for the three months ended March 31, 2021. Three individual customers accounted for 41%, 39% and 8% of accounts receivable from product sales as of March 31, 2022 and 41%, 41% and 10% of accounts receivable from product sales as of December 31, 2021. The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in its customers’ credit profile. As of March 31, 2022, the Company believes that such customers are of high credit quality.

As of March 31, 2022, the Company’s cash was concentrated at three financial institutions in the U.S., which potentially exposes the Company to credit risks. However, the Company does not believe that there is significant risk of non-performance by the financial institutions. The Company also purchases commercial paper, government and government agency bonds, corporate bonds and certificates of deposit issued by highly rated corporations, financial institutions and governments and limits the amount of credit exposure to any one issuer. These amounts may at times exceed federally insured limits. The Company has not experienced any credit losses related to these financial instruments and does not believe to be exposed to any significant credit risk related to these instruments.

Significant Accounting Policies

For details about the Company’s accounting policies, please read Note 2, Summary of Significant Accounting Policies and Recent Accounting Pronouncements of the Annual Report on Form 10-K for the year ended December 31, 2021.

There have not been any material changes to the Company’s accounting policies through March 31, 2022.

3. LICENSE AND COLLABORATION AGREEMENTS

F. Hoffman-La Roche Ltd.

For both of the three months ended March 31, 2022 and 2021, the Company recognized $22.0 million of collaboration revenue associated with the license, collaboration and option agreement (the “Roche Agreement”) with F. Hoffman-La Roche Ltd. (“Roche”). As of March 31, 2022, the Company has total deferred revenue of $641.5 million associated with the Roche Agreement, of which $89.2 million is classified as current. The portion of deferred revenue related to the separate material rights for the options to acquire ex-U.S. rights to certain Duchenne-specific programs was $485.0 million as of March 31, 2022 and December 31, 2021.

The costs associated with co-development activities performed under the Roche Agreement are included in operating expenses, with any reimbursement of costs by Roche reflected as a reduction of such expenses when the related expense is incurred. For the three months ended March 31, 2022 and 2021, costs reimbursable by Roche and reflected as a reduction to operating expenses were $17.7 million and $13.4 million, respectively. As of March 31, 2022, there was $17.7 million of collaboration receivable included in other current assets.

Research and Option Agreements

The Company has research and option agreements with third parties in order to develop various technologies and biologics that may be used in the administration of the Company’s genetic therapeutics. The agreements generally provide for research services related to pre-clinical development programs and options to license the technology for clinical development. Prior to the options under these agreements being executed, the Company may be required to make up to $11.0 million in research milestone payments. Under these agreements, there are $187.1 million in potential option payments to be made by the Company upon the determination to exercise the options. Additionally, if the options for each agreement are executed, the Company would incur additional contingent obligations and may be required to make development, regulatory, and sales milestone payments and tiered royalty payments based on the sales of the developed products upon commercialization. As of March 31, 2022, the Company has not exercised any options nor have any additional research milestone payments become probable of occurring.

Milestone Obligations

The Company has license and collaboration agreements in place for which it could be obligated to pay, in addition to the payment of up-front fees upon execution of the agreements, certain milestone payments as a product candidate proceeds from the submission of an investigational new drug application through approval for commercial sale and beyond. As of March 31, 2022, the Company may be obligated to make up to $4.0 billion in future development, regulatory, commercial and up-front royalty milestone payments associated with its license and collaboration agreements. These obligations exclude potential future option and milestone payments for options that have yet to be exercised within agreements entered into by the Company as of March 31, 2022, which are discussed above. For the three months ended March 31, 2022 and 2021, the Company recognized up-front, development milestone

and settlement expenses of less than $0.1 million and $14.0 million, respectively, as research and development expense in the accompanying unaudited condensed consolidated statement of operations and comprehensive loss.

4. FAIR VALUE MEASUREMENTS

The Company has certain financial assets and liabilities that are recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

•

Level 1 — quoted prices for identical instruments in active markets;

•

Level 2 — quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

•

Level 3 — valuations derived from valuation techniques in which one or more significant value drivers are unobservable.

During the three months ended March 31, 2022, there were no transfers between Levels 1, 2 and 3. The tables below present information about the Company’s financial assets and liabilities that are measured and carried at fair value and indicate the level within the fair value hierarchy of valuation techniques it utilizes to determine such fair value:


	Fair Value Measurement as of March 31, 2022
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets
Money market funds	$	606,498	$	606,498	$	—	$	—
Commercial paper		145,335		—		145,335		—
Government and government agency bonds		602,288		54,856		547,432		—
Corporate bonds		187,232		—		187,232