Sarepta Therapeutics(SRPT) - 2025 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents Sarepta Therapeutics, Inc.'s unaudited condensed consolidated financial statements, including the balance sheets, statements of comprehensive (loss) income, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, collaboration agreements, fair value measurements, and other financial details for the periods ended March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (Unaudited, in thousands) | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $240.87 | $1,103.01 | | Total current assets | $2,432.53 | $3,073.46 | | Total assets | $3,465.39 | $3,963.17 | | Total current liabilities | $605.59 | $731.68 | | Total liabilities | $2,322.66 | $2,435.43 | | Total stockholders' equity | $1,142.72 | $1,527.74 | - Cash and cash equivalents decreased significantly from $1,103.01 million at December 31, 2024, to $240.87 million at March 31, 2025[8] - Total assets decreased by approximately $497.8 million, and total stockholders' equity decreased by approximately $385 million from December 31, 2024, to March 31, 2025[8] Condensed Consolidated Statements of Comprehensive (Loss) Income This section presents the company's financial performance, including revenues, expenses, and net loss or income over a period Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited, in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Products, net revenue | $611.52 | $359.48 | | Collaboration and other revenue | $133.33 | $53.98 | | Total revenues | $744.86 | $413.46 | | Total cost and expenses | $1,045.24 | $378.56 | | Operating (loss) income | $(300.39) | $34.91 | | Net (loss) income | $(447.51) | $36.12 | | Basic (loss) earnings per share (per share) | $(4.60) | $0.38 | | Diluted (loss) earnings per share (per share) | $(4.60) | $0.37 | - Total revenues increased by 80% year-over-year, from $413.5 million in Q1 2024 to $744.9 million in Q1 2025[9] - The company reported a significant net loss of $447.5 million in Q1 2025, compared to a net income of $36.1 million in Q1 2024, primarily due to a substantial increase in research and development expenses[9] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, reflecting net income or loss, stock-based compensation, and other equity transactions Changes in Stockholders' Equity (Unaudited, in thousands) | Item | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Balance at December 31 | $1,527.74 | $859.34 | | Stock-based compensation | $46.56 | $45.21 | | Net (loss) income | $(447.51) | $36.12 | | Balance at March 31 | $1,142.72 | $961.19 | - Total stockholders' equity decreased from $1,527.7 million at December 31, 2024, to $1,142.7 million at March 31, 2025, primarily driven by the net loss[11] - Stock-based compensation expense contributed $46.6 million and $45.2 million to additional paid-in capital for the three months ended March 31, 2025 and 2024, respectively[11] Condensed Consolidated Statements of Cash Flows This section details the inflows and outflows of cash from operating, investing, and financing activities over a period Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | Activity | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(583.44) | $(242.08) | | Net cash (used in) provided by investing activities | $(291.18) | $218.80 | | Net cash provided by financing activities | $12.47 | $22.14 | | Decrease in cash, cash equivalents and restricted cash | $(862.14) | $(1.14) | | Cash, cash equivalents and restricted cash, end of period | $256.45 | $442.87 | - Net cash used in operating activities increased significantly to $583.4 million in Q1 2025 from $242.1 million in Q1 2024[14] - Investing activities shifted from providing $218.8 million in Q1 2024 to using $291.2 million in Q1 2025, primarily due to a strategic investment acquisition[14] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of significant accounting policies, collaboration agreements, fair value measurements, and other financial details Note 1. Organization and Nature of Business This note provides detailed accounting information related to Organization and Nature of Business - Sarepta Therapeutics, Inc. is a commercial-stage biopharmaceutical company focused on RNA-targeted therapeutics, gene therapy, and other genetic modalities for rare diseases, including Duchenne muscular dystrophy (Duchenne) and Limb-girdle muscular dystrophies (LGMDs)[17] - The company has multiple FDA-approved products for Duchenne: EXONDYS 51 (2016), VYONDYS 53 (2019), AMONDYS 45 (2021), and ELEVIDYS (June 2024 for ambulatory patients at least four years old, and non-ambulatory patients under accelerated approval)[18][19] - As of March 31, 2025, the company had $647.5 million in cash, cash equivalents, restricted cash, and investments, which it believes is sufficient to fund operations for at least the next twelve months[20] Note 2. Summary of Significant Accounting Policies This note provides detailed accounting information related to Summary of Significant Accounting Policies - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, reflecting Sarepta and its wholly-owned subsidiaries, with all intercompany transactions eliminated[21] - Management operates in a single segment: discovering, developing, manufacturing, and delivering therapies for rare diseases[21] - The company's financial instruments are subject to credit risk, with cash concentrated at three financial institutions and accounts receivable concentrated with three entities (56%, 17%, and 13% as of March 31, 2025)[24] Note 3. License and Collaboration Agreements This note provides detailed accounting information related to License and Collaboration Agreements - Sarepta entered into an exclusive global license and collaboration agreement with Arrowhead Pharmaceuticals, Inc., effective February 7, 2025, for DUX4, DMPK, ATXN2, MMP7, ATXN1, ATXN3, and HTT programs[28][29] - Under the Arrowhead Agreement, Sarepta made an upfront payment of $500.0 million and invested $325.0 million in Arrowhead's common stock. $583.6 million was recorded as R&D expense for the upfront license fee[35] - Sarepta recognized $112.0 million and $48.0 million in collaboration revenue from Roche in Q1 2025 and Q1 2024, respectively, primarily due to the expiration of options for certain Duchenne development programs[37] Roche Collaboration Agreement Revenue and Costs (in thousands) | Metric | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Contract manufacturing revenue | $17.38 | $5.81 | | Royalty revenue | $3.95 | $0.17 | | Cost of sales (inventory costs related to products sold to Roche) | $(12.14) | $(1.65) | | Costs reimbursable by Roche (reduction to operating expenses) | $28.50 | $21.70 | - As of March 31, 2025, Sarepta may be obligated to make up to $12.6 billion in future development, regulatory, commercial, and upfront royalty payments associated with its collaboration and license agreements[40] Note 4. Fair Value Measurements This note provides detailed accounting information related to Fair Value Measurements - The company classifies financial assets and liabilities into Level 1 (quoted prices in active markets), Level 2 (observable market inputs), and Level 3 (unobservable inputs) within the fair value hierarchy[41] Fair Value Measurement of Assets and Liabilities (in thousands) | Category | Total (March 31, 2025) (in millions) | Level 1 (March 31, 2025) (in millions) | Level 2 (March 31, 2025) (in millions) | Level 3 (March 31, 2025) (in millions) | | :-------------------------- | :--------------------- | :----------------------- | :----------------------- | :----------------------- | | Total Assets | $612.27 | $195.27 | $416.00 | $1.00 | | Total Liabilities | $47.40 | $0.00 | $0.00 | $47.40 | | Category | Total (December 31, 2024) (in millions) | Level 1 (December 31, 2024) (in millions) | Level 2 (December 31, 2024) (in millions) | Level 3 (December 31, 2024) (in millions) | | :-------------------------- | :---------------------- | :------------------------ | :------------------------ | :------------------------ | | Total Assets | $844.19 | $458.25 | $384.95 | $1.00 | | Total Liabilities | $47.40 | $0.00 | $0.00 | $47.40 | - Strategic investments, including Arrowhead common stock, are primarily classified as Level 1, while government and corporate bonds are Level 2. Contingent consideration is classified as Level 3[43][44][46] Note 5. Cash, Cash Equivalents and Marketable Securities This note provides detailed accounting information related to Cash, Cash Equivalents and Marketable Securities Cash, Cash Equivalents, Short-term and Non-current Investments (in thousands) | Category | March 31, 2025 Fair Value (in millions) | December 31, 2024 Fair Value (in millions) | | :------------------------------------ | :-------------------------- | :--------------------------- | | Cash and cash equivalents | $240.87 | $1,103.01 | | Short-term investments | $281.90 | $251.78 | | Non-current investments | $109.13 | $133.16 | | Total cash, cash equivalents and investments | $631.89 | $1,487.96 | - The company's investment portfolio is diversified across money market funds, commercial paper, government and government agency bonds, corporate bonds, and certificates of deposit[49][50] - The weighted average maturity of available-for-sale securities was approximately eight months as of March 31, 2025, down from eleven months at December 31, 2024[49] Note 6. Product Revenues, Net, Accounts Receivable, Net, and Reserves for Product Revenues This note provides detailed accounting information related to Product Revenues, Net, Accounts Receivable, Net, and Reserves for Product Revenues Net Product Revenues by Product (in thousands) | Product | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :-------------------------- | :-------------------------------- | :-------------------------------- | | PMO Products | $236.54 | $225.55 | | ELEVIDYS | $374.99 | $133.94 | | Total product revenues, net | $611.52 | $359.48 | - Total net product revenues increased by $252.0 million (70%) year-over-year, primarily driven by a $241.0 million increase in ELEVIDYS net product revenues due to its expanded label approval in June 2024[51][109] Accounts Receivable, Net and Total Reserves (in thousands) | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------- | :------------- | :---------------- | | Accounts receivable, net | $659.37 | $601.99 | | Total reserves | $235.58 | $194.30 | Note 7. Inventory This note provides detailed accounting information related to Inventory Inventory Components (in thousands) | Component | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :---------------- | :------------- | :---------------- | | Raw materials | $298.98 | $280.05 | | Work in progress | $762.23 | $610.69 | | Finished goods | $61.37 | $47.21 | | Total inventory | $1,122.59 | $937.95 | - Total inventory increased by $184.6 million from December 31, 2024, to March 31, 2025, primarily in work in progress[54] - Non-current inventory, primarily raw materials and work in progress for PMO Products, is classified when consumption is expected beyond the two-year normal operating cycle[55][56] Note 8. Other Assets This note provides detailed accounting information related to Other Assets Other Current Assets (in thousands) | Component | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------------- | :------------- | :---------------- | | Collaboration and other receivables | $55.22 | $34.61 | | Total other current assets | $105.48 | $90.46 | Other Non-Current Assets (in thousands) | Component | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :------------------------------------ | :------------- | :---------------- | | Manufacturing-related deposits and prepaids | $27.60 | $25.96 | | Intangible assets, net | $26.20 | $26.89 | | Restricted cash | $15.58 | $15.58 | | Total other non-current assets | $80.55 | $76.21 | Note 9. Accrued Expenses This note provides detailed accounting information related to Accrued Expenses Accrued Expenses (in thousands) | Component | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :------------------------------ | :------------- | :---------------- | | Product revenue related reserves | $118.35 | $109.16 | | Accrued income taxes | $79.86 | $17.39 | | Accrued contract manufacturing costs | $66.85 | $77.84 | | Accrued employee compensation costs | $35.30 | $91.12 | | Total accrued expenses | $391.65 | $373.51 | - Accrued income taxes increased significantly from $17.4 million to $79.9 million, while accrued employee compensation costs decreased from $91.1 million to $35.3 million[58] Note 10. Stock-Based Compensation This note provides detailed accounting information related to Stock-Based Compensation Stock Awards Granted (Weighted Average Grant Date Fair Value) | Award Type | Q1 2025 Grants (units) | Q1 2025 Avg. Fair Value (per share) | Q1 2024 Grants (units) | Q1 2024 Avg. Fair Value (per share) | | :-------------------- | :------------- | :---------------------- | :------------- | :---------------------- | | Stock options | 466,176 | $48.49 | 316,378 | $67.56 | | Restricted stock units | 1,498,184 | $97.84 | 1,161,985 | $128.58 | Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Stock options | $12.89 | $16.28 | | Restricted stock units | $31.54 | $27.53 | | Employee stock purchase plan | $2.12 | $1.40 | | Total stock-based compensation expense | $41.43 | $40.69 | | Allocated to Research and development | $17.32 | $16.27 | | Allocated to Selling, general and administrative | $24.11 | $24.42 | - Total stock-based compensation expense increased slightly to $41.4 million in Q1 2025 from $40.7 million in Q1 2024[61][62] Note 11. Other (Loss) Income, Net This note provides detailed accounting information related to Other (Loss) Income, Net Other (Loss) Income, Net (in thousands) | Component | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Interest income | $10.19 | $7.09 | | (Loss) gain on strategic investments | $(90.73) | $0.93 | | Interest expense | $(4.50) | $(4.17) | | Change in fair value of derivatives | $0.00 | $(10.10) | | Total other (loss) income, net | $(83.13) | $6.54 | - Other (loss) income, net, significantly decreased by $89.7 million, primarily due to a $91.7 million increase in the loss on strategic investments in Q1 2025[63][126] Note 12. Income Taxes This note provides detailed accounting information related to Income Taxes - The company recorded an income tax provision of $64.0 million in Q1 2025, with an effective tax rate of (16.7)%, primarily due to current tax on taxable profits in certain states and capitalization of R&D costs for tax purposes[64] - A full valuation allowance of approximately $989.6 million is maintained against net deferred tax assets as of March 31, 2025, due to uncertainty regarding their realization[65] - The Tax Cuts and Jobs Act of 2017 requires capitalization and amortization of R&D expenses for tax purposes, contributing to taxable profits and tax expense[66][67] Note 13. Revolving Credit Facility This note provides detailed accounting information related to Revolving Credit Facility - On February 13, 2025, Sarepta entered into a five-year, $600.0 million senior secured revolving credit facility with JPMorgan Chase Bank, N.A.[68] - The facility's interest rates are variable (Adjusted SOFR plus a margin or a base reference rate plus a margin), and an unused commitment fee applies[69] - As of March 31, 2025, there were no outstanding amounts under the Revolving Credit Facility, and the company was in compliance with all covenants[71] Note 14. (Loss) Earnings Per Share This note provides detailed accounting information related to (Loss) Earnings Per Share Basic and Diluted (Loss) Earnings Per Common Share (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :-------------------------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net (loss) income - basic | $(447.51) | $36.12 | | Weighted-average common shares outstanding, basic | 97,362 | 93,991 | | (Loss) earnings per common share, basic (per share) | $(4.60) | $0.38 | | (Loss) earnings per common share, diluted (per share) | $(4.60) | $0.37 | - For Q1 2025, basic and diluted net loss per share were both $(4.60) due to the net loss, making common stock equivalents anti-dilutive[72][73] - Approximately 20.5 million potential common shares were excluded from diluted EPS computation in Q1 2025 as they were anti-dilutive, including 12.4 million from equity incentive plans and 8.1 million from convertible debt[74] Note 15. Segment Information This note provides detailed accounting information related to Segment Information - Sarepta operates in a single segment, with the CEO using consolidated net (loss) income to allocate resources and assess performance[21][76] Segment Net (Loss) Income (in thousands) | Metric | Three Months Ended March 31, 2025 (in millions) | Three Months Ended March 31, 2024 (in millions) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total revenues | $744.86 | $413.46 | | Up-front and milestone expenses | $583.79 | $0.00 | | Research and development- other (excluding non-cash items) | $28.47 | $28.85 | | Selling, general and administrative- other (excluding non-cash items) | $51.14 | $48.96 | | Roche collaboration reimbursement | $(28.48) | $(21.66) | | Loss (gain) on strategic investments | $90.73 | $(0.93) | | Income tax expense | $63.99 | $5.33 | | Stock-based compensation expense | $41.43 | $40.69 | | Segment net (loss) income | $(447.51) | $36.12 | Note 16. Commitments and Contingencies This note provides detailed accounting information related to Commitments and Contingencies Aggregate Non-Cancelable Contractual Manufacturing Obligations (in thousands) | Year | Amount (in millions) | | :-------------------- | :------- | | 2025 (April-December) | $846.65 | | 2026 | $168.17 | | 2027 | $79.86 | | 2028 | $72.40 | | Total manufacturing commitments | $1,167.07 | - Sarepta is involved in several legal proceedings, including patent infringement lawsuits with REGENXBIO INC. and the Trustees of the University of Pennsylvania regarding the '617 and '274 Patents related to ELEVIDYS[82][83] - A lawsuit with Nippon Shinyaku Co., Ltd. regarding exon 53 skipping technology resulted in a jury award of approximately $115.2 million in damages to Sarepta for NS's infringement of the '851 Patent[85] - Genzyme Corporation filed a patent infringement lawsuit against Sarepta regarding ELEVIDYS, with a trial scheduled for January 25, 2027[86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Sarepta's financial condition, changes in financial condition, and results of operations, offering a detailed analysis of revenues, expenses, liquidity, and cash flows for the three months ended March 31, 2025, and 2024. It also includes an overview of the company's business, approved products, and pipeline Overview This section provides a high-level summary of the company's business, approved products, and development pipeline - Sarepta is a commercial-stage biopharmaceutical company focused on RNA-targeted therapeutics and gene therapy for rare diseases, with multiple FDA-approved products for Duchenne muscular dystrophy[90] - Approved products include EXONDYS 51, VYONDYS 53, AMONDYS 45 (PMO Products), and ELEVIDYS (AAV-based gene therapy), all for Duchenne[94] - The pipeline includes SRP-9003 for LGMD2E, which completed enrollment and dosing in a Phase 3 clinical trial (EMERGENE) in December 2024, with a BLA expected in H2 2025[95] - The company relies on third-party CMOs for GMP manufacturing of products and product candidates, with partnerships like Aldevron and Catalent enhancing gene therapy manufacturing capabilities[96][98] Results of Operations for the Three Months Ended March 31, 2025 and 2024 This section analyzes the company's financial performance, including revenues, costs, and expenses for the reported periods Selected Unaudited Condensed Consolidated Statements of (Loss) Income Data (in thousands, except per share amounts) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change ($) (in millions) | Change (%) | | :------------------------------------ | :-------- | :-------- | :--------- | :--------- | | Products, net revenue | $611.52 | $359.48 | $252.04 | 70% | | Collaboration and other revenue | $133.33 | $53.98 | $79.35 | 147% | | Total revenues | $744.86 | $413.46 | $331.39 | 80% | | Cost of sales (excluding amortization) | $137.56 | $50.56 | $87.01 | 172% | | Research and development | $773.45 | $200.40 | $573.05 | 286% | | Selling, general and administrative | $133.63 | $127.00 | $6.63 | 5% | | Operating (loss) income | $(300.39) | $34.91 | $(335.29) | NM* | | Net (loss) income | $(447.51) | $36.12 | $(483.63) | NM* | | Basic (loss) earnings per share (per share) | $(4.60) | $0.38 | $(4.98) | NM* | | Diluted (loss) earnings per share (per share) | $(4.60) | $0.37 | $(4.97) | NM* | Revenues This section analyzes the company's revenue streams, including product sales and collaboration income, and their year-over-year changes Net Product Revenues by Product (in thousands) | Product | Q1 2025 (in millions) | Q1 2024 (in millions) | Change ($) (in millions) | Change (%) | | :---------- | :-------- | :-------- | :--------- | :--------- | | ELEVIDYS | $374.99 | $133.94 | $241.05 | 180% | | PMO Products | $236.54 | $225.55 | $10.99 | 5% | | Products, net | $611.52 | $359.48 | $252.04 | 70% | - Total net product revenues increased by $252.0 million (70%) year-over-year, primarily driven by a 180% increase in ELEVIDYS net product revenues due to its expanded label approval in June 2024[109] Collaboration and Other Revenues (in thousands) | Component | Q1 2025 (in millions) | Q1 2024 (in millions) | Change ($) (in millions) | Change (%) | | :-------------------- | :-------- | :-------- | :--------- | :--------- | | Collaboration revenue | $112.00 | $48.00 | $64.00 | 133% | | Contract manufacturing | $17.38 | $5.81 | $11.57 | 199% | | Royalty revenue | $3.95 | $0.17 | $3.78 | NM* | | Total | $133.33 | $53.98 | $79.35 | 147% | - Collaboration and other revenues increased by $79.4 million (147%), mainly due to $112.0 million in collaboration revenue recognized from the expiration of a Roche option in Q1 2025[111] Cost of sales (excluding amortization of in-licensed rights) This section examines the direct costs associated with product sales, including inventory and royalty payments Cost of Sales (excluding amortization of in-licensed rights) (in thousands) | Component | Q1 2025 (in millions) | Q1 2024 (in millions) | Change ($) (in millions) | Change (%) | | :-------------------------------------------------------------------------------- | :-------- | :-------- | :--------- | :--------- | | Inventory costs related to products sold (excluding products sold to Roche) | $109.76 | $37.70 | $72.06 | 191% | | Royalty payments | $15.66 | $11.21 | $4.46 | 40% | | Inventory costs related to products sold to Roche | $12.14 | $1.65 | $10.49 | NM* | | Total cost of sales (excluding amortization of in-licensed rights) | $137.56 | $50.56 | $87.01 | 172% | - Cost of sales increased by $87.0 million (172%), driven by higher ELEVIDYS sales and increased costs for products sold to Roche, partially offset by fewer write-offs of batches not meeting quality specifications[115][116] - If ELEVIDYS manufacturing costs had not been expensed as R&D prior to approval, incremental inventory costs would have been $13.7 million higher in Q1 2025 and $23.8 million higher in Q1 2024[113] Research and development expenses This section details the company's investment in R&D, including upfront payments for collaborations and project-specific expenditures Research and Development Expenses by Project (in thousands) | Project | Q1 2025 (in millions) | Q1 2024 (in millions) | Change ($) (in millions) | Change (%) | | :-------------------------- | :-------- | :-------- | :--------- | :--------- | | Up-front and milestone expenses | $583.79 | $0.00 | $583.79 | NM* | | SRP-9001 | $68.86 | $71.40 | $(2.54) | (4)% | | LGMD platform | $27.66 | $16.95 | $10.70 | 63% | | PPMO platform | $0.54 | $12.51 | $(11.98) | (96)% | | Total research and development expenses | $773.45 | $200.40 | $573.05 | 286% | - Total R&D expenses increased by $573.1 million (286%), primarily due to a $583.8 million increase in upfront and milestone expenses related to the Arrowhead Agreement[119][120][122] - Clinical trial expenses decreased by $11.0 million (25%) due to the discontinuation of PPMO programs[119][122] Selling, general and administrative expenses This section reviews the company's operational overhead, encompassing compensation, professional services, and facility costs Selling, General and Administrative Expenses by Category (in thousands) | Category | Q1 2025 (in millions) | Q1 2024 (in millions) | Change ($) (in millions) | Change (%) | | :-------------------------------- | :-------- | :-------- | :--------- | :--------- | | Compensation and other personnel expenses | $45.79 | $42.05 | $3.73 | 9% | | Professional services | $42.23 | $39.67 | $2.57 | 6% | | Facility- and technology-related expenses | $12.81 | $11.76 | $1.06 | 9% | | Total selling, general and administrative expenses | $133.63 | $127.00 | $6.63 | 5% | - SG&A expenses increased by $6.6 million (5%), driven by higher compensation and personnel expenses, professional services for ELEVIDYS commercialization, and facility-related expenses[121][123] Amortization of in-licensed rights This section explains the amortization of intangible assets related to in-licensed intellectual property over their useful lives - Amortization of in-licensed rights remained consistent at approximately $0.6 million for both Q1 2025 and Q1 2024[124] - These rights relate to agreements with UWA, Nationwide, BioMarin, and Parent Project Muscular Dystrophy, amortized straight-line over the relevant patent life from regulatory approval or first commercial sale[124] Other (expense) income, net This section covers non-operating financial items, including interest income, strategic investment gains or losses, and interest expenses - Other (expense) income, net, decreased by $89.7 million, primarily due to a $91.7 million increase in the loss on strategic investments, including fair value adjustments of publicly-traded companies like Arrowhead[125][126] - Components include unrealized gains/losses on strategic equity investments, interest expense on 2027 Notes, interest income on cash/investments, accretion of investment discount, and changes in fair value of contingent consideration[125] Income tax expense This section discusses the company's income tax provisions, effective tax rates, and deferred tax asset valuation allowances - Income tax expense increased to $64.0 million in Q1 2025 from $5.3 million in Q1 2024, primarily due to state, federal, and foreign income taxes where tax losses or credits were unavailable[127] - The company maintains a full valuation allowance against deferred tax assets (except in certain foreign jurisdictions) and continues to monitor for potential future release, which could materially impact net earnings[127] Liquidity and Capital Resources This section assesses the company's financial flexibility, including cash position, working capital, and ability to meet short-term and long-term obligations Financial Condition (in thousands) | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | Change ($) (in millions) | Change (%) | | :------------------------------------ | :------------- | :---------------- | :--------- | :--------- | | Total cash, cash equivalents and investments | $647.47 | $1,503.53 | $(856.07) | (57)% | | Total borrowings (Convertible debt) | $1,138.29 | $1,137.12 | $1.16 | (—)% | | Total working capital | $1,826.95 | $2,341.78 | $(514.83) | (22)% | - Total cash, cash equivalents, and investments decreased by $856.1 million (57%) from December 31, 2024, to March 31, 2025[128] - Principal uses of cash included a $583.6 million upfront payment and a $241.4 million equity investment in Arrowhead, along with R&D, manufacturing, and SG&A expenses[129] - The company believes existing cash, cash equivalents, future cash from operations, and the $600.0 million Revolving Credit Facility are sufficient to meet capital requirements for at least the next 12 months[103][131] Cash Flows This section analyzes the company's cash generation and usage across operating, investing, and financing activities Cash Flow Activity (in thousands) | Activity | Q1 2025 (in millions) | Q1 2024 (in millions) | Change ($) (in millions) | Change (%) | | :------------------------------------ | :---------- | :---------- | :---------- | :--------- | | Operating activities | $(583.44) | $(242.08) | $(341.36) | 141% | | Investing activities | $(291.18) | $218.80 | $(509.97) | NM* | | Financing activities | $12.47 | $22.14 | $(9.67) | (44)% | | Decrease in cash and cash equivalents | $(862.14) | $(1.14) | $(861.00) | NM* | - Cash used in operating activities increased by $341.4 million, primarily due to a net loss of $447.5 million, increased inventory, and higher accounts receivable, partially offset by a decrease in manufacturing-related deposits[136][137] - Cash used in investing activities was $291.2 million in Q1 2025, a significant shift from $218.8 million provided in Q1 2024, mainly due to a $241.4 million acquisition of strategic investments (Arrowhead)[139] - Cash provided by financing activities decreased by $9.7 million, primarily due to $3.2 million in fees for the Revolving Credit Facility, partially offsetting proceeds from stock option exercises[141] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section outlines the company's exposure to market risks, specifically interest rate and market price risks, and assesses their potential impact on financial instruments - The company's investment policy maintains a diversified portfolio of money market investments, commercial paper, certificates of deposit, government/agency bonds, and high-grade corporate bonds with maturities of 24 months or less[143] - A hypothetical 10 basis point adverse movement in interest rates is estimated to result in a $0.2 million loss in fair value for interest-rate-sensitive instruments as of March 31, 2025[143] - Strategic equity investments, including publicly traded biotechnology companies, expose the company to market price risk. A hypothetical 10.0% adverse movement is estimated to result in a $15.3 million loss in fair value for market-price-sensitive instruments as of March 31, 2025[145][147] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[148] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that materially affected or are reasonably likely to materially affect the company's internal control over financial reporting[149] PART II — OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 16 of the financial statements for details on material legal proceedings, which include ongoing patent infringement lawsuits and other litigation - Material legal proceedings are detailed in Note 16, Commitments and Contingencies, to the unaudited condensed consolidated financial statements[152] Item 1A. Risk Factors This section outlines various risks and uncertainties that could materially affect Sarepta's business, financial condition, and results of operations, covering aspects from product commercialization and regulatory compliance to intellectual property, manufacturing, and financial stability - The commercial success of Sarepta's products is highly dependent on factors such as sales effectiveness, new data generation, regulatory compliance, reimbursement levels, and competition[154] - Accelerated approvals for products like EXONDYS 51, VYONDYS 53, AMONDYS 45, and ELEVIDYS are subject to ongoing post-approval development and regulatory requirements, including confirmatory trials, with potential for withdrawal if clinical benefits are not verified[156][157] - Unfavorable reimbursement policies, healthcare policy reforms, and governmental/private payor initiatives could hinder commercial success and lead to pricing pressures for current and future products[162][166][168] - The company faces intense competition and rapid technological change in the biotechnology and pharmaceutical industries, including from other companies developing exon skipping, gene therapies, and gene editing approaches for Duchenne[202][203] - Reliance on third parties for manufacturing, distribution, and R&D activities poses risks, including potential supply interruptions, quality control issues, and non-compliance with cGMP regulations[264][266][280] - The company's success depends on its ability to obtain, maintain, and defend patent protection for its products and technologies, with significant litigation risks in the biopharmaceutical industry[286][291][292] - Failure to comply with healthcare and other regulations (e.g., anti-kickback, false claims, data privacy) could result in substantial penalties, fines, and adverse effects on business operations and financial condition[298][300][303] - The company has incurred operating losses and may not maintain profitability, with expenses expected to increase substantially due to commercialization, R&D, and infrastructure expansion[323][324] - The company's stock price is volatile and can fluctuate significantly due to factors such as commercial performance, regulatory decisions, clinical trial results, and competitive developments[332][334] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds during the reporting period - No unregistered sales of equity securities or use of proceeds occurred during the three months ended March 31, 2025[363] Item 3. Defaults Upon Senior Securities This section confirms that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred during the three months ended March 31, 2025[364] Item 4. Mine Safety Disclosures This section indicates that there are no mine safety disclosures to report - No mine safety disclosures are applicable for the reporting period[365] Item 5. Other Information This section reports that no directors or officers adopted or terminated Rule 10b5-1(c) plans for securities trading during the quarter - No director or officer adopted or terminated Rule 10b5-1(c) plans for the purchase or sale of company securities during the three months ended March 31, 2025[366] Item 6. Exhibits This section lists the exhibits filed or furnished as part of the Quarterly Report on Form 10-Q, including corporate documents, the Credit Agreement, and certifications - The exhibits listed on the Exhibit Index are filed or furnished as part of this Quarterly Report on Form 10-Q[367] - Key exhibits include the Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and the Credit Agreement dated February 13, 2025[370] - Certifications from the Principal Executive Officer and Principal Financial and Accounting Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act of 2002) are included[370] Signatures This section contains the official signatures of the company's President and Chief Executive Officer, Douglas S. Ingram, and Executive Vice President, Chief Financial Officer, Ian M. Estepan, certifying the filing of the report - The report is signed by Douglas S. Ingram, President and Chief Executive Officer, and Ian M. Estepan, Executive Vice President, Chief Financial Officer, on May 6, 2025[374]