Sarepta Therapeutics(SRPT) - 2020 Q4 - Annual Report

PART I Item 1. Business Sarepta Therapeutics is a commercial-stage biopharmaceutical company specializing in RNA-targeted therapeutics and gene therapy for rare diseases Overview and Strategy Sarepta focuses on discovering and developing RNA-targeted therapeutics, gene therapy, and other genetic modalities for rare diseases - Sarepta is a commercial-stage biopharmaceutical company focused on RNA-targeted therapeutics and gene therapy for rare diseases like DMD and LGMDs[16] - The company's core therapeutic areas are Duchenne muscular dystrophy (DMD), Limb-girdle muscular dystrophies (LGMDs), and Charcot-Marie-tooth Disease (CMT)[26][27][28] - Key strategic activities include building its gene therapy engine, advancing RNA technologies (PMO and PPMO), and investing in next-generation precision medicine through internal research and partnerships[29] Commercial Products The company has three commercial products, all for the treatment of Duchenne muscular dystrophy (DMD) and all granted accelerated approval by the FDA Commercial Product Portfolio | Product | Indication | Patient Population Amenability | FDA Approval Date | | :--- | :--- | :--- | :--- | | EXONDYS 51 | DMD amenable to exon 51 skipping | ~13% | Sep 19, 2016 | | VYONDYS 53 | DMD amenable to exon 53 skipping | ~8% | Dec 12, 2019 | | AMONDYS 45 | DMD amenable to exon 45 skipping | ~8% | Feb 25, 2021 | Net Product Revenue (2018-2020) | Year | Net Revenue (in millions) | | :--- | :--- | | 2020 | $455.9 | | 2019 | $380.8 | | 2018 | $301.0 | Product Pipeline Sarepta's pipeline includes over 40 programs, with key clinical-stage candidates for DMD and LGMD - SRP-5051 (PPMO for DMD): A next-generation chemistry designed for enhanced delivery and potentially less frequent dosing than PMOs for exon 51 skipping. Results from the 30 mg/kg cohort are expected in Q2 2021[37][38] - SRP-9001 (Gene Therapy for DMD): A micro-dystrophin gene therapy using an AAVrh.74 vector. Top-line results for Part 1 of Study 102 were released in January 2021, with additional results from Part 2 expected in Q1 2022[39][40] - SRP-9003 (Gene Therapy for LGMD): A gene therapy for LGMD2E. The company expects to complete GMP runs and seek FDA confirmation to initiate a pivotal trial in 2021[42][43] Manufacturing, Supply and Distribution Sarepta uses a hybrid manufacturing strategy, relying on third-party CMOs for GMP production and partnering for gene therapy manufacturing - The company relies on third-party CMOs for large-scale GMP manufacturing of its commercial products and clinical candidates[46] - A hybrid strategy is used for gene therapy, combining internal R&D manufacturing with strategic partnerships for clinical and commercial supply[49] - Key gene therapy manufacturing partners include Thermo Fisher Scientific, Catalent, and Aldevron, which provide support for micro-dystrophin and LGMD programs[49] Material Agreements and Strategic Alliances Sarepta has key strategic agreements, including a significant collaboration with Roche for SRP-9001 and license agreements for its exon-skipping technology Roche Collaboration Financial Terms (SRP-9001) | Component | Amount | | :--- | :--- | | Up-front Payment (Cash & Equity) | ~$1.2 billion | | Potential Regulatory & Sales Milestones | Up to $1.7 billion | | Royalties on Net Sales | Mid-teens percentage | - In 2019, Sarepta acquired Myonexus for approximately $173.8 million upfront to gain control of its LGMD gene therapy programs, including SRP-9003[68] - The company has key license agreements with BioMarin and the University of Western Australia (UWA) for its exon-skipping technology, involving milestone and royalty payments[69][77] Intellectual Property and Regulation Sarepta's success relies on patent protection and regulatory exclusivity, navigating a complex regulatory environment including FDA approval and healthcare laws U.S. Regulatory Exclusivity for Commercial Products | Product | NCE Exclusivity Until | Orphan Drug Exclusivity Until | | :--- | :--- | :--- | | EXONDYS 51 | Sep 19, 2021 | Sep 19, 2023 | | VYONDYS 53 | Dec 12, 2024 | Dec 12, 2026 | | AMONDYS 45 | Feb 25, 2026 | Feb 25, 2028 | - The company's products are subject to extensive regulation by the FDA in the U.S. and other authorities abroad, covering testing, manufacturing, marketing, and distribution[105] - Sarepta is subject to various healthcare laws, including anti-kickback statutes and false claims laws, as well as data privacy regulations like GDPR in Europe and CCPA in California[139][145][146] Competition and Human Capital Sarepta operates in an intensely competitive biotechnology industry, particularly in the DMD space, and manages a global workforce of 866 employees - Key competitors in the DMD space include Nippon Shinyaku (VILTEPSO, exon 53 skipping), Pfizer (gene therapy), and Solid Biosciences (gene therapy)[160][163][164] Employee Statistics (as of Dec 31, 2020) | Metric | Value | | :--- | :--- | | Total Employees | 866 | | Research & Development | 494 | | Selling, General & Admin | 372 | | Women in Workforce | 55% | | Women in Leadership | 47% | | Racially/Ethnically Diverse | 29% | Item 1A. Risk Factors The company faces numerous risks, including dependence on approved DMD products, development uncertainties, manufacturing reliance, and financial challenges - Business Risks: The company is highly dependent on the commercial success of EXONDYS 51, VYONDYS 53, and AMONDYS 45 in the U.S. and faces uncertainty regarding reimbursement policies and market adoption[181][188] - Development Risks: Failures or delays in clinical trials, particularly for novel gene therapies, could prevent or delay regulatory approval. Results from early-stage trials may not be indicative of late-stage success[227][232] - Third-Party & Manufacturing Risks: Sarepta relies on third parties for manufacturing, which creates dependence and risks related to cGMP compliance, supply chain interruptions, and the ability to scale up production for gene therapies[262][269][276] - Operational & Financial Risks: The COVID-19 pandemic may continue to disrupt commercialization, clinical trials, and manufacturing. The company has a history of operating losses and will need to raise additional funding[294][307][309] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[351] Item 2. Properties Sarepta's principal facilities, including corporate headquarters and laboratories, are located in Massachusetts and Ohio - The company's main facilities are located in Massachusetts and Ohio, serving as corporate headquarters, laboratory, and office space[352][353] Item 3. Legal Proceedings Sarepta is involved in a patent infringement lawsuit filed by REGENXBIO INC. concerning its AAV gene therapy manufacturing technology for SRP-9001 - Sarepta is involved in a patent infringement lawsuit filed by REGENXBIO INC. related to its AAV gene therapy manufacturing technology for products like SRP-9001[667] Item 4. Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[355] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Sarepta's common stock trades on the NASDAQ under symbol SRPT, with no cash dividends paid or anticipated in the foreseeable future - The company's common stock trades on the NASDAQ under the symbol SRPT[357] - No cash dividends were paid in 2018, 2019, or 2020, and none are anticipated in the foreseeable future[359] Item 6. Selected Financial Data This section summarizes Sarepta's key financial data, showing product revenue growth but continued significant operating and net losses due to R&D investments Selected Financial Data (2018-2020) | (in thousands) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Product revenues, net | $455,865 | $380,833 | $301,034 | | Collaboration revenue | $84,234 | $— | $— | | Research and development | $722,343 | $560,909 | $401,843 | | Operating loss | $(564,163) | $(705,563) | $(343,628) | | Net loss | $(554,128) | $(715,075) | $(361,918) | | Net loss per share | $(7.11) | $(9.71) | $(5.46) | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights increased product and collaboration revenue, high R&D expenses, a narrowed operating loss, and boosted liquidity Results of Operations Total revenues increased 42% to $540.1 million in 2020, while R&D expenses rose 29% to $722.3 million, leading to a narrowed operating loss Comparison of Operations (2020 vs. 2019) | (in thousands) | 2020 | 2019 | Change % | | :--- | :--- | :--- | :--- | | Total revenues | $540,099 | $380,833 | 42% | | Products, net | $455,865 | $380,833 | 20% | | Collaboration | $84,234 | $— | NM | | Total cost and expenses | $1,104,262 | $1,086,396 | 2% | | Research and development | $722,343 | $560,909 | 29% | | Selling, general and administrative | $317,875 | $284,812 | 12% | | Operating loss | $(564,163) | $(705,563) | (20)% | | Net loss | $(554,128) | $(715,075) | (23)% | - R&D expenses increased by $161.4 million (29%), primarily driven by a $223.9 million increase in manufacturing expenses for the micro-dystrophin and other gene therapy programs. This was partially offset by a $65.9 million reimbursement from Roche[405][406] Liquidity and Capital Resources As of December 31, 2020, Sarepta's cash, cash equivalents, and investments increased 72% to $1.95 billion, primarily due to the Roche collaboration Financial Condition Summary (as of Dec 31) | (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Cash, cash equivalents and investments | $1,947,886 | $1,134,314 | | Total borrowings | $992,493 | $681,900 | | Working capital | $2,069,170 | $1,204,146 | Cash Flow Summary (Year Ended Dec 31) | (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Cash from Operating Activities | $107,466 | $(456,463) | | Cash (used in) from Investing Activities | $(121,721) | $286,725 | | Cash from Financing Activities | $682,323 | $642,554 | - The company has potential future milestone obligations of up to $3.9 billion related to its collaboration and license agreements, which are not recorded on the balance sheet as they are contingent on future events[427] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its $1.95 billion investment portfolio - The company's main market risk is interest rate risk on its $1.95 billion portfolio of cash, cash equivalents, and investments[430] - A hypothetical adverse 10 basis point change in interest rates is estimated to result in a $0.2 million loss in the fair value of its investments[430] Item 8. Financial Statements and Supplementary Data This section incorporates by reference the company's consolidated financial statements and the independent auditor's report from Part IV, Item 15 - The required financial statements are located starting on page F-1 of the report[431] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[432] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, a conclusion confirmed by KPMG LLP - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[433] - Management concluded that internal control over financial reporting was effective as of December 31, 2020, an assessment audited and confirmed by KPMG LLP[437] Item 9B. Other Information The company reports no other information for this item - None[439] PART III Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2021 proxy statement - Information is incorporated by reference from the 2021 proxy statement[440] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the 2021 proxy statement - Information is incorporated by reference from the 2021 proxy statement[441] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the 2021 proxy statement - Information is incorporated by reference from the 2021 proxy statement[442] Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding related transactions and director independence is incorporated by reference from the 2021 proxy statement - Information is incorporated by reference from the 2021 proxy statement[443] Item 14. Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the 2021 proxy statement - Information is incorporated by reference from the 2021 proxy statement[444] PART IV Item 15. Exhibits, Financial Statement Schedules This section lists the documents filed as part of the Annual Report on Form 10-K, including consolidated financial statements and a detailed list of exhibits - This item contains the list of financial statements and exhibits filed with the 10-K[446][448] Item 16. Form 10-K Summary This item is not applicable - Not applicable[457]