Sarepta Therapeutics, Inc. 2021 Form 10-K Summary
Business context and reporting period
Sarepta is a commercial-stage biopharmaceutical company focused on RNA-targeted therapeutics, gene therapy and other genetic medicines for rare diseases, primarily Duchenne muscular dystrophy, limb-girdle muscular dystrophies and related neuromuscular disorders. This filing covers the fiscal year ended December 31, 2021; the filing does not provide a separate Q4 income statement.
The company commercializes three FDA accelerated-approved Duchenne products: EXONDYS 51, VYONDYS 53 and AMONDYS 45. AMONDYS 45 was approved in February 2021. The pipeline includes more than 40 programs, with SRP-9001 micro-dystrophin gene therapy, SRP-9003 gene therapy and SRP-5051 PPMO among the leading programs.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $701.9 million | $540.1 million | 30% |
| Product revenue | $612.4 million | $455.9 million | 34% |
| Collaboration and other revenue | $89.5 million | $84.2 million | 6% |
| Operating loss | $459.7 million | $564.2 million | 19% improvement |
| Net loss | $418.8 million | $554.1 million | 24% improvement |
| Net loss per share | $5.15 | $7.11 | Improved by $1.96 |
| Cash used in operating activities | $443.2 million | Cash provided of $107.5 million | Unfavorable change |
Product revenue consisted of EXONDYS 51 of $454.4 million, VYONDYS 53 of $89.5 million and AMONDYS 45 of $68.5 million. Product revenue growth reflected increased demand and the launch of AMONDYS 45.
Reported gross profit was approximately $604.8 million, implying an approximate 86.2% gross margin based on product revenue and reported cost of sales. The operating margin was approximately negative 65.5% and the net margin was approximately negative 59.7% based on total revenue. These calculated margins are affected by collaboration revenue and the company’s substantial research and development investment.
Research and development expense increased 7% to $771.2 million, led by micro-dystrophin expense of $320.2 million, other gene therapy expense of $102.0 million and manufacturing expense of $384.7 million. Selling, general and administrative expense declined 11% to $282.7 million.
Liquidity, cash flow and debt
- Cash, cash equivalents and investments totaled $2.126 billion at December 31, 2021, including $2.116 billion of cash and cash equivalents and $9.9 million of restricted cash and investments.
- Cash increased by $613.8 million during 2021, primarily from $548.5 million of net proceeds from a common-stock offering, $495.4 million of investing cash inflows and financing activities of $561.6 million.
- Operating cash use of $443.2 million was driven by the net loss, an $89.2 million decrease in deferred revenue, an $83.8 million increase in inventory and a $51.7 million increase in accounts receivable.
- Total debt carrying value was $1.097 billion, comprising $563.7 million of 1.50% convertible senior notes due 2024 and $533.2 million of term loans. Principal debt payments are scheduled primarily in 2023 and 2024.
- The term loan carries an 8.5% annual interest rate, matures in tranches in December 2023 and December 2024, and is secured by specified collateral, including certain U.S. intellectual property and other assets. The credit agreement requires consolidated liquidity of at least $100 million at each month-end.
- Management stated that available liquidity is sufficient to fund the current operating plan for at least the next twelve months, while also noting that additional financing may be required to support longer-term development and commercialization.
Material changes versus the prior comparable period
- Total revenue increased 30%, driven mainly by 34% growth in product revenue and the initial contribution from AMONDYS 45.
- EXONDYS 51 revenue increased 8%, while VYONDYS 53 revenue increased 164% from a smaller base.
- Operating and net losses narrowed despite higher research and development expense, largely because of revenue growth, lower selling and administrative costs and favorable changes in contingent consideration.
- Operating cash flow deteriorated substantially because 2020 included significant cash received under the Roche collaboration, while 2021 included greater inventory and receivables investment and a reduction in deferred revenue.
- The company raised approximately $548.5 million net through an October 2021 public equity offering, issuing approximately 7.1 million shares at $81 per share.
- The company adopted ASU 2020-06 for convertible debt effective January 1, 2021. The adoption increased the carrying value of the convertible notes by $96.8 million, reduced accumulated deficit by $60.2 million and reduced additional paid-in capital by $157.0 million. It reduced 2021 interest expense and net loss by $22.4 million, or $0.28 per share.
- Research and development expense included a $28.7 million 2021 charge related to a Nationwide sublicense payment and increased manufacturing costs associated with changes to the Thermo supply arrangement.
Guidance, outlook, commentary and unusual items
- Management expected to announce additional SRP-9001 data in 2022, complete good manufacturing practice runs for SRP-9003 and meet with the FDA regarding a pivotal SRP-9003 trial.
- SRP-9001 pivotal Study 301 began enrollment in October 2021. SRP-5051 Study 5051-201 Part B also began enrollment in the fourth quarter of 2021.
- The Roche collaboration covers SRP-9001 outside the United States. Sarepta retained U.S. rights and is responsible for manufacturing clinical and, if approved, commercial supply. Roche options cover certain additional Duchenne products outside the United States.
- The company received $102.0 million from selling the AMONDYS 45 Priority Review Voucher in 2021. This gain was non-recurring and had no carrying value at the time of sale.
- The company continues to incur operating losses and does not expect near-term profitability or positive operating cash flow. Future funding needs depend on product sales, development spending, manufacturing commitments, regulatory progress and business-development activity.
- All three marketed products have accelerated approval and require post-marketing studies to verify and describe clinical benefit. Failure to satisfy those requirements or unfavorable confirmatory results could lead to restrictions or withdrawal of approval.
- COVID-19 continued to create risks to product infusions, payer reauthorizations, clinical-trial enrollment and data collection, manufacturing and supply chains.
- Manufacturing obligations totaled approximately $1.229 billion, including substantial take-or-pay and capacity commitments. Cancellable future CRO commitments were approximately $378.5 million.
- Potential future development, regulatory, commercial and royalty milestone obligations under license and collaboration agreements could total up to approximately $4.0 billion, excluding certain unexercised options.
- Material litigation includes patent litigation involving RegenXBIO and the University of Pennsylvania concerning AAV manufacturing technology, and litigation with Nippon Shinyaku involving exon 53 skipping patents, VYONDYS 53 and related inter partes review petitions. The filing states that no material loss accrual or estimable material loss range was recorded for these matters as of December 31, 2021.
Most important facts for an investor to verify
- Whether confirmatory studies for EXONDYS 51, VYONDYS 53 and AMONDYS 45 verify clinical benefit and preserve accelerated approvals.
- Enrollment, safety, efficacy, manufacturing comparability and regulatory progress for SRP-9001, including pivotal Study 301.
- SRP-9003 development milestones, FDA interactions and the ability to complete commercial-scale manufacturing.
- The sustainability of product growth, payer coverage, reimbursement, discounting and concentration among major customers.
- Operating cash burn, the timing of 2023–2024 debt maturities and whether additional equity or debt financing will be required.
- The financial impact of manufacturing commitments, contingent milestones, royalties and other license obligations.
- Outcomes and potential commercial disruption from the RegenXBIO and Nippon Shinyaku patent disputes.
- Actual effects of COVID-19, competing Duchenne therapies and evolving gene therapy regulation on sales and clinical programs.