Sarepta Therapeutics, Inc. (SRPT) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The purpose of Management's Discussion and Analysis of Financial Condition and Results of Operations is to provide an understanding of the financial condition, changes in financial condition and results of operations of Sarepta Therapeutics, Inc. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Please review our legend titled “Forward-Looking Information” at the beginning of this Annual Report on Form 10-K which is incorporated herein by reference. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K. Throughout this discussion, unless the context specifies or implies otherwise, the terms “Sarepta”, “we”, “us” and “our” refer to Sarepta Therapeutics, Inc. and its subsidiaries.

This section discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 have been excluded from this Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

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 have developed multiple approved products for the treatment of Duchenne and are developing potential therapeutic candidates for a broad range of diseases and disorders, including Duchenne, LGMDs, and other neuromuscular and central nervous system related disorders.

We commercialized four products that have been approved by the FDA:

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The PMO Products:

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EXONDYS 51 (eteplirsen) Injection (“EXONDYS 51”), granted accelerated approval by the FDA on September 19, 2016, is indicated for the treatment of Duchenne in patients who have a confirmed mutation of the dystrophin gene that is amenable to exon 51 skipping. EXONDYS 51 uses our PMO chemistry and exon-skipping technology to skip exon 51 of the dystrophin gene.

o
VYONDYS 53 (golodirsen) Injection (“VYONDYS 53”), granted accelerated approval by the FDA on December 12, 2019, is indicated for the treatment of Duchenne in patients who have a confirmed mutation of the dystrophin 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.

o
AMONDYS 45 (casimersen) Injection (“AMONDYS 45”), granted accelerated approval by the FDA on February 25, 2021, is indicated for the treatment of Duchenne in patients who have a confirmed mutation of the dystrophin 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.

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ELEVIDYS (delandistrogene moxeparvovec-rokl), approved by the FDA on June 20, 2024, is an AAV-based gene therapy for the treatment of ambulatory patients at least four years old with Duchenne with a confirmed mutation in the Duchenne gene. ELEVIDYS is also approved for non-ambulatory patients under the accelerated approval pathway. ELEVIDYS was previously granted accelerated approval by the FDA on June 22, 2023 for the treatment of ambulatory patients aged four through five years with Duchenne with a confirmed mutation in the Duchenne gene. ELEVIDYS is contraindicated in patients with any deletion in exon 8 and/or exon 9 in the Duchenne gene.

We are in the process of conducting various clinical trials for our approved products, including studies that are required to comply with our post-marketing FDA requirements/commitments to verify and describe the clinical benefit of these products.

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A summary description of our key product candidates, including those in collaboration with our strategic partners, is as follows:

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SRP-9003 (LGMD, gene therapy program). We are developing gene therapy programs for various forms of LGMD. The most advanced of our LGMD product candidates, SRP-9003, aims to treat LGMD2E, also known as beta-sarcoglycanopathy, a severe and debilitating form of LGMD characterized by progressive muscle fiber loss, inflammation and muscle fiber replacement with fat and fibrotic tissue. SRP-9003 is designed to transfect a gene that codes for and restores beta-sarcoglycan protein with the goal of restoring the dystrophin associated protein complex. SRP-9003 has generated positive pre-clinical safety and efficacy data utilizing the AAVrh.74 vector, the same vector used in our SRP-9001 gene therapy program. A Phase 1/2a trial of SRP-9003 commenced in the fourth quarter of 2018. In June 2020, we announced safety and expression results from 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 March 2022, we announced 36-month functional data from three clinical trial participants in the low-dose cohort and 24-month functional data from two clinical trial participants in the high-dose cohort. In December 2024, we announced that we had completed enrollment and dosing in EMERGENE (Study SRP-9003-301), a Phase 3 clinical trial of SRP-9003 (bidridistrogene xeboparvovec).

Our pipeline includes 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.

We have developed proprietary state-of-the-art 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 sustain large-scale production of our PMO-based therapies and optimizing manufacturing for gene therapy-based product candidates. We have entered into certain manufacturing and supply arrangements with third-party suppliers and will utilize these capabilities to support production of certain of our products and 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 GMP manufacturing capabilities to produce our products and product candidates for commercial and/or clinical use.

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 reimbursement programs and the complex regulatory environment in which we operate.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The preparation of our consolidated financial statements in accordance with U.S. GAAP 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 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 most critical to the judgments and estimates used in the preparation of our consolidated financial statements:

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inventory; and

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income tax.

Inventory Valuation

Inventories are stated at the lower of cost and net realizable value with cost determined on a first-in, first-out basis. We capitalize inventory costs associated with products following regulatory approval when future commercialization is considered probable and the future economic benefit is expected to be realized. EXONDYS 51, VYONDYS 53, AMONDYS 45 and ELEVIDYS inventory that may be used in clinical development programs is charged to research and development expense when the product enters the research and development process and no longer can be used for commercial purposes.

We periodically analyze our inventories for excess amounts or obsolescence and write down obsolete or otherwise unmarketable inventory to its estimated net realizable value based on assumptions about expected future demand and market conditions. Additionally, though our products are subject to strict quality control and monitoring, which we perform throughout the manufacturing processes, certain batches or units of product may not meet quality specifications. Expense incurred related to excess

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inventory, obsolete inventory, or inventories that do not meet our quality specifications is recorded as a component of cost of sales in the consolidated statements of comprehensive income (loss).

Income Tax

We follow the asset and liability method of accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for expected future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the net deferred tax asset to zero when it is more likely than not that the net deferred tax asset will not be realized. As of December 31, 2024, we continued to maintain a full valuation allowance against all of our deferred tax assets, with the exception of deferred tax assets in certain foreign jurisdictions, based on management's evaluation of all available evidence, including our earnings history.

We will continue to monitor the realizability of our deferred tax assets in future periods. We may release all or a portion of the valuation allowance in the near-term; however, the release of the valuation allowance, as well as the exact timing and the amount of such release, continue to be subject to, among other things, our level of profitability, revenue growth and expectations regarding future profitability. If and when we determine the valuation allowance should be released or reduced, the adjustment would result in a benefit to income tax expense for the period the release is recorded, which could have a material impact on net earnings.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination. The calculation of our tax liabilities (or amount of reduction in our deferred tax assets from net operating loss carryover and research credit carryover) resulting from uncertain tax positions can involve significant judgment. Further, the calculation may involve the application of complex tax regulations in a foreign jurisdiction. Any significant impact as a result of changes in underlying facts, law, tax rates, tax audit, or review could lead to adjustments to our deferred tax asset, income tax expense, our effective tax rate, and/or our cash flow. Although we believe that we have adequately provided for tax liabilities resulting from uncertain tax positions, the actual amounts paid, if any, could have a material impact on our results of operations. Interest and penalties associated with uncertain tax positions are classified as a component of income tax expense.

Please read Note 2, Summary of Significant Accounting Policies and Recent Accounting Pronouncements to the consolidated financial statements, included elsewhere in this Annual Report on Form 10-K, for a further discussion of our critical accounting policies and estimates.

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The following table sets forth selected consolidated statements of income (loss) data for each of the periods indicated:

* NM: not meaningful

Revenues

The following table summarizes the components of our net product revenues, by product, for the periods indicated:

* NM: not meaningful

Net product revenues for our products for 2024 increased by $643.1 million, or 56%, compared with 2023. The increase primarily reflects an increase in net product revenues of ELEVIDYS of $620.4 million in 2024 as a result of its initial FDA approval in June 2023 and subsequent expanded label approval in June 2024.

The following table summarizes the components of our collaboration and other revenues for the periods indicated:

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* NM: not meaningful

** Related to the recognition of previously deferred revenue under the Roche collaboration agreement as the Company satisfies its performance obligations under the contract. For more information, please read Note 3, License and Collaboration Agreements.

Collaboration and other revenues relate to our collaboration arrangement with Roche. For 2024 and 2023, we recognized $114.0 million and $98.5 million of collaboration and other revenues, respectively. In accordance with the Roche Agreement, the parties agreed to enter into a supply agreement in order for us to supply Roche with clinical and commercial batches of ELEVIDYS (the “Supply Agreement”). Roche utilizes the supply for sales of ELEVIDYS in territories outside of the U.S where Roche has received certain approvals for ELEVIDYS. We are eligible to receive royalties on these sales. While the Supply Agreement is in the process of being negotiated, we delivered batches of commercial ELEVIDYS supply to Roche that were agreed upon on a purchase order-by-purchase order basis. For 2024 and 2023, we recognized $49.0 million and $9.2 million of contract manufacturing revenue, respectively, which is related to these Roche shipments. In addition, we recognized $17.0 million of royalty revenue from sales of ELEVIDYS by Roche in 2024, with no similar activity for 2023. For 2024, we recognized $48.0 million in collaboration revenue related to Roche’s declined option to acquire the ex-US rights to a certain external, early-stage Duchenne development program, as compared to the $89.2 million in collaboration revenue in 2023 related to the amortization of the single, combined performance obligation under the Roche Agreement, which was fully amortized as of December 31, 2023. Please refer to Note 3, License and Collaboration Agreements for further discussion of the Roche Agreement.

Cost of sales (excluding amortization of in-licensed rights)

Our cost of sales (excluding amortization of in-licensed rights) consists of inventory costs that relate to sales of our products and the related overhead costs and royalty payments primarily to BioMarin and UWA for our PMO Products and to Nationwide for ELEVIDYS. Prior to receiving regulatory approval for our products, we expensed manufacturing and material costs as research and development expenses. For the PMO Products, all previously expensed manufacturing costs had been fully consumed prior to 2023. For ELEVIDYS sold in 2024, a portion of related manufacturing costs incurred had previously been expensed as research and development expenses. For ELEVIDYS sold in 2023, the majority of 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 ELEVIDYS sold, including products sold to Roche under the Roche Agreement, would have been approximately $100.8 million and $33.9 million higher for 2024 and 2023, respectively.

The following table summarizes the components of our cost of sales (excluding amortization of in-licensed rights) for the periods indicated:

* NM: not meaningful

** See above for further details regarding product supply sold to Roche via contract manufacturing under the Roche Agreement.

The cost of sales (excluding amortization of in-licensed rights) for 2024 increased by $168.8 million, or 112%, compared with 2023. The change primarily reflects an increase in cost of sales related to ELEVIDYS due to an increase in demand following its initial FDA approval in June 2023 and subsequent expanded label approval in June 2024, as well as increases in the write-offs of certain batches of our products not meeting our quality specifications. For 2024 and 2023, we recognized $22.2 million and $1.8 million, respectively, of cost of sales related to products sold to Roche under the Roche Agreement.

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Research and development expenses

Research and development expenses consist of costs associated with research activities as well as those 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 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 table summarizes our research and development expenses, by project, for each of the periods indicated:

The following table summarizes our research and development expenses by category for each of the periods indicated:

*Beginning in 2024, we implemented an updated manufacturing absorption methodology that allocates the absorption of indirect manufacturing costs to their respective originating categories. Research and development expenses by category, specifically, manufacturing expenses, compensation and other personnel expenses, facility- and technology-related expenses and professional services, have been reclassified for 2023 for comparability. This reallocation has no impact on the total research and development expenses recognized.

Research and development expenses for 2024 decreased by $72.9 million, or 8%, compared with 2023. The decrease was primarily driven by the following:

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•
$16.8 million decrease in manufacturing expenses primarily due to the capitalization of commercial batches of ELEVIDYS manufactured upon its approval in June 2023, a decrease in clinical batches for our PPMO platform as a result of our decision to discontinue our PPMO programs during 2024, partially offset by $91.9 million of costs associated with the termination of the development, commercial manufacturing and supply agreement (the “Thermo Agreement”) related to Brammer Bio MA, LLC, an affiliate of Thermo Fisher Scientific, Inc. (“Thermo”) in August 2024 and an increase in costs associated with our LGMD gene therapy programs. Please refer to Note 22, Commitments and Contingencies for further discussion of the Thermo Agreement;

•
$2.6 million increase in compensation and other personnel expenses primarily due to changes in headcount, partially offset by an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023;

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$23.7 million decrease in clinical trial expenses primarily due to a decrease in activity for our PPMO platform and our decision to discontinue our PPMO programs in November 2024, as well as a ramp-down of the ESSENCE studies for AMONDYS 45 and VYONDYS 53;

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$3.4 million increase in facility- and technology-related expenses primarily due to our continuing expansion efforts, partially offset by an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023;

•
$8.5 million decrease in stock-based compensation expense primarily due to an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023, partially offset by the achievement of performance conditions related to certain restricted stock units with performance conditions (“PSUs”) during 2024;

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$3.9 million increase in professional services primarily due to an increase in reliance on third-party research and development contractors for clinical programs, partially offset by an increase in indirect manufacturing costs absorption offset as a result of ELEVIDYS approval in June 2023;

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$5.5 million decrease in pre-clinical expenses primarily due to a decrease in activity in our PPMO platform and decision to discontinue our PPMO programs in November 2024;

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$8.5 million decrease in research and other expenses primarily due to timing of achievement of certain up-front and milestone payments, partially offset by an increase in sponsored research with academic institutions during 2024; and

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$19.7 million increase in the offset to expense associated with a collaboration reimbursement from Roche due to reimbursable costs associated with the termination of the Thermo Agreement during 2024, with no similar activity during 2023. This was partially offset by a decrease in clinical supply costs due to timing for our SRP-9001 gene therapy programs.

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.

The following table summarizes our selling, general and administrative expenses by category for each of the periods indicated:

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Selling, general and administrative expenses for 2024 increased by $76.0 million, or 16%, compared with 2023. The increase was primarily driven by the following:

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$25.2 million increase in professional service expenses primarily related to ongoing litigation matters, our continuing expansion efforts and continuing efforts to commercialize ELEVIDYS;

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$14.2 million increase in compensation and other personnel expenses primarily due to changes in headcount;

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$10.3 million increase in stock-based compensation expense primarily related to the achievement of performance conditions related to certain PSUs during the year ended December 31, 2024 and changes in headcount;

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$6.8 million increase in facility- and technology-related expenses primarily due to our continuing expansion efforts; and

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$20.1 million increase in other expenses primarily due to the timing of charitable contribution activity.

Amortization of in-licensed rights

Amortization of in-licensed rights relates to the agreements we entered into with UWA, Nationwide, BioMarin and Parent Project Muscular Dystrophy in April 2013, December 2016, July 2017 and May 2018, respectively. Each in-licensed right is being amortized on a straight-line basis over the remaining life of the relevant patent from the date the related fee was incurred, either the regulatory approval or the first commercial sale of the applicable product. For 2024 and 2023, we recorded amortization of in-licensed rights of $2.4 million and $1.6 million, respectively.

Other income (expense), net

Other income (expense), net primarily consists of interest expense on our debt instruments, interest income on our cash, cash equivalents and investments, amortization of investment premium or accretion of investment discount, unrealized gain or loss from our investment in our strategic investments, the changes in the fair value of the derivative assets associated with the capped call options for our convertible senior notes due on November 15, 2024 (the “2024 Notes”) and the changes in the fair value of contingent consideration related to regulatory-related contingent payments meeting the definition of a derivative liability. Our cash equivalents and investments consist of money market funds, corporate bonds, government and government agency debt securities and certificates of deposit.

Other income, net for 2024 increased by approximately $9.6 million compared to 2023. The change is primarily due to the impairment of a strategic investment during 2023, with no similar activity during 2024. This change was partially offset by a decrease in interest income and accretion of investment discount, net as a result of lower interest rates and the investment mix of our investment portfolio and an increase in the fair value of derivatives, primarily related to contingent consideration.

Loss on debt extinguishment

On March 2, 2023, we entered into separate, privately negotiated exchange agreements with certain holders of the outstanding 2024 Notes, which resulted in an exchange of $313.5 million in aggregate principal value of the 2024 Notes for approximately 4.5 million shares of our common stock (the “2024 Notes Exchange”). The exchange was not pursuant to the conversion privileges included in the terms of the debt at issuance and, therefore, was accounted for as a debt extinguishment, resulting in a recognition of an extinguishment loss of $387.3 million for 2023. There was no similar activity in 2024.

Gain from sale of Priority Review Voucher

In June 2023, we entered into an agreement to sell the rare pediatric disease Priority Review Voucher (“ELEVIDYS PRV”) we received from the FDA in connection with the approval of ELEVIDYS for consideration of $102.0 million, with no commission costs. The transaction was not subject to the conditions set forth under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and closed in June 2023. The net proceeds were recorded as a gain from sale of the ELEVIDYS PRV for 2023 as it did not have a carrying value at the time of the sale. There was no similar activity in 2024.

Income tax expense

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Income tax expense for 2024 and 2023 was approximately $25.5 million and $15.9 million, respectively. Income tax expense for 2024 and 2023 relates to state, foreign and federal taxes for which available tax losses or credits were not available to offset. As of December 31, 2024, we continued to maintain a full valuation allowance against our deferred tax assets, with the exception of deferred tax assets in certain foreign jurisdictions. We continue to monitor the available evidence relative to recovery of our deferred tax assets and whether such evidence would be sufficient to conclude that it is more likely than not that such deferred tax assets may be partially or fully recoverable. If we were to remove our valuation allowance in part or full, any such adjustment could have a material impact on our effective tax rate in the applicable period and beyond. Refer to Note 18, Income Taxes for discussion of the key drivers impacting our effective tax rate.

Liquidity and Capital Resources

The following table summarizes our financial condition for each of the periods indicated:

For 2024 and 2023, our principal sources of liquidity were primarily derived from sales of our products, net proceeds from sale of the ELEVIDYS PRV, proceeds from the settlement of capped call options associated with the 2024 Notes (the “2017 Capped Calls”) and our collaboration arrangement with Roche. Our principal uses of cash are research and development expenses, manufacturing costs, selling, general and administrative expenses, investments, capital expenditures, business development transactions, settlement of long-term debt and other working capital requirements. Refer to Note 13, Indebtedness and Note 19, Leases for additional discussion of our outstanding indebtedness and material changes to our leasing obligations, respectively. The changes in our working capital primarily reflect the use of cash in operating activities, as well as an increase in inventory due to the capitalization of ELEVIDYS inventory after its approval in June 2023. While our contractual obligations, commitments and debt service requirements over the next several years are significant, we intend to continue to fund our short-term financing needs and working capital requirements from cash flows of operating activities as well as cash on hand and such sources are anticipated to be adequate to fund working capital requirements for at least twelve months from the date these consolidated financial statements were issued.

Beyond 2025, our cash requirements will depend extensively on our ability to advance our research, development and commercialization of product candidates. We may seek additional financings primarily from, but not limited to, the sale and issuance of equity and debt securities, the licensing or sale of our technologies and entering into additional government contracts and/or funded research and development agreements. Our future expenditures and long-term capital requirements may be substantial and will depend on many factors, including but not limited to the following:

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our ability to continue to generate revenues from sales of commercial products and potential future products;

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the timing and costs associated with our expansion efforts;

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the timing and costs associated with repurchases of our common stock under our $500.0 million share repurchase program, approved by our Board of Directors in November 2024 and effective for 18 months;

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the timing and costs of building out our manufacturing capabilities;

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the timing of payments related to our future inventory commitments and manufacturing obligations;

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•
the timing and costs associated with our existing lease obligations and new obligations expected to be entered into in future years;

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the timing and costs associated with our clinical trials and pre-clinical trials;

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the attainment of milestones and our obligations to make milestone payments to Arrowhead, Myonexus's selling shareholders, BioMarin, Nationwide, UWA and other institutions;

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obligations to holders of our 1.25% convertible senior notes due on September 15, 2027 (“2027 Notes”); and

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the costs of filing, prosecuting, defending and enforcing patent claims and our other intellectual property rights.

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 the results of operations. To the extent we issue additional equity securities, our existing stockholders could experience substantial dilution. We believe that existing cash and cash equivalents, along with future cash generated from operations will be sufficient to meet the capital requirements of our operations for the next 12 months and foreseeable future.

We have entered into long-term contractual arrangements from time to time for our facilities, the provision of goods and services, and issuance of debt securities, among others. Additional information regarding our obligations under debt, lease, and manufacturing arrangements is provided in Note 13, Indebtedness, Note 19, Leases, Note 22, Commitments and Contingencies and Note 23, Subsequent event, respectively, to the consolidated financial statements. The following table summarizes our total obligations under debt, lease, and manufacturing arrangements:

(1) Interest payments are included within the future debt obligations.

(2) Lease obligations only include real estate leases that had commenced prior to December 31, 2024.

(3) The leases embedded in a certain supply agreement are included in manufacturing obligations. The increase in short-term manufacturing commitments is primarily driven by ramp-up of ELEVIDYS manufacturing activities as a result of anticipated increase in demand.

For products and product candidates that are currently approved or are in various research and development stages, we may be obligated to make up to $2.3 billion of future development, regulatory, up-front royalty and sales milestone payments associated with our license and collaboration agreements. Excluded from this metric are $10.3 billion of future development, regulatory and sales milestone payments associated with our license and collaboration agreement with Arrowhead, as the transaction had not closed as of December 31, 2024. When the license and collaboration agreement with Arrowhead became effective in February 2025, we paid Arrowhead an up-front payment of $500.0 million and invested $325.0 million in Arrowhead's common stock at a premium to the valuation on the closing date. 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 of December 31, 2024, such contingencies have not been recorded in our 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 commercial milestones.

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Cash Flows

The following table summarizes our cash flow activity for each of the periods indicated:

* NM: not meaningful

Operating Activities

Cash used in operating activities, which consists of our net income (loss) adjusted for non-cash items and changes in net operating assets and liabilities, totaled $205.8 million and $501.0 million of cash in 2024 and 2023, respectively. Cash used in operating activities in 2024 was primarily driven by the net income of $235.2 million, adjusted for the following non-cash items:

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$184.3 million in stock-based compensation expense;

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$62.7 million in non-cash termination charges as a result of the Thermo Agreement termination;

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$37.7 million in depreciation and amortization expense;

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$16.2 million reduction in the carrying amount of the right of use assets;

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$7.8 million charge related to the change in the fair value of derivatives; and

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$7.1 million in other non-cash items.

These amounts were partially offset by $40.3 million in accretion of investment discount, net.

The net cash outflow from changes in our operating assets and liabilities was primarily driven by the following:

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$395.2 million increase in inventory primarily due to capitalized inventory related to ELEVIDYS;

•
$201.7 million increase in accounts receivable due to an increase in demand for ELEVIDYS following its initial FDA approval in June 2023 and subsequent expanded label approval in June 2024 and an increase in payment terms for product sales related to the PMO Products;

•
$188.6 million increase in manufacturing-related deposits and prepaids primarily due to an increase in prepaids for raw materials and batch fees with Catalent, partially offset by decreases in manufacturing-related deposits and prepaids at Thermo as a result of the termination of the Thermo Agreement during 2024; and

•
$32.2 million decrease in deferred revenue primarily related to the collaboration with Roche.

These amounts were partially offset by a $110.6 million increase in accounts payable, accrued expenses, lease liabilities and other liabilities primarily due to the timing and invoicing of payments with our CROs and CMOs.

Cash used in operating activities in 2023 was primarily driven by the net loss of $536.0 million, adjusted for the following non-cash items:

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$387.3 million in loss on debt extinguishment of the 2024 Notes;

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$182.5 million in stock-based compensation expense;

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$44.4 million in depreciation and amortization expense;

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$30.3 million in impairments associated with our strategic investments; and

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$19.7 million in other non-cash items.

These amounts were partially offset by the gain of $102.0 million recorded from the sale of the ELEVIDYS PRV and $46.2 million in accretion of investment discount, net.

The net cash outflow from changes in our operating assets and liabilities was primarily driven by the following:

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•
$185.7 million increase in accounts receivable due to the launch of ELEVIDYS and an increase in the demand of our PMO Products;

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$147.7 million increase in inventory primarily due to capitalized inventory related to ELEVIDYS;

•
$86.8 million decrease in deferred revenue primarily related to the collaboration with Roche;

•
$50.1 million decrease in accounts payable, accrued expenses, lease liabilities and other liabilities, primarily due to the $54.0 million shortfall payment to Thermo and payments to Catalent for raw materials in 2023 and the overall timing and invoicing of payments; and

•
$12.5 million increase in manufacturing-related deposits and prepaids primarily due to the timing and usage of manufacturing prepaids.

Investing Activities

Cash provided by investing activities for 2024 was $755.6 million, while cash used by investing activities for 2023 was $165.8 million. Cash provided by investing activities in 2024 consisted of $2,002.1 million from the maturity and sales of available-for-sale securities, partially offset by purchases of available-for-sale securities, property and equipment and intangible assets of $1,099.6 million, $137.0 million and $10.0 million, respectively.

Cash used in investing activities in 2023 primarily consisted of purchases of available-for-sale securities, property and equipment and intangible assets of $2,044.9 million, $76.1 million and $11.2 million, respectively, partially offset by $1,868.5 million from the maturity and sales of available-for-sale securities and $102.0 million of net proceeds related to the sale of the ELEVIDYS PRV.

Financing Activities

Cash provided by financing activities was $124.8 million in 2024, compared to $125.0 million in 2023. Cash provided by financing activities in 2024 primarily consisted of $79.5 million in proceeds from exercise of options and purchase of stock under our Employee Stock Purchase Program and $45.3 million in proceeds from the settlement of the 2017 Capped Calls.

Cash provided by financing activities in 2023 consisted of $80.6 million in partial settlement the 2017 Capped Calls and $51.2 million in proceeds from exercise of options and purchase of stock under our Employee Stock Purchase Program, partially offset by $6.9 million in third-party debt conversion costs related to the 2024 Notes Exchange.

Other Funding Commitments

We have several on-going clinical trials in various development stages. Our most significant clinical trial expenditures are to CROs. The CRO contracts are generally cancellable at our option. As of December 31, 2024, we had approximately $594.5 million in cancellable future commitments based on existing CRO contracts.

Recent Accounting Pronouncements

Please read Note 2, Summary of Significant Accounting Policies and Recent Accounting Pronouncements to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.