Form 10-Q PTC THERAPEUTICS, INC. For: Jun 30
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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As of August 2, 2022, there were
TABLE OF CONTENTS
PTC Therapeutics, Inc.
Page No. | |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 40 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk | 58 |
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58 | |
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59 | |
59 | |
60 |
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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:
| ● | our expectations with respect to the COVID-19 pandemic and related response measures and their effects on our business, operations, clinical trials, potential regulatory submissions and approvals, our collaborators, contract research organizations, suppliers and manufacturers; |
| ● | our ability to negotiate, secure and maintain adequate pricing, coverage and reimbursement terms and processes on a timely basis, or at all, with third-party payors for our products or product candidates that we commercialize or may commercialize in the future; |
| ● | expectations with respect to our gene therapy platform, including our ability to commercialize UpstazaTM (eladocagene exuparvovec), formerly known as PTC-AADC, for the treatment of Aromatic L-Amino Acid Decarboxylase, or AADC deficiency, in the European Economic Area, or EEA, any potential regulatory submissions and potential approvals, our manufacturing capabilities and the potential financial impact and benefits of our leased biologics manufacturing facility and the potential achievement of development, regulatory and sales milestones and contingent payments that we may be obligated to make; |
| ● | our ability to maintain our marketing authorization of TranslarnaTM (ataluren) for the treatment of nonsense mutation Duchenne muscular dystrophy, or nmDMD, in the EEA, which is subject to the specific obligation to conduct and submit the results of Study 041 to the European Medicines Agency, or EMA, and annual review and renewal by the European Commission following reassessment of the benefit-risk balance of the authorization by the EMA; |
| ● | our ability to utilize results from Study 041 to support a marketing approval for Translarna for the treatment of nmDMD in the United States; |
| ● | the anticipated period of market exclusivity for Emflaza® (deflazacort) for the treatment of Duchenne muscular dystrophy in the United States under the Orphan Drug Act of 1983; |
| ● | our expectations with respect to the commercial status of Evrysdi® (risdiplam) and our program directed against spinal muscular atrophy in collaboration with F. Hoffmann La Roche Ltd and Hoffmann La Roche Inc. and the Spinal Muscular Atrophy Foundation and our estimates regarding future revenues from sales-based royalty payments or the achievement of milestones in that program; |
| ● | our expectations and the potential financial impact and benefits related to our Collaboration and License Agreement with a subsidiary of Ionis Pharmaceuticals, Inc. including with respect to the timing of regulatory approval of Tegsedi® (inotersen) and WaylivraTM (volanesorsen) in countries in which we are licensed to commercialize them, the commercialization of Tegsedi and Waylivra, and our expectations with respect to royalty payments by us based on our potential achievement of certain net sales thresholds; |
| ● | the timing and scope of our commercialization of our products and product candidates; |
| ● | our ability to obtain additional and maintain existing reimbursed named patient and cohort early access programs for our products on adequate terms, or at all; |
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| ● | our estimates regarding the potential market opportunity for our products or product candidates, including the size of eligible patient populations and our ability to identify such patients; |
| ● | our estimates regarding expenses, future revenues, third-party discounts and rebates, capital requirements and needs for additional financing, including our ability to maintain the level of our expenses consistent with our internal budgets and forecasts and to secure additional funds on favorable terms or at all; |
| ● | the timing and conduct of our ongoing, planned and potential future clinical trials and studies in our splicing, gene therapy, Bio-e, metabolic and oncology programs and studies of emvododstat for COVID-19 as well as studies in our products for maintaining authorizations, label extensions and additional indications, including the timing of initiation, enrollment and completion of the trials and the period during which the results of the trials will become available; |
| ● | our ability to realize the anticipated benefits of our acquisitions or other strategic transactions, including the possibility that the expected impact of benefits from the acquisitions or strategic transactions will not be realized or will not be realized within the expected time period, significant transaction costs, the integration of operations and employees into our business, our ability to obtain marketing approval of our product candidates we acquired from the acquisitions or other strategic transactions and unknown liabilities; |
| ● | the rate and degree of market acceptance and clinical utility of any of our products or product candidates; |
| ● | the ability and willingness of patients and healthcare professionals to access our products and product candidates through alternative means if pricing and reimbursement negotiations in the applicable territory do not have a positive outcome; |
| ● | the timing of, and our ability to obtain additional marketing authorizations for our products and product candidates; |
| ● | the ability of our products and our product candidates to meet existing or future regulatory standards; |
| ● | our ability to maintain the current labeling under the marketing authorization in the EEA or expand the approved product label of Translarna for the treatment of nmDMD; |
| ● | our ability to complete Study 041, a multicenter, randomized, double-blind, 18-month, placebo-controlled clinical trial of Translarna for the treatment of nmDMD followed by an 18-month open-label extension, according to the protocol agreed with the EMA, and by the EMA’s deadline; |
| ● | the potential receipt of revenues from future sales of our products or product candidates; |
| ● | the potential impact that completion of Study 041 may have on our revenue growth; |
| ● | our sales, marketing and distribution capabilities and strategy, including the ability of our third-party manufacturers to manufacture and deliver our products and product candidates in clinically and commercially sufficient quantities and the ability of distributors to process orders in a timely manner and satisfy their other obligations to us; |
| ● | our ability to establish and maintain arrangements for the manufacture of our products and product candidates that are sufficient to meet clinical trial and commercial launch requirements; |
| ● | our ability to complete any post-marketing requirements imposed by regulatory agencies with respect to our products; |
| ● | our ability to operate and grow our manufacturing capabilities for our gene therapy platform; |
2
| ● | our expectations with respect to the potential financial impact and benefits of our leased biologics manufacturing facility and our ability to satisfy our obligations under the terms of the lease agreement for such facility; |
| ● | our ability to satisfy our obligations under the indenture governing our 3.00% convertible senior notes due August 15, 2022 and under the indenture governing our 1.50% convertible senior notes due September 15, 2026; |
| ● | our regulatory submissions, including with respect to timing and outcome of regulatory review; |
| ● | our plans to advance our earlier stage programs and pursue research and development of other product candidates, including our splicing, gene therapy, Bio-e, metabolic and oncology programs; |
| ● | whether we may pursue business development opportunities, including potential collaborations, alliances, and acquisition or licensing of assets and our ability to successfully develop or commercialize any assets to which we may gain rights pursuant to such business development opportunities; |
| ● | the potential advantages of our products and any product candidate; |
| ● | our intellectual property position; |
| ● | the impact of government laws and regulations; |
| ● | the impact of litigation that has been or may be brought against us or of litigation that we are pursuing against others; and |
| ● | our competitive position. |
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in Part II, Item 1A. Risk Factors as well as in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021 completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.
In this Quarterly Report on Form 10-Q, unless otherwise stated or the context otherwise requires, references to “PTC,” “PTC Therapeutics,” “the Company,” “we,” “us,” “our,” and similar references refer to PTC Therapeutics, Inc. and, where appropriate, its subsidiaries. The trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.
All website addresses given in this Quarterly Report on Form 10-Q are for information only and are not intended to be an active link or to incorporate any website information into this document.
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
PTC Therapeutics, Inc.
Consolidated Balance Sheets (unaudited)
In thousands (except shares)
June 30, | December 31, | ||||||
| 2022 |
| 2021 | ||||
Assets | |||||||
Current assets: |
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Cash and cash equivalents | $ | | $ | | |||
Marketable securities |
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Trade and royalty receivables, net |
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Inventory, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Fixed assets, net |
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Intangible assets, net |
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Goodwill |
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Operating lease ROU assets | | | |||||
Deposits and other assets |
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Total assets | $ | | $ | | |||
Liabilities and stockholders’ (deficit) equity |
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Current liabilities: |
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Accounts payable and accrued expenses | $ | | $ | | |||
Current portion of long-term debt |
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Operating lease liabilities- current | | | |||||
Finance lease liabilities- current | | | |||||
Liability for sale of future royalties- current | | | |||||
Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Contingent consideration payable |
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Deferred tax liability |
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Operating lease liabilities- noncurrent | | | |||||
Finance lease liabilities- noncurrent | | | |||||
Liability for sale of future royalties- noncurrent | | | |||||
Total liabilities |
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Stockholders’ (deficit) equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total stockholders’ (deficit) equity |
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Total liabilities and stockholders’ equity | $ | | $ | | |||
See accompanying unaudited notes.
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PTC Therapeutics, Inc.
Consolidated Statements of Operations (unaudited)
In thousands (except shares and per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Revenues: |
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Net product revenue | $ | | $ | | $ | | $ | | ||||
Collaboration revenue |
| — | — |
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Royalty revenue | | | | | ||||||||
Total revenues |
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Operating expenses: |
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Cost of product sales, excluding amortization of acquired intangible assets |
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Amortization of acquired intangible assets |
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Research and development |
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Selling, general and administrative |
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Change in the fair value of deferred and contingent consideration |
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Total operating expenses |
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Loss from operations |
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Interest expense, net |
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Other (expense) income, net |
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Loss before income tax expense |
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| ( |
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Income tax expense |
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Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted-average shares outstanding: | ||||||||||||
Basic and diluted (in shares) |
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Net loss per share—basic and diluted (in dollars per share) | $ | ( | $ | ( | $ | ( | $ | ( | ||||
See accompanying unaudited notes.
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PTC Therapeutics, Inc.
Consolidated Statements of Comprehensive Loss (unaudited)
In thousands
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Other comprehensive loss: |
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Unrealized loss on marketable securities, net of tax of $ |
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Foreign currency translation gain (loss), net of tax of $ |
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Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||
See accompanying unaudited notes.
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PTC Therapeutics, Inc.
Consolidated Statements of Stockholders’ (Deficit) Equity (unaudited)
In thousands (except shares)
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| Accumulated |
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| Additional |
| other |
| Total | ||||||||||||
Three months ended June 30, 2022 | Common stock | paid-in |
| comprehensive | Accumulated | stockholders’ | |||||||||||
| Shares |
| Amount |
| capital |
| (loss) income |
| deficit |
| deficit | ||||||
Balance, March 31, 2022 | |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | ( | |
Exercise of options |
| | — | | — | — | | ||||||||||
Restricted stock vesting and issuance, net |
| | — | — | — | — | — | ||||||||||
Issuance of common stock in connection with an employee stock purchase plan |
| | — | | — | — | | ||||||||||
Share-based compensation expense |
| — | — | | — | — | | ||||||||||
Net loss |
| — | — | — | — | ( | ( | ||||||||||
Comprehensive income |
| — | — | — | | — | | ||||||||||
Balance, June 30, 2022 |
| | $ | | $ | | $ | | $ | ( | $ | ( | |||||
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| Accumulated |
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| Additional |
| other |
| Total | ||||||||||||
Three months ended June 30, 2021 | Common stock | paid-in |
| comprehensive | Accumulated | stockholders’ | |||||||||||
| Shares |
| Amount |
| capital |
| loss |
| deficit |
| equity | ||||||
Balance, March 31, 2021 |
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| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
Exercise of options |
| | — | | — | — | | ||||||||||
Restricted stock vesting and issuance, net |
| | — | — | — | — | — | ||||||||||
Issuance of common stock in connection with an employee stock purchase plan | | — | | — | — | | |||||||||||
Share-based compensation expense |
| — | — | | — | — | | ||||||||||
Net loss |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Comprehensive loss |
| — |
| — |
| — |
| ( |
| — |
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Balance, June 30, 2021 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
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| Accumulated |
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| Additional |
| other |
| Total | ||||||||||||
Six months ended June 30, 2022 | Common stock | paid-in |
| comprehensive | Accumulated | stockholders’ | |||||||||||
| Shares |
| Amount |
| capital |
| (loss) income |
| deficit |
| equity (deficit) | ||||||
Balance, December 31, 2021 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Exercise of options |
| |
| — |
| |
| — |
| — |
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Restricted stock vesting and issuance, net |
| |
| — |
| — |
| — |
| — |
| — | |||||
Issuance of common stock in connection with an employee stock purchase plan |
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| — |
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| — |
| — |
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Share-based compensation expense |
| — |
| — |
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| — |
| — |
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Net loss |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Comprehensive income |
| — |
| — |
| — |
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| — |
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Balance, June 30, 2022 |
| | $ | | $ | | $ | | $ | ( | $ | ( | |||||
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| Additional |
| other |
| Total | ||||||||||||
Six months ended June 30, 2021 | Common stock | paid-in |
| comprehensive | Accumulated | stockholders’ | |||||||||||
| Shares |
| Amount |
| capital |
| (loss) income |
| deficit |
| equity | ||||||
Balance, December 31, 2020 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Exercise of options | |
| — |
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| — |
| — | | |||||||
Restricted stock vesting and issuance, net | |
| — |
| — |
| — |
| — | — | |||||||
Issuance of common stock in connection with an employee stock purchase plan |
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Share-based compensation expense |
| — |
| — |
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| — |
| — |
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Adjustment for the adoption of ASU 2020-06 | — | — | ( | — | | ( | |||||||||||
Net loss |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Comprehensive income |
| — |
| — |
| — |
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| — |
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Balance, June 30, 2021 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
See accompanying unaudited notes.
7
PTC Therapeutics, Inc.
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended June 30, | |||||||
| 2022 |
| 2021 | ||||
Cash flows from operating activities | |||||||
Net loss | $ | ( | $ | ( | |||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Non-cash operating lease expense |
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Non-cash royalty revenue related to sale of future royalties | ( | ( | |||||
Non-cash interest expense on liability related to sale of future royalties | | | |||||
Change in valuation of deferred and contingent consideration |
| ( | | ||||
Unrealized gain on ClearPoint Equity Investments |
| ( | ( | ||||
Unrealized gain on ClearPoint convertible debt security | ( | ( | |||||
Unrealized loss (gain) on marketable securities- equity investments | | ( | |||||
Loss on disposal of asset | | — | |||||
Amortization of premiums on investments, net |
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Amortization of debt issuance costs |
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Share-based compensation expense |
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Unrealized foreign currency transaction losses, net |
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Changes in operating assets and liabilities: |
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Inventory, net |
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Prepaid expenses and other current assets |
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Trade and royalty receivables, net |
| ( | ( | ||||
Deposits and other assets |
| ( | ( | ||||
Accounts payable and accrued expenses |
| ( | ( | ||||
Other liabilities |
| ( | ( | ||||
Deferred revenue |
| — | ( | ||||
Net cash used in operating activities | $ | ( | $ | ( | |||
Cash flows from investing activities |
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Purchases of fixed assets | $ | ( | $ | ( | |||
Purchases of marketable securities- available for sale | ( | ( | |||||
Purchases of marketable securities- equity investments | — | ( | |||||
Sale and redemption of marketable securities- available for sale | | | |||||
Sale and redemption of marketable securities- equity investments | | — | |||||
Acquisition of product rights and licenses | ( | ( | |||||
Purchase of equity investment in ClearPoint |
| — | ( | ||||
Net cash provided by investing activities | $ | | $ | | |||
Cash flows from financing activities |
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Proceeds from exercise of options | | | |||||
Proceeds from employee stock purchase plan | | | |||||
Payment of finance lease principal | ( | ( | |||||
Net cash provided by financing activities | $ | | $ | | |||
Effect of exchange rate changes on cash |
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Net decrease in cash and cash equivalents |
| ( |
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Cash and cash equivalents, and restricted cash beginning of period |
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Cash and cash equivalents, and restricted cash end of period | $ | | $ | | |||
Supplemental disclosure of cash information |
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Cash paid for interest | $ | | $ | | |||
Cash paid for income taxes | | | |||||
Supplemental disclosure of non-cash investing and financing activity |
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Unrealized loss on marketable securities, net of tax | $ | ( | $ | ( | |||
Right-of-use assets obtained in exchange for operating lease obligations | | | |||||
Acquisition of product rights and licenses | | | |||||
Milestone payable | | — | |||||
See accompanying unaudited notes.
8
PTC Therapeutics, Inc.
Notes to Consolidated Financial Statements (unaudited)
June 30, 2022
In thousands (except share and per share amounts unless otherwise noted)
1. The Company
PTC Therapeutics, Inc. (the “Company” or “PTC”) is a science-driven global biopharmaceutical company focused on the discovery, development and commercialization of clinically differentiated medicines that provide benefits to patients with rare disorders. PTC’s ability to innovate to identify new therapies and to globally commercialize products is the foundation that drives investment in a robust and diversified pipeline of transformative medicines. PTC’s mission is to provide access to best-in-class treatments for patients who have few or no treatment options. PTC’s strategy is to leverage its strong scientific and clinical expertise and global commercial infrastructure to bring therapies to patients. PTC believes that this allows it to maximize value for all of its stakeholders.
PTC has a portfolio pipeline that includes several commercial products and product candidates in various stages of development, including clinical, pre-clinical and research and discovery stages, focused on the development of new treatments for multiple therapeutic areas for rare diseases.
The Company has
The Company has a pipeline of gene therapy product candidates for rare monogenic diseases that affect the central nervous system (“CNS”) including Upstaza (eladocagene exuparvovec), formerly known as PTC-AADC, for the treatment of Aromatic L-Amino Acid Decarboxylase (“AADC”) deficiency (“AADC deficiency”), a rare CNS disorder arising from reductions in the enzyme AADC that results from mutations in the dopa decarboxylase gene. In July 2022, the European Commission approved Upstaza for the treatment of AADC deficiency for patients 18 months and older within the EEA. The Company is also preparing a biologics license application (“BLA”) for Upstaza for the treatment of AADC deficiency in the United States. In response to discussions with the United States Food and Drug Administration (“FDA”), the Company intends to provide additional information concerning the use of the commercial cannula for Upstaza in young patients. The Company expects to submit a BLA to the FDA in the fourth quarter of 2022.
The Company holds the rights for the commercialization of Tegsedi® (inotersen) and Waylivra® (volanesorsen) for the treatment of rare diseases in countries in Latin America and the Caribbean pursuant to the Collaboration and License Agreement (the “Tegsedi-Waylivra Agreement”), dated August 1, 2018, by and between the Company and Akcea Therapeutics, Inc. (“Akcea”), a subsidiary of Ionis Pharmaceuticals, Inc. Tegsedi has received marketing authorization in the United States, the European Union (the “EU”) and Brazil for the treatment of stage 1 or stage 2 polyneuropathy in adult patients with hereditary transthyretin amyloidosis (“hATTR amyloidosis”). The Company began to make commercial sales of Tegsedi for the treatment of hATTR amyloidosis in Brazil in the second quarter of 2022 and it continues to make Tegsedi available in certain other countries within Latin America and the Caribbean through early access programs (“EAP Programs”). In August 2021, ANVISA, the Brazilian health regulatory authority, approved Waylivra as the first treatment for familial chylomicronemia syndrome (“FCS”) in Brazil and the Company began to make commercial sales of Waylivra in Brazil in the third quarter of 2022 while continuing to make Waylivra available in certain other countries within Latin America and the Caribbean through EAP Programs. Waylivra has also received marketing authorization in the EU for the treatment of FCS. Additionally, the Company submitted an application to ANVISA in December 2021 for the approval of
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Waylivra for the treatment of familial partial lipodystrophy, and it expects a regulatory decision on approval in the second half of 2022.
The Company also has a spinal muscular atrophy (“SMA”) collaboration with F. Hoffman-La Roche Ltd and Hoffman-La Roche Inc. (referred to collectively as “Roche”) and the Spinal Muscular Atrophy Foundation (“SMA Foundation”). The SMA program has one approved product, Evrysdi® (risdiplam), which was approved by the FDA in August 2020 for the treatment of SMA in adults and children two months and older and by the European Commission in March 2021 for the treatment of 5q SMA in patients two months and older with a clinical diagnosis of SMA Type 1, Type 2 or Type 3 or with one to four SMN2 copies. Evrysdi also received marketing authorization for the treatment of SMA in Brazil in October 2020 and Japan in June 2021. In May 2022, the FDA approved a label expansion for Evrysdi to include infants under two months old with SMA. In addition to the Company’s SMA program, the Company’s splicing platform also includes PTC518, which is being developed for the treatment of Huntington’s disease (“HD”). The Company announced the results from its Phase 1 study of PTC518 in healthy volunteers in September 2021 demonstrating dose-dependent lowering of huntingtin messenger ribonucleic acid and protein levels, that PTC518 efficiently crosses the blood brain barrier at significant levels and that PTC518 was well tolerated. The Company initiated a Phase 2 study of PTC518 for the treatment of HD in the first quarter of 2022, which consists of an initial 12-week placebo-controlled phase focused on safety, pharmacology and pharmacodynamic effects followed by a nine-month placebo-controlled phase focused on PTC518 biomarker effect. The Company expects data from the initial 12-week phase of the Phase 2 study by the end of 2022.
The Company’s Bio-e platform consists of small molecule compounds that target oxidoreductase enzymes that regulate oxidative stress and inflammatory pathways central to the pathology of a number of CNS diseases. The two most advanced molecules in the Company’s Bio-e platform are vatiquinone and PTC857. The Company initiated a registration-directed Phase 2/3 placebo-controlled trial of vatiquinone in children with mitochondrial disease associated seizures in the third quarter of 2020. The Company has experienced additional delays in enrolling this trial due to the COVID-19 pandemic and anticipates results from this trial to be available in the first quarter of 2023. The Company also initiated a registration-directed Phase 3 trial of vatiquinone in children and young adults with Friedreich ataxia in the fourth quarter of 2020 and anticipates results from this trial to be available in the second quarter of 2023. In the third quarter of 2021, the Company completed a Phase 1 trial in healthy volunteers to evaluate the safety and pharmacology of PTC857. PTC857 was found to be well-tolerated with no reported serious adverse events while demonstrating predictable pharmacology. The Company initiated a Phase 2 trial of PTC857 for amyotrophic lateral sclerosis in the first quarter of 2022.
The most advanced molecule in the Company’s metabolic platform is PTC923, an oral formulation of synthetic sepiapterin, a precursor to intracellular tetrahydrobiopterin, which is a critical enzymatic cofactor involved in metabolism and synthesis of numerous metabolic products, for orphan diseases. The Company initiated a registration-directed Phase 3 trial for PTC923 for phenylketonuria (“PKU”) in the third quarter of 2021 and expects results from this trial to be available by the end of 2022.
The Company also has two oncology agents that are in clinical development, unesbulin and emvododstat. The Company completed its Phase 1 trials evaluating unesbulin in leiomyosarcoma (“LMS”) and diffuse intrinsic pontine glioma (“DIPG”) in the fourth quarter of 2021. The Company initiated a registration-directed Phase 2/3 trial of unesbulin for the treatment of LMS in the first quarter of 2022, and it expects to initiate a registration-directed Phase 2 trial of unesbulin for the treatment of DIPG in the third quarter of 2022. The Company completed its Phase 1 trial evaluating emvododstat in acute myelogenous leukemia (“AML”), in the fourth quarter of 2021. The Company expects to provide further updates regarding its emvododstat program at a later date.
In June 2020, the Company initiated a Phase 2/3 clinical trial evaluating the efficacy and safety of emvododstat in patients hospitalized with COVID-19. In February 2021, the Company announced the completion of the first stage of the Phase 2/3 trial. Given the changing nature of the COVID-19 pandemic to the outpatient treatment setting, the Company concluded enrollment in the Phase 2/3 trial early to review the data collected to date and make a decision on next steps. Based upon the Company’s initial analyses of all randomized subjects, there was a trend towards emvododstat benefit across several disease relevant endpoints including reduced hospitalizations and time to reduction of fever. Additionally, within the cohort of patients enrolled within five days of infection, emvododstat demonstrated a benefit with respect to time to respiratory improvement, duration of hospitalization, dyspnea resolution and cough relief. The Company plans to complete the remaining data analyses and will then formulate a strategy for next steps.
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In addition, the Company has a pipeline of product candidates and discovery programs that are in early clinical, pre-clinical and research and development stages focused on the development of new treatments for multiple therapeutic areas for rare diseases.
The Company’s marketing authorization for Translarna in the EEA is subject to annual review and renewal by the European Commission following reassessment by the EMA of the benefit-risk balance of the authorization, which the Company refers to as the annual EMA reassessment. The marketing authorization in the EEA was last renewed in June 2022 and is effective, unless extended, through August 5, 2023. This marketing authorization is further subject to the specific obligation to conduct and submit the results of a multi-center, randomized, double-blind, 18-month, placebo-controlled trial, followed by an 18-month open-label extension, according to an agreed protocol, in order to confirm the efficacy and safety of Translarna. The Company refers to the trial and open-label extension together as Study 041. In June 2022, the Company announced top-line results from the placebo-controlled trial of Study 041. Within the placebo-controlled trial, Translarna showed a statistically significant treatment benefit across the entire intent to treat population as assessed by the 6-minute walk test, assessing ambulation and endurance, and in lower-limb muscle function as assessed by the North Star Ambulatory Assessment, a functional scale designed for boys affected by DMD. Additionally, Translarna showed a statistically significant treatment benefit across the intent to treat population within the 10-meter run/walk and 4-stair stair climb, each assessing ambulation and burst activity, while also showing a positive trend in the 4-stair stair descend although not statistically significant. Within the primary analysis group, Translarna demonstrated a positive trend across all endpoints, however, statistical significance was not achieved. Translarna was also well tolerated. The Company expects to submit a report on the placebo-controlled trial and the open-label extension data that has been collected to date to the EMA by the end of the third quarter of 2022, as required.
Translarna is an investigational new drug in the United States. During the first quarter of 2017, the Company filed a New Drug Application (“NDA”) over protest with the FDA, for which the FDA granted a standard review. In October 2017, the Office of Drug Evaluation I of the FDA issued a complete response letter for the NDA, stating that it was unable to approve the application in its current form. In response, the Company filed a formal dispute resolution request with the Office of New Drugs of the FDA. In February 2018, the Office of New Drugs of the FDA denied PTC’s appeal of the Complete Response Letter. In its response, the Office of New Drugs recommended a possible path forward for the ataluren NDA submission based on the accelerated approval pathway. This would involve a re-submission of an NDA containing the current data on effectiveness of ataluren with new data to be generated on dystrophin production in nmDMD patients’ muscles. The Company followed the FDA’s recommendation and collected, using newer technologies via procedures and methods that the Company designed, such dystrophin data in a new study, Study 045, and announced the results of Study 045 in February 2021. Study 045 did not meet its pre-specified primary endpoint. In June 2022, the Company announced top-line results from the placebo-controlled trial of Study 041. The Company is preparing to have discussions with the FDA regarding a potential resubmission of the Translarna NDA.
As of June 30, 2022, the Company had an accumulated deficit of approximately $
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2. Summary of significant accounting policies
The Company’s complete listing of significant accounting policies is set forth in Note 2 of the notes to the Company’s audited financial statements as of December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 22, 2022 (the "2021 Form 10-K"). Selected significant accounting policies are discussed in further detail below.
Basis of presentation
The accompanying financial information as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 has been prepared by the Company, without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") have been condensed or omitted pursuant to such rules and regulations. These interim financial statements should be read in conjunction with the Company’s audited financial statements as of December 31, 2021 and notes thereto included in the 2021 Form 10-K.
In the opinion of management, the unaudited financial information as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 reflects all adjustments, which are normal recurring adjustments, necessary to present a fair statement of financial position, results of operations, stockholders’ equity, and cash flows. The results of operations for the three and six months ended June 30, 2022 and 2021 are not necessarily indicative of the results to be expected for the year ended December 31, 2022 or for any other interim period or for any other future year.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates in these consolidated financial statements have been made in connection with the calculation of net product sales, royalty revenue, certain accruals related to the Company’s research and development expenses, valuation procedures for liability for sale of future royalties, valuation procedures for convertible notes, fair value of the contingent consideration, and the provision for or benefit from income taxes. Actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known.
Restricted cash
Restricted cash included in deposits and other assets on the consolidated balance sheet contains an unconditional, irrevocable and transferable letter of credit that was entered into during the twelve-month period ended December 31, 2019 in connection with obligations under a facility lease for the Company’s leased biologics manufacturing facility in Hopewell Township, New Jersey. The amount of the letter of credit is $
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The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the same amounts shown in the statement of cash flows:
| End of |
| Beginning of | |||
| period- |
| period- | |||
| June 30, |
| December 31, | |||
| 2022 | 2021 | ||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash included in deposits and other assets |
| |
| | ||
Total Cash, cash equivalents and restricted cash per statement of cash flows | $ | | $ | | ||
Marketable securities
The Company’s marketable securities consists of both debt securities and equity investments. The Company considers its investments in debt securities with original maturities of greater than 90 days to be available for sale securities. Securities under this classification are recorded at fair value and unrealized gains and losses within accumulated other comprehensive income. The estimated fair value of the available for sale securities is determined based on quoted market prices or rates for similar instruments. In addition, the cost of debt securities in this category is adjusted for amortization of premium and accretion of discount to maturity. For available for sale debt securities in an unrealized loss position, the Company assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value. If the criteria are not met, the Company evaluates whether the decline in fair value has resulted from a credit loss or other factors. In making this assessment, management considers, among other factors, the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized costs basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. For the three and six months ended June 30, 2022 and 2021,
Marketable securities that are equity investments are measured at fair value, as it is readily available, and as such are classified as Level 1 assets. Unrealized holding gains and losses for these equity investments are components of other (expense) income, net within the consolidated statement of operations.
Inventory and cost of product sales
Inventory
Inventories are stated at the lower of cost and net realizable value with cost determined on a first-in, first-out basis by product. The Company capitalizes inventory costs associated with products following regulatory approval when future commercialization is considered probable and the future economic benefit is expected to be realized. Products which may be used in clinical development programs are included in inventory and charged to research and development expense when the product enters the research and development process and no longer can be used for commercial purposes. Inventory used for marketing efforts are charged to selling, general and administrative expense. Amounts related to clinical development programs and marketing efforts are immaterial.
The following table summarizes the components of the Company’s inventory for the periods indicated:
| June 30, 2022 |
| December 31, 2021 | |||
Raw materials | $ | | $ | | ||
Work in progress |
| |
| | ||
Finished goods |
| |
| | ||
Total inventory | $ | | $ | | ||
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The Company periodically reviews its inventories for excess amounts or obsolescence and writes down obsolete or otherwise unmarketable inventory to its estimated net realizable value. For the three and six months ended June 30, 2022, the Company recorded inventory write-downs of $
Cost of product sales
Cost of product sales consists of the cost of inventory sold, manufacturing and supply chain costs, storage costs, amortization of the acquired intangible asset, royalty payments associated with net product sales, and royalty payments to collaborative partners associated with royalty revenues and collaboration revenue related to milestones. Production costs are expensed as cost of product sales when the related products are sold or royalty revenues and collaboration revenue milestones are earned.
Revenue recognition
Net product revenue
The Company’s net product revenue primarily consists of sales of Translarna in territories outside of the U.S. for the treatment of nmDMD and sales of Emflaza in the U.S. for the treatment of DMD. The Company recognizes revenue when its performance obligations with its customers have been satisfied. The Company’s performance obligations are to provide products based on customer orders from distributors, hospitals, specialty pharmacies or retail pharmacies. The performance obligations are satisfied at a point in time when the Company’s customer obtains control of the product, which is typically upon delivery. The Company invoices its customers after the products have been delivered and invoice payments are generally due within 30 to 90 days of the invoice date. The Company determines the transaction price based on fixed consideration in its contractual agreements. Contract liabilities arise in certain circumstances when consideration is due for goods the Company has yet to provide. As the Company has identified only one distinct performance obligation, the transaction price is allocated entirely to product sales. In determining the transaction price, a significant financing component does not exist since the timing from when the Company delivers product to when the customers pay for the product is typically less than one year. Customers in certain countries pay in advance of product delivery. In those instances, payment and delivery typically occur in the same month.
The Company records product sales net of any variable consideration, which includes discounts, allowances, rebates related to Medicaid and other government pricing programs, and distribution fees. The Company uses the expected value or most likely amount method when estimating its variable consideration, unless discount or rebate terms are specified within contracts. The identified variable consideration is recorded as a reduction of revenue at the time revenues from product sales are recognized. These estimates for variable consideration are adjusted to reflect known changes in factors and may impact such estimates in the quarter those changes are known. Revenue recognized does not include amounts of variable consideration that are constrained. For the three months ended June 30, 2022 and 2021, net product sales outside of the United States were $
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In relation to customer contracts, the Company incurs costs to fulfill a contract but does not incur costs to obtain a contract. These costs to fulfill a contract do not meet the criteria for capitalization and are expensed as incurred. The Company considers any shipping and handling costs that are incurred after the customer has obtained control of the product as a cost to fulfill a promise. Shipping and handling costs associated with finished goods delivered to customers are recorded as a selling expense.
Collaboration and royalty revenue
The terms of these agreements typically include payments to the Company of one or more of the following: nonrefundable, upfront license fees; milestone payments; research funding and royalties on future product sales. In addition, the Company generates service revenue through agreements that generally provide for fees for research and development services and may include additional payments upon achievement of specified events.
At the inception of a collaboration arrangement, the Company needs to first evaluate if the arrangement meets the criteria in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 808 “Collaborative Arrangements” to then determine if ASC Topic 606 is applicable by considering whether the collaborator meets the definition of a customer. If the criteria are met, the Company assesses the promises in the arrangement to identify distinct performance obligations.
For licenses of intellectual property, the Company assesses, at contract inception, whether the intellectual property is distinct from other performance obligations identified in the arrangement. If the licensing of intellectual property is determined to be distinct, revenue is recognized for nonrefundable, upfront license fees when the license is transferred to the customer and the customer can use and benefit from the license. If the licensing of intellectual property is determined not to be distinct, then the license will be bundled with other promises in the arrangement into one distinct performance obligation. The Company needs to determine if the bundled performance obligation is satisfied over time or at a point in time. If the Company concludes that the nonrefundable, upfront license fees will be recognized over time, the Company will need to assess the appropriate method of measuring proportional performance.
For milestone payments, the Company assesses, at contract inception, whether the development or sales-based milestones are considered probable of being achieved. If it is probable that a significant revenue reversal will occur, the Company will not record revenue until the uncertainty has been resolved. Milestone payments that are contingent upon regulatory approval are not considered probable of being achieved until the applicable regulatory approvals or other external conditions are obtained as such conditions are not within the Company’s control. If it is probable that a significant revenue reversal will not occur, the Company will estimate the milestone payments using the most likely amount method. The Company will re-assess the development and sales-based milestones each reporting period to determine the probability of achievement. The Company recognizes royalties from product sales at the later of when the related sales occur or when the performance obligation to which the royalty has been allocated has been satisfied. If it is probable that a significant revenue reversal will not occur, the Company will estimate the royalty payments using the most likely amount method.
The Company recognizes revenue for reimbursements of research and development costs under collaboration agreements as the services are performed. The Company records these reimbursements as revenue and not as a reduction of research and development expenses as the Company has the risks and rewards as the principal in the research and development activities.
For the three months ended June 30, 2022 and 2021, the Company did
For the three and six months ended June 30, 2022, the Company has recognized $
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Allowance for doubtful accounts
The Company maintains an allowance for estimated losses resulting from the inability of its customers to make required payments. The Company estimates uncollectible amounts based upon current customer receivable balances, the age of customer receivable balances, the customer’s financial condition and current economic trends. The Company also assesses whether an allowance for expected credit losses may be required which includes a review of the Company’s receivables portfolio, which are pooled on a customer basis or country basis. In making its assessment of whether an allowance for credit losses is required, the Company considers its historical experience with customers, current balances, levels of delinquency, regulatory and legal environments, and other relevant current and future forecasted economic conditions. For the three and six months ended June 30, 2022 and 2021,
Liability for sale of future royalties
On July 17, 2020, the Company, RPI, and, for the limited purposes set forth in the agreement, Royalty Pharma PLC, entered into the Royalty Purchase Agreement. Pursuant to the Royalty Purchase Agreement, the Company sold to RPI
The cash consideration obtained pursuant to the Royalty Purchase Agreement is classified as debt and is recorded as “liability for sale of future royalties-current” and “liability for sale of future royalties-noncurrent” on the Company’s consolidated balance sheet based on the timing of the expected payments to be made to RPI. The fair value for the liability for sale of future royalties at the time of the transaction was based on the Company’s estimates of future royalties expected to be paid to RPI over the life of the arrangement, which was determined using forecasts from market data sources, which are considered Level 3 inputs. The liability is being amortized using the effective interest method over the life of the arrangement, in accordance with the respective guidance. The Company utilizes the prospective method to account for subsequent changes in the estimated future payments to be made to RPI. Refer to Note 9 for further details.
Indefinite-lived intangible assets
Indefinite-lived intangible assets consist of in process research and development ("IPR&D"). IPR&D acquired directly in a transaction other than a business combination is capitalized if the projects will be further developed or have an alternative future use; otherwise they are expensed. The fair values of IPR&D projects and license agreement assets acquired in business combinations are capitalized. Several methods may be used to determine the estimated fair value of the IPR&D and license agreement asset acquired in a business combination. The Company utilizes the "income method” and uses estimated future net cash flows that are derived from projected sales revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, and expected pricing and industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. These assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written off, as appropriate. Intangible assets with indefinite lives, including IPR&D, are tested for impairment if impairment indicators arise and, at a minimum, annually. However, an entity is permitted to first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying amount. Otherwise, no further impairment testing is required. The indefinite-lived intangible asset impairment test consists of a one-step analysis that compares the fair value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in
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an amount equal to that excess. The Company considers many factors in evaluating whether the value of its intangible assets with indefinite lives may not be recoverable, including, but not limited to, expected growth rates, the cost of equity and debt capital, general economic conditions, the Company’s outlook and market performance of the Company’s industry and recent and forecasted financial performance.
Goodwill
Goodwill represents the amount of consideration paid in excess of the fair value of net assets acquired as a result of the Company’s business acquisitions accounted for using the acquisition method of accounting. Goodwill is not amortized and is subject to impairment testing at a reporting unit level on an annual basis or when a triggering event occurs that may indicate the carrying value of the goodwill is impaired. The Company reassess its reporting units as part of its annual segment review. An entity is permitted to first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
Income Taxes
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act, referred to herein as the CARES Act, as a response to the economic uncertainty resulting from a strain of novel coronavirus, COVID-19. The CARES Act includes modifications for net operating loss carryovers and carrybacks, limitations of business interest expense for tax, immediate refund of alternative minimum tax (“AMT”) credit carryovers as well as a technical correction to the 2017 Tax Cuts and Jobs Act ("the 2017 Tax Act") for qualified improvement property. On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 – a $900 billion relief package to deliver the second round of economic stimulus for individuals, families, and businesses was signed into law. The bill provides relief through multiple measures and expands many of the provisions already put into place under the CARES Act. As of June 30, 2022, the Company expects that these provisions will not have a material impact. Tax provisions of the CARES Act also include the deferral of certain payroll taxes, relief for retaining employees, and other provisions. The relief for retaining employees was not material to the financial statements and the deferral of certain payroll taxes amounted to $
Additionally, the Organization for Economic Co-operation and Development (“OECD”), the European Community (“the EC”), and individual taxing jurisdictions where the Company and its affiliates do business have recently focused on issues related to the taxation of multinational corporations. The OECD has released its comprehensive plan to create an agreed set of international rules for fighting base erosion and profit shifting. In addition, the OECD, the EC and individual taxing jurisdictions are examining changes to how taxing rights should be allocated among countries considering the digital economy. As a result, the tax laws in the U.S. and other countries in which the Company and its affiliates do business could change on a prospective or retroactive basis and any such changes could materially adversely affect the Company’s business.
On December 22, 2017, the U.S. government enacted the 2017 Tax Act, which significantly revised U.S. tax law by, among other provisions, lowering the U.S. federal statutory corporate income tax rate to
Starting in 2022, TCJA amendments to IRC Section 174 will no longer permit an immediate deduction for research and development (R&D) expenditures in the tax year that such costs are incurred. Instead, these IRC Section 174 development costs must now be capitalized and amortized over either a five- or 15-year period, depending on the location of the activities performed. The new amortization period begins with the midpoint of any taxable year that IRC Section 174 costs are first incurred, regardless of whether the expenditures were made prior to or after July 1, and runs until the midpoint of year five for activities conducted in the United States or year 15 in the case of development conducted on foreign soil. As a result of this tax law change, the Company recorded a federal tax provision for the six months ended June 30, 2022, in the amount
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of $
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured at rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date. A valuation allowance is recorded when it is not more likely than not that all or a portion of the net deferred tax assets will be realized.
On August 23, 2018, the Company completed its acquisition of Agilis Biotherapeutics, Inc. (“Agilis”), pursuant to an Agreement and Plan of Merger, dated as of July 19, 2018 (the “Agilis Merger Agreement”), by and among the Company, Agility Merger Sub, Inc., a Delaware corporation and the Company’s wholly owned, indirect subsidiary, Agilis and, solely in its capacity as the representative, agent and attorney-in-fact of the equityholders of Agilis, Shareholder Representative Services LLC, (the “Agilis Merger”). The Company recorded a deferred tax liability in conjunction with the Agilis Merger of $
Leases
The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and non-lease components, which the Company accounts for as a single lease component for all leases. Operating and finance leases are classified as right of use ("ROU") assets, short term lease liabilities, and long term lease liabilities. Operating and finance lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. ROU assets are amortized and lease liabilities accrete to yield straight-line expense over the term of the lease. Lease payments included in the measurement of the lease liability are comprised of fixed payments.
Variable lease payments associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented in the Company’s consolidated statements of operations in the same line item as expense arising from fixed lease payments for operating leases.
Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company applies this policy to all underlying asset categories.
A lessee is required to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates.
The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Leasehold improvements are capitalized and depreciated over the lesser of useful life or lease term. See Note 3 Leases for additional information.
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3. Leases
The Company leases office space in South Plainfield, New Jersey for its principal office under
The Company also leases approximately
In May 2022, the Company entered into a Lease Agreement (the “Warren Lease”) with Warren CC Acquisitions, LLC (the “Warren Landlord”) relating to the lease of
The Company plans on developing the Warren Premises into office and laboratory space. The Company is entitled to an allowance of approximately $
The Company also modified its Mountain View, California lease and entered into a new operating lease for an office in Tokyo, Japan during the six months ended June 30, 2022. These leases did not have a material impact on the Company’s consolidated financial statements.
On June 19, 2020, the Company entered into a commercial manufacturing service agreement for a term of
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determined to be $
The Company also leases certain vehicles, lab equipment, and office equipment under operating leases. The Company’s leases have remaining operating lease terms ranging from
The components of operating lease expense were as follows:
| Three Months Ended |
| Three Months Ended |
| Six Months Ended |
| Six Months Ended | ||||||
June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||||
Operating Lease Cost |
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Fixed lease cost | $ | | $ | | $ | | $ | | |||||
Variable lease cost |
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Short-term lease cost |
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Total operating lease cost | $ | | $ | | $ | | $ | | |||||
Total operating lease cost is a component of operating expenses on the consolidated statements of operations.
Supplemental lease term and discount rate information related to leases was as follows as of June 30, 2022 and December 31, 2021:
| June 30, 2022 |
| December 31, 2021 |
| ||
Weighted-average remaining lease terms - operating leases (years) |
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Weighted-average discount rate - operating leases | | % | | % | ||
Weighted-average remaining lease terms - finance lease (years) |
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Weighted-average discount rate - finance lease |
| | % | | % |
Supplemental cash flow information related to leases was as follows as of June 30, 2022 and 2021:
| Six Months Ended June 30, | |||||
| 2022 |
| 2021 | |||
Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash flows from operating leases | $ | | $ | | ||
Financing cash flows from finance lease | | | ||||
Operating cash flows from finance leases | | | ||||
Right-of-use assets obtained in exchange for lease obligations: |
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Operating leases | $ | | $ | | ||
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Future minimum lease payments under non-cancelable leases as of June 30, 2022 were as follows:
| Operating Leases |
| Finance Lease | ||||
2022 (excludes the six months ended June 30, 2022) | $ | | $ | — | |||
2023 |
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2024 |
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2025 |
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2026 and thereafter |
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Total lease payments |
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Less: Imputed Interest expense |
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Total | $ | | $ | | |||
4. Fair value of financial instruments and marketable securities
The Company follows the fair value measurement rules, which provideguidance on the use of fair value in accounting and disclosure for assets and liabilities when such accounting and disclosure is called for by other accounting literature. These rules establish a fair value hierarchy for inputs to be used to measure fair value of financial assets and liabilities. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels: Level 1 (highest priority), Level 2, and Level 3 (lowest priority).
| ● | Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the balance sheet date. |
| ● | Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). |
| ● | Level 3—Inputs are unobservable and reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available. |
Cash equivalents and marketable securities are reflected in the accompanying financial statements at fair value. The carrying amount of receivables and accounts payable and accrued expenses approximates fair value due to the short-term nature of those instruments.
In May 2019, the Company purchased $
21
In January 2020, the Company purchased a $
In February 2021, the Company invested $
Fair value of marketable securities that are classified as available for sale debt securities is based upon market prices using quoted prices in active markets for identical assets quoted on the last day of the period. In establishing the estimated fair value of the remaining available for sale debt securities, the Company used the fair value as determined by its investment advisors using observable inputs other than quoted prices.
22
The following represents the fair value using the hierarchy described above for the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021:
June 30, 2022 | ||||||||||||
|
| Quoted prices |
| Significant |
| |||||||
| in active |
| other |
| Significant | |||||||
| markets for |
| observable |
| unobservable | |||||||
| identical assets |
| inputs |
| inputs | |||||||
| Total |
| (level 1) |
| (level 2) |
| (level 3) | |||||
Marketable securities - available for sale | $ | | $ | — | $ | | $ | — | ||||
Marketable securities - equity investments | $ | | $ | | $ | — | $ | — | ||||
ClearPoint Equity Investments | $ | | $ | | $ | — | $ | — | ||||
ClearPoint convertible debt security | $ | | $ | — | $ | | $ | — | ||||
Contingent consideration payable- development and regulatory milestones | $ | | $ | — | $ | — | $ | | ||||
Contingent consideration payable- net sales milestones and royalties | $ | | $ | — | $ | — | $ | | ||||
December 31, 2021 | ||||||||||||
|
| Quoted prices |
| Significant |
| |||||||
| in active |
| other |
| Significant | |||||||
| markets for |
| observable |
| unobservable | |||||||
| identical assets |
| inputs |
| inputs | |||||||
| Total |
| (level 1) |
| (level 2) |
| (level 3) | |||||
Marketable securities - available for sale | $ | | $ | — | $ | | $ | — | ||||
Marketable securities - equity investments | $ | | $ | | $ | — | $ | — | ||||
ClearPoint Equity Investments | $ | | $ | | $ | — | $ | — | ||||
ClearPoint convertible debt security | $ | | $ | — | $ | | $ | — | ||||
Contingent consideration payable- development and regulatory milestones | $ | | $ | — | $ | — | $ | | ||||
Contingent consideration payable- net sales milestones and royalties | $ | | $ | — | $ | — | $ | | ||||
The following is a summary of marketable securities accounted for as available for sale debt securities at June 30, 2022 and December 31, 2021:
June 30, 2022 | ||||||||||||
| Amortized |
| Gross Unrealized | |||||||||
| Cost |
| Gains |
| Losses |
| Fair Value | |||||
Corporate debt securities |
| | | ( | | |||||||
Government obligations | | — | ( | | ||||||||
Total | $ | | $ | — | $ | ( | $ | | ||||
December 31, 2021 | ||||||||||||
| Amortized |
| Gross Unrealized | |||||||||
| Cost |
| Gains |
| Losses |
| Fair Value | |||||
Commercial paper | $ | | | ( | $ | | ||||||
Corporate debt securities |
| | | ( |
| | ||||||
Asset-backed securities |
| | | ( |
| | ||||||
Government obligations | | | ( | | ||||||||
Total | $ | | $ | | $ | ( | $ | | ||||
23
For available for sale debt securities in an unrealized loss position, the Company assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value. For the three and six months ended June 30, 2022,
For the three and six months ended June 30, 2022, the Company had $
June 30, 2022 | ||||||||||||||||||
| Securities in an unrealized loss |
| Securities in an unrealized loss |
| ||||||||||||||
| position less than 12 months |
| position greater than or equal to 12 months | Total | ||||||||||||||
| Unrealized losses |
| Fair Value |
| Unrealized losses |
| Fair Value |
| Unrealized losses |
| Fair Value | |||||||
Corporate debt securities | ( | | ( | | ( | | ||||||||||||
Government obligations | ( | | — | — | ( | | ||||||||||||
Total | $ | ( | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
The unrealized losses and fair values of available for sale debt securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of December 31, 2021 are as follows:
December 31, 2021 | ||||||||||||||||||
| Securities in an unrealized loss |
| Securities in an unrealized loss |
| ||||||||||||||
| position less than 12 months |
| position greater than or equal to 12 months | Total | ||||||||||||||
| Unrealized losses |
| Fair Value |
| Unrealized losses |
| Fair Value |
| Unrealized losses |
| Fair Value | |||||||
Commercial paper | $ | ( | | — | — | ( | | |||||||||||
Corporate debt securities | ( | | ( | | ( | | ||||||||||||
Asset-backed securities |
| ( | | — | — |
| ( | | ||||||||||
Government obligations | ( | | — | — | ( | | ||||||||||||
Total | $ | ( | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
Available for sale debt securities at June 30, 2022 and December 31, 2021 mature as follows:
June 30, 2022 | ||||||
| Less Than |
| More Than | |||
| 12 Months |
| 12 Months | |||
Corporate debt securities |
| |
| | ||
Government obligations | — | | ||||
Total | $ | | $ | | ||
24
December 31, 2021 | ||||||
| Less Than |
| More Than | |||
| 12 Months |
| 12 Months | |||
Commercial paper | $ | | $ | — | ||
Corporate debt securities |
| |
| | ||
Asset-backed securities |
| |
| | ||
Government obligations | | | ||||
Total | $ | | $ | | ||
The Company classifies all of its marketable securities as current as they are all either available for sale debt securities or equity investments and are available for current operations.
Convertible senior notes
In August 2015, the Company issued $
Level 3 valuation
The contingent consideration payable is fair valued each reporting period with the change in fair value recorded as a gain or loss within the change in the fair value of deferred and contingent consideration on the consolidated statements of operations. The fair value of the development and regulatory milestones is estimated utilizing a probability adjusted, discounted cash flow approach. The discount rates are estimated utilizing Corporate B rated bonds maturing in the years of expected payments based on the Company’s estimated development timelines for the acquired product candidate. At June 30, 2022, the weighted average discount rate for the development and regulatory milestones was
The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuations for the contingent consideration payable for the periods ended June 30, 2022 and June 30, 2021:
Level 3 liabilities | ||||||
Contingent consideration payable- | Contingent consideration payable- | |||||
development and regulatory | net sales milestones and royalties | |||||
| milestones |
| ||||
Beginning balance as of December 31, 2021 | $ | | $ | | ||
Additions |
|
| ||||
Change in fair value |
| ( |
| ( | ||
Reclass to accounts payable and accrued expenses | ( | |||||
Payments | ||||||
Ending balance as of June 30, 2022 | $ | | $ | | ||
25
Level 3 liabilities | ||||||
Contingent consideration payable- | Contingent consideration payable- | |||||
development and regulatory | net sales milestones and royalties | |||||
| milestones |
| ||||
Beginning balance as of December 31, 2020 | $ | | $ | | ||
Additions |
|
| ||||
Change in fair value |
| |
| | ||
Payments | ||||||
Ending balance as of June 30, 2021 | $ | | $ | | ||
The following significant unobservable inputs were used in the valuation of the contingent consideration payable for the periods ended June 30, 2022 and December 31, 2021:
June 30, 2022 | ||||||||
| Fair Value |
| Valuation Technique |
| Unobservable Input |
| Range | |
Contingent consideration payable- | $ |
| Probability-adjusted discounted cash flow |
| Potential development and regulatory milestones | $ | ||
Contingent considerable payable- net sales | $ |
| Option-pricing model with Monte Carlo simulation |
| Potential net sales milestones | $ | ||
December 31, 2021 | ||||||||
| Fair Value |
| Valuation Technique |
| Unobservable Input |
| Range | |
Contingent consideration payable- | $ |
| Probability-adjusted discounted cash flow |
| Potential development and regulatory milestones | $ | ||
Contingent considerable payable- net sales | $ |
| Option-pricing model with Monte Carlo simulation |
| Potential net sales milestones | $ | ||
The contingent consideration payables are classified Level 3 liabilities as their valuation requires substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for the various inputs to the valuation approaches, including but not limited to, assumptions involving probability adjusted sales estimates for the gene therapy platform and estimated discount rates, the estimated fair value could be significantly higher or lower than the fair value determined.
5. Accounts payable and accrued expenses
Accounts payable and accrued expenses at June 30, 2022 and December 31, 2021 consist of the following:
June 30, | December 31, | ||||||
| 2022 |
| 2021 | ||||
Employee compensation, benefits, and related accruals | $ | | $ | | |||
Income tax payable | | | |||||
Consulting and contracted research |
| |
| | |||
Professional fees |
| |
| | |||
Sales allowance |
| |
| | |||
Sales rebates |
| |
| | |||
Royalties | | | |||||
Accounts payable |
| |
| | |||
26
Milestone payable | | — | |||||
Other |
| |
| | |||
Total | $ | | $ | |
6. Capitalization
In August 2019, the Company entered into an At the Market Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald and RBC Capital Markets, LLC (together, the “Sales Agents”), pursuant to which, the Company may offer and sell shares of its common stock, having an aggregate offering price of up to $
7. Net loss per share
Basic and diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding. Potentially dilutive securities were excluded from the diluted calculation because their effect would be anti-dilutive.
The following tables set forth the computation of basic and diluted net loss per share:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| |||||||
Numerator | |||||||||||||||
Net loss | $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
| |||
Denominator | |||||||||||||||
Denominator for basic and diluted net loss per share |
| |
|
| |
|
| |
|
| |
| |||
Net loss per share: | |||||||||||||||
Basic and diluted | $ | ( | * | $ | ( | * | $ | ( | * | $ | ( | * | |||
* In the three and six months ended June 30, 2022 and 2021, the Company experienced a net loss and therefore did not report any dilutive share impact.
The following table shows historical dilutive common share equivalents outstanding, which are not included in the above historical calculation, as the effect of their inclusion is anti-dilutive during each period.
As of June 30, | |||||
| 2022 |
| 2021 |
| |
Stock Options | | | |||
Unvested restricted stock awards and units |
| |
| |
|
Total |
| |
| |
|
8. Stock award plan
In May 2013, the Company’s Board of Directors and stockholders approved the 2013 Long-Term Incentive Plan, which became effective upon the closing of the Company’s initial public offering. On June 8, 2022 (the “Restatement Effective Date”), the Company’s stockholders approved the Amended and Restated 2013 Long-Term Incentive Plan (the “Amended 2013 LTIP”). The Amended 2013 LTIP provides for the grant of incentive stock options, nonstatutory stock options, restricted stock units and other stock-based awards. The number of shares of common stock reserved for issuance under the Amended 2013 LTIP is the sum of (A) the number of shares of the Company’s common stock (up to
27
Incentive Plan immediately prior to the Restatement Effective Date and (3) the number of shares subject to awards granted under the 2013 Long-Term Incentive Plan prior to the Restatement Effective Date that are outstanding as of the Restatement Effective Date, plus (B) from and after the Restatement Effective Date, an additional
There are
In January 2020, the Company’s Board of Directors approved the 2020 Inducement Stock Incentive Plan. The 2020 Inducement Stock Incentive Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards and other stock-based awards for up to, at the time, an aggregate of
The Board of Directors has the authority to select the individuals to whom options are granted and determine the terms of each option, including (i) the number of shares of common stock subject to the option; (ii) the date on which the option becomes exercisable; (iii) the option exercise price, which, in the case of incentive stock options, must be at least
From January 1, 2022 through June 30, 2022, the Company issued a total of
A summary of stock option activity is as follows:
|
|
| Weighted- |
|
| ||||||
Weighted- | average | Aggregate | |||||||||
average | remaining | intrinsic | |||||||||
Number of | exercise | contractual | value(in | ||||||||
options | price | term | thousands) | ||||||||
| |||||||||||
Outstanding at December 31, 2021 |
| | $ | |
|
|
|
| |||
Granted |
| | |
|
|
|
| ||||
Exercised |
| ( | |
|
|
|
| ||||
Forfeited/Cancelled |
| ( | |
|
|
|
| ||||
Outstanding at June 30, 2022 |
| | $ | |
| years | $ | | |||
Vested or Expected to vest at June 30, 2022 |
| | $ | |
| years | $ | | |||
Exercisable at June 30, 2022 |
| | $ | |
| years | $ | | |||
The fair value of grants made in the six months ended June 30, 2022 was contemporaneously estimated on the date of grant using the following assumptions:
| Six months ended | |
| June 30, 2022 | |
Risk-free interest rate |
| |
Expected volatility |
| |
Expected term |
|
28
The Company assumed
The expected term of options was estimated based on the Company’s historical exercise data and the expected volatility of options was estimated based on the Company’s historical stock volatility. The risk-free rate of the options was based on U.S. Government Securities Treasury Constant Maturities yields at the date of grant for a term similar to the expected term of the option.
Restricted Stock Awards and Restricted Stock Units—Restricted stock awards and restricted stock units are granted subject to certain restrictions, including in some cases service or time conditions (restricted stock). The grant-date fair value of restricted stock awards and restricted stock units, which have been determined based upon the market value of the Company’s shares on the grant date, are expensed over the vesting period. From January 1, 2022, through June 30, 2022, the Company issued a total of
The following table summarizes information on the Company’s restricted stock awards and units:
Restricted Stock Awards and Units | |||||
Weighted | |||||
Average | |||||
Grant | |||||
Number of | Date | ||||
| Shares |
| Fair Value | ||
Unvested at December 31, 2021 | | $ | | ||
Granted |
| | | ||
Vested |
| ( | | ||
Forfeited |
| ( | | ||
Unvested at June 30, 2022 |
| | $ | | |
Employee Stock Purchase Plan—In June 2016, the Company established an Employee Stock Purchase Plan (as amended, “ESPP” or the "Plan”), for certain eligible employees. The Plan is administered by the Company’s Board of Directors or a committee appointed by the Company’s Board of Directors. In June 2021, the Plan was amended to increase the total number of shares available for purchase under the Plan from
The Company recorded share-based compensation expense in the statement of operations related to incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock units and the ESPP as follows:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||
Research and development | $ | | $ | | $ | | $ | | |||||
Selling, general and administrative |
| |
| |
| |
| | |||||
Total | $ | | $ | | $ | | $ | | |||||
As of June 30, 2022, there was approximately $
29
for new hires. This cost is expected to be recognized as share-based compensation expense over the weighted average remaining service period of approximately
9. Debt
Liability for sale of future royalties
In July 2020, the Company entered into the Royalty Purchase Agreement. As RPI’s interest is explicitly limited, the $
The following table shows the activity within the “liability for sale of future royalties- current” and “liability for sale of future royalties- noncurrent” accounts for the six months ended June 30, 2022:
| Six Months Ended June 30, | |||
Liability for sale of future royalties- (current and noncurrent) | 2022 | |||
Beginning balance as of December 31, 2021 | $ | | ||
Less: Non-cash royalty revenue payable to RPI | ( | |||
Plus: Non-cash interest expense recognized | | |||
Ending balance | $ | | ||
Effective interest rate as of June 30, 2022 |
| % | ||
Non-cash interest expense is recorded in the statement of operations within “Interest expense, net”.
2026 Convertible Notes
In September 2019, the Company issued, at par value, $
The 2026 Convertible Notes are governed by an indenture (the "2026 Convertible Notes Indenture") with U.S Bank National Association as trustee (the "2026 Convertible Notes Trustee").
Holders of the 2026 Convertible Notes may convert their 2026 Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding March 15, 2026 only under the following circumstances:
| ● | during any calendar quarter commencing on or after December 31, 2019 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least |
30
| ● | during the business day period after any consecutive trading day period (the “measurement period”) in which the trading price (as defined in the 2026 Convertible Notes Indenture) per $1,000 principal amount of 2026 Convertible Notes for each trading day of the measurement period was less than |
| ● | during any period after the Company has issued notice of redemption until the close of business on the scheduled trading day immediately preceding the relevant redemption date; or |
| ● | upon the occurrence of specified corporate events. |
On or after March 15, 2026, until the close of business on the business day immediately preceding the maturity date, holders may convert their 2026 Convertible Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or any combination thereof at the Company’s election.
The conversion rate for the 2026 Convertible Notes was initially, and remains,
The Company is not permitted to redeem the 2026 Convertible Notes prior to September 20, 2023. The Company may redeem for cash all or any portion of the 2026 Convertible Notes, at its option, if the last reported sale price of its common stock has been at least
If the Company undergoes a “fundamental change” (as defined in the 2026 Convertible Notes Indenture), subject to certain conditions, holders of the 2026 Convertible Notes may require the Company to repurchase for cash all or part of their 2026 Convertible Notes at a repurchase price equal to
The 2026 Convertible Notes represent senior unsecured obligations and will rank senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the notes, equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated, effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) incurred by the Company’s subsidiaries. The 2026 Convertible Notes Indenture contains customary events of default with respect to the 2026 Convertible Notes, including that upon certain events of default (including the Company’s failure to make any payment of principal or interest on the 2026 Convertible Notes when due and payable) occurring and continuing, the 2026 Convertible Notes Trustee by notice to the Company, or the holders of at least
Prior to the adoption of ASU 2020-06, the Company accounted for the 2026 Convertible Notes as a liability and equity component where the carrying value of the liability component was valued based on a similar instrument. In accounting for the issuance of the 2026 Convertible Notes, the Company separated the 2026 Convertible Notes into liability and equity
31
components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that did not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2026 Convertible Notes as a whole. The excess of the principal amount of the liability component over its carrying amount, referred to as the debt discount, was amortized to interest expense over the
In accounting for the transaction costs related to the issuance of the 2026 Convertible Notes, the Company allocated the total costs incurred to the liability and equity components of the 2026 Convertible Notes based on their relative values. Transaction costs attributable to the liability component were amortized to interest expense over the
Effective January 1, 2021 the Company adopted ASU 2020-06. After adoption, the Company now accounts for the 2026 Convertible Notes as a single liability measured at amortized cost. As the equity component is no longer required to be split into a separate component, the Company recorded an adjustment for the initial $
The 2026 Convertible Notes consist of the following:
| |||||||
Liability component | June 30, 2022 | December 31, 2021 | |||||
Principal | $ | | $ | | |||
Less: Debt issuance costs |
| ( |
| ( | |||
Net carrying amount | $ | | $ | | |||
As of June 30, 2022, the remaining contractual life of the 2026 Convertible Notes is approximately
The following table sets forth total interest expense recognized related to the 2026 Convertible Notes:
|
| ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2022 | 2021 |
| 2022 | 2021 | |||||||||
Contractual interest expense | $ | | $ | | $ | | $ | | |||||
Amortization of debt issuance costs |
| | | | | ||||||||
Total | $ | | $ | | $ | | $ | | |||||
Effective interest rate of the liability component |
| | % | | % | | % | | % | ||||
In April 2022, under the terms of the 2026 Convertible Notes Indenture, the Company paid additional interest on the 2026 Convertible Notes at a rate equal to
32
2022 Convertible Notes
In August 2015, the Company issued, at par value, $
The 2022 Convertible Notes are governed by an indenture (the "2022 Convertible Notes Indenture") with U.S Bank National Association as trustee (the "2022 Convertible Notes Trustee").
As of February 15, 2022, until the close of business on the business day immediately preceding the maturity date, holders may convert their 2022 Convertible Notes at any time. Upon conversion, the Company will pay and deliver a combination of cash and shares of the Company’s common stock.
The conversion rate for the 2022 Convertible Notes was initially, and remains,
The Company was not permitted to redeem the 2022 Convertible Notes prior to August 20, 2018. As of August 20, 2018, the Company may redeem for cash all or any portion of the 2022 Convertible Notes, at its option, if the last reported sale price of its common stock has been at least
If the Company undergoes a “fundamental change” (as defined in the 2022 Convertible Notes Indenture), subject to certain conditions, holders of the 2022 Convertible Notes may require the Company to repurchase for cash all or part of their 2022 Convertible Notes at a repurchase price equal to
The 2022 Convertible Notes represent senior unsecured obligations and will rank senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the notes, equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated, effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) incurred by the Company’s subsidiaries. The 2022 Convertible Notes Indenture contains customary events of default with respect to the 2022 Convertible Notes, including that upon certain events of default (including the Company’s failure to make any payment of principal or interest on the 2022 Convertible Notes when due and payable) occurring and continuing, the 2022 Convertible Notes Trustee by notice to the Company, or the holders of at least
33
Prior to the adoption of ASU 2020-06, the Company accounted for the 2022 Convertible Notes as a liability and equity component where the carrying value of the liability component was valued based on a similar instrument. In accounting for the issuance of the 2022 Convertible Notes, the Company separated the 2022 Convertible Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that did not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2022 Convertible Notes as a whole. The excess of the principal amount of the liability component over its carrying amount, referred to as the debt discount, was amortized to interest expense over the
In accounting for the transaction costs related to the issuance of the 2022 Convertible Notes, the Company allocated the total costs incurred to the liability and equity components of the 2022 Convertible Notes based on their relative values. Transaction costs attributable to the liability component were amortized to interest expense over the
Effective January 1, 2021 the Company adopted ASU 2020-06. After adoption, the Company now accounts for the 2022 Convertible Notes as a single liability measured at amortized cost. As the equity component is no longer required to be split into a separate component, the Company recorded an adjustment for the initial $
The 2022 Convertible Notes consist of the following:
Liability component |
| June 30, 2022 |
| December 31, 2021 | |||
Principal | $ | | $ | | |||
Less: Debt issuance costs |
| ( |
| ( | |||
Net carrying amount | $ | | $ | | |||
As of June 30, 2022, the remaining contractual life of the 2022 Convertible Notes is approximately
The following table sets forth total interest expense recognized related to the 2022 Convertible Notes:
|
| |||||||||||||
Three Months Ended June 30, |
| Six Months Ended June 30, |
| |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||||
Contractual interest expense | $ | | $ | | $ | | $ | | ||||||
Amortization of debt issuance costs |
| |
| |
| |
| | ||||||
Total | $ | | $ | | $ | | $ | | ||||||
Effective interest rate of the liability component |
| | % |
| | % |
| | % |
| | % | ||
10. Commitments and contingencies
Under various agreements, the Company will be required to pay royalties and milestone payments upon the successful development and commercialization of products. The Company has entered into funding agreements with The Wellcome Trust Limited ("Wellcome Trust") for the research and development of small molecule compounds in connection with the
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Company’s oncology and antibacterial programs. As the Company has discontinued development under its antibacterial program, it no longer expects that milestone and royalty payments from the Company to Wellcome Trust will apply under that agreement, resulting in a change to the total amount of development and regulatory milestone payments the Company may become obligated to pay for this program. Under the oncology program funding agreement, to the extent that the Company develops and commercializes program intellectual property on a for-profit basis itself or in collaboration with a partner (provided the Company retains overall control of worldwide commercialization), the Company may become obligated to pay to Wellcome Trust development and regulatory milestone payments and single-digit royalties on sales of any research program product. The Company’s obligation to pay such royalties would continue on a country-by-country basis until the longer of the expiration of the last patent in the program intellectual property in such country covering the research program product and the expiration of market exclusivity of such product in such country. The Company made the first development milestone payment of $
The Company has also entered into a collaboration agreement with the SMA Foundation. The Company is obligated to pay the SMA Foundation single-digit royalties on worldwide net product sales of any collaboration product that is successfully developed and subsequently commercialized or, with respect to collaboration products the Company outlicenses, including Evrysdi, a specified percentage of certain payments the Company receives from its licensee. As of the six months ended June 30, 2022, the SMA Foundation earned $
Pursuant to the asset purchase agreement ("Asset Purchase Agreement") between the Company and Marathon Pharmaceuticals, LLC (now known as Complete Pharma Holdings, LLC) (“Marathon”), Marathon is entitled to receive contingent payments from the Company based on annual net sales of Emflaza up to a specified aggregate maximum amount over the expected commercial life of the asset. In addition, Marathon received a $
Pursuant to the Agilis Merger Agreement, Agilis equityholders were previously entitled to receive contingent consideration payments from the Company based on (i) the achievement of certain development milestones up to an aggregate maximum amount of $
Pursuant to the terms of a Rights Exchange Agreement, by and among the Company, the Rightholders set forth therein, and, for the limited purposes set forth therein, Shareholder Representatives Services LLC, dated as of April 29, 2020 (the “Rights Exchange Agreement”), the former equityholders of Agilis (the “Participating Rightholders”) canceled and forfeited their rights under the Agilis Merger Agreement to receive (i) $
The Rights Exchange Agreement has no effect on the Agilis Merger Agreement other than to provide for the cancellation and forfeiture of the Participating Rightholders’ rights to receive $
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rights were not canceled and forfeited pursuant to the Rights Exchange Agreement), up to a maximum aggregate amount of $
Subject to the terms and conditions of the BioElectron Asset Acquisition Agreement, BioElectron may become entitled to receive contingent milestone payments of up to $
Subject to the terms and conditions of the Agreement and Plan of Merger, dated as of May 5, 2020 (the “Censa Merger Agreement”) by and among the Company, Hydro Merger Sub, Inc., our wholly owned, indirect subsidiary, and, solely in its capacity as the representative, agent and attorney-in-fact of the securityholders of Censa, Shareholder Representative Services LLC (such merger pursuant thereto, the “Censa Merger”), former Censa securityholders may become entitled to receive contingent payments from the Company based on (i) the achievement of certain development and regulatory milestones up to an aggregate maximum amount of $
The Company also has the Tegsedi-Waylivra Agreement for the commercialization of Tegsedi and Waylivra, and products containing those compounds in countries in Latin America and the Caribbean. Pursuant to the Tegsedi-Waylivra Agreement, the Company paid Akcea an upfront licensing fee, which included an initial payment of $
The Company has employment agreements with certain employees which require the funding of a specific level of payments, if certain events, such as a change in control or termination without cause, occur. Additionally, the Company has royalty payments associated with Translarna, Emflaza, and Upstaza product net sales, payable quarterly or annually in accordance with the terms of the related agreements.
From time to time in the ordinary course of its business, the Company is subject to claims, legal proceedings, and disputes. The Company is not currently aware of any material legal proceedings against it.
11. Revenue recognition
Net product sales
The Company views its operations and manages its business in
During the three months ended June 30, 2022 and 2021, net product sales in the United States were $
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$
During the six months ended June 30, 2022 and 2021, net product sales in the United States were $
As of June 30, 2022 and December 31, 2021, the Company did
Remaining performance obligations
Remaining performance obligations represent the transaction price for goods the Company has yet to provide. As of June 30, 2022 and December 31, 2021 the Company does
Collaboration and Royalty revenue
In November 2011, the Company and the SMA Foundation entered into the SMA License Agreement with Roche. Under the terms of the SMA License Agreement, Roche acquired an exclusive worldwide license to the Company’s SMA program.
Under the SMA License Agreement, the Company is eligible to receive additional payments from Roche if specified events are achieved with respect to each licensed product, including up to $
The SMA program currently has one approved product, Evrysdi, which was approved in August 2020 by the FDA for the treatment of SMA in adults and children two months and older. As of June 30, 2022, the Company does
For the three months ended June 30, 2022 and 2021, the Company did
In addition to research and development and sales milestones, the Company is eligible to receive up to double-digit royalties on worldwide annual net sales of a commercial product under the SMA License Agreement. For the three and six months ended June 30, 2022, the Company has recognized $
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12. Intangible assets and goodwill
Definite-lived intangibles
On April 20, 2017, the Company completed its previously announced acquisition of all rights to Emflaza pursuant to the Asset Purchase Agreement, dated March 15, 2017, and amended on April 20, 2017, by and between the Company and Marathon. The assets acquired by the Company in the transaction include intellectual property rights related to Emflaza, inventories of Emflaza, and certain contractual rights related to Emflaza. In accordance with ASU 2017-01, the Company determined that substantially all of the fair value is concentrated in the Emflaza rights intangible asset and as such accounted for the transaction as an asset acquisition under ASC 805-50 and recorded an intangible asset of $
Marathon is entitled to receive contingent payments from the Company based on annual net sales of Emflaza beginning in 2018, up to a specified aggregate maximum amount over the expected commercial life of the asset. In accordance with the guidance for an asset acquisition, the Company records the milestone payment when it becomes payable to Marathon and increases the cost basis for the Emflaza rights intangible asset. Marathon received a $
Pursuant to the Tegsedi-Waylivra Agreement, in May 2019 the Company made a $
Akcea is also entitled to receive royalty payments subject to certain terms set forth in the Tegsedi-Waylivra Agreement related to sales of Waylivra and Tegsedi. In accordance with the guidance for an asset acquisition, the Company will record royalty payments when they become payable to Akcea and increase the cost basis for the Waylivra and Tegsedi intangible assets, respectively. For the three and six months ended June 30, 2022, a royalty payment of $
For the three months ended June 30, 2022 and 2021, the Company recognized amortization expense of $
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respectively, related to the Emflaza rights, Waylivra, and Tegsedi intangible assets. The estimated future amortization of the Emflaza rights, Waylivra, and Tegsedi intangible assets is expected to be as follows:
| As of June 30, 2022 | ||
2022 | $ | | |
2023 |
| | |
2024 |
| | |
2025 |
| | |
2026 and thereafter |
| | |
Total | $ | | |
The weighted average remaining amortization period of the definite-lived intangibles as of June 30, 2022 is
Indefinite-lived intangibles
In connection with the acquisition of the Company’s gene therapy platform from Agilis, the Company acquired rights to Upstaza, for the treatment of AADC deficiency. AADC deficiency is a rare CNS disorder arising from reductions in the enzyme AADC that result from mutations in the dopa decarboxylase gene. The gene therapy platform also includes an asset targeting Friedreich ataxia, a rare and life-shortening neurodegenerative disease caused by a single defect in the FXN gene which causes reduced production of the frataxin protein. Additionally, the gene therapy platform includes two other programs targeting CNS disorders, including Angelman syndrome, a rare, genetic, neurological disorder characterized by severe developmental delays.
In accordance with the acquisition method of accounting, the Company allocated the acquisition cost for the Agilis Merger to the underlying assets acquired and liabilities assumed, based upon the estimated fair values of those assets and liabilities at the date of acquisition. The Company classified the fair value of the acquired IPR&D as indefinite lived intangible assets until the successful completion or abandonment of the associated research and development efforts. The value allocated to the indefinite lived intangible assets was $
Goodwill
As a result of the Agilis Merger on August 23, 2018, the Company recorded $
13. Subsequent events
In July 2022, the European Commission approved Upstaza for the treatment of AADC deficiency for patients 18 months and older within the EEA. As a result of such approval, the Company is obligated to pay the former equityholders of Agilis $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis is meant to provide material information relevant to an assessment of the financial condition and results of operations of our company, including an evaluation of the amounts and certainty of cash flows from operations and from outside resources, so as to allow investors to better view our company from management’s perspective. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the notes to those financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2021 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2022, or our 2021 Annual Report. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth in Part II, Item 1A. (Risk Factors) of this Quarterly Report on Form 10-Q and Part I, Item 1A. (Risk Factors) of our 2021 Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.
Our Company
We are a science-driven global biopharmaceutical company focused on the discovery, development and commercialization of clinically differentiated medicines that provide benefits to patients with rare disorders. Our ability to innovate to identify new therapies and to globally commercialize products is the foundation that drives investment in a robust and diversified pipeline of transformative medicines. Our mission is to provide access to best-in-class treatments for patients who have few or no treatment options. Our strategy is to leverage our strong scientific and clinical expertise and global commercial infrastructure to bring therapies to patients. We believe that this allows us to maximize value for all of our stakeholders.
We have a portfolio pipeline that includes several commercial products and product candidates in various stages of development, including clinical, pre-clinical and research and discovery stages, focused on the development of new treatments for multiple therapeutic areas for rare diseases.
Corporate Updates
COVID-19 Impact
The global pandemic caused by a strain of novel coronavirus, COVID-19, has impacted and is continuing to impact the timing of certain of our clinical trials and regulatory submissions as well as other aspects of our business operations. In addition to our previous disclosures regarding the impact of the COVID-19 pandemic, such as those set forth in our Annual Report on Form 10-K for the year ended December 31, 2021, the following expectations have been revised as a result of the impact or expected impact of the COVID-19 pandemic:
| ● | We have experienced additional delays in enrolling patients for our registration-directed Phase 2/3 placebo-controlled trial of vatiquinone in children with mitochondrial disease associated seizures as some patients have been unable or hesitant to travel to clinical sites due to the COVID-19 pandemic. We have also experienced delays in opening certain clinical trial sites. We now anticipate results from this trial to be available in the first quarter of 2023. |
| ● | As of the date of this Report on Form 10-Q, except as otherwise previously disclosed with respect to Translarna product revenue in Brazil, our ability to generate revenue has not been significantly affected by the COVID-19 pandemic. However, due to travel restrictions, social distancing and the continued global uncertainty resulting from the COVID-19 pandemic, we may have difficulty identifying and accessing new patients, supporting existing patients and meeting with regulatory authorities or other governmental entities, which may negatively affect our future revenue. We continue to support our existing patient base and remotely connect with them, as necessary. We have not encountered any material issues in supplying those patients. |
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| ● | As previously disclosed, in response to the global uncertainty caused by the COVID-19 pandemic, we are continuing to prioritize our expenses where we deem appropriate and strategically positioning our capital allocation. |
The COVID-19 pandemic and responsive measures thereto may result in further negative impacts, including additional delays in our clinical and regulatory activities and further fluctuations in our revenue. We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business and it has the potential to materially adversely affect our business, financial condition, results of operations, and prospects. For additional information, see “Item 1A. Risk Factors - We face risks related to health epidemics and other widespread outbreaks of contagious disease, which are, and may continue to, delay our ability to complete our ongoing clinical trials and initiate future clinical trials, disrupt regulatory activities and have other adverse effects on our business and operations, including the novel coronavirus (COVID-19) pandemic, which has disrupted, and may continue to disrupt, our operations and may significantly impact our operating results. In addition, the COVID-19 pandemic has caused substantial disruption in the financial markets and economies, which could result in adverse effects on our business and operations.” in our Annual Report on Form 10-K for the year ended December 31, 2021.
UpstazaTM (eladocagene exuparvovec) Approved in European Economic Area
In July 2022, the European Commission approved Upstaza, formerly known as PTC-AADC, for the treatment of Aromatic L-Amino Decarboxylase, or AADC, deficiency, a rare central nervous system, or CNS, disorder arising from reductions in the enzyme AADC that results from mutations in the dopa decarboxylase gene, for patients 18 months and older within the European Economic Area, or EEA. Upstaza is the first commercially approved disease-modifying treatment for AADC deficiency and the first marketed gene therapy directly infused into the brain.
Global Commercial Footprint
Global DMD Franchise
We have two products, Translarna™ (ataluren) and Emflaza® (deflazacort), for the treatment of Duchenne muscular dystrophy, or DMD, a rare, life threatening disorder. Translarna has marketing authorization in the EEA for the treatment of nonsense mutation Duchenne muscular dystrophy, or nmDMD, in ambulatory patients aged two years and older and in Russia for the treatment of nmDMD in patients aged two years and older. In July 2020, the European Commission approved the removal of the statement “efficacy has not been demonstrated in non-ambulatory patients” from the indication statement for Translarna. Translarna also has marketing authorization in Brazil for the treatment of nmDMD in ambulatory patients two years and older and for continued treatment of patients that become non-ambulatory. During the quarter ended June 30, 2022, we recognized $77.0 million in net sales from Translarna. We hold worldwide commercialization rights to Translarna for all indications in all territories. Emflaza is approved in the United States for the treatment of DMD in patients two years and older. During the quarter ended June 30, 2022, we recognized $56.8 million in net sales from Emflaza.
Our marketing authorization for Translarna in the EEA is subject to annual review and renewal by the European Commission following reassessment by the European Medicines Agency, or EMA, of the benefit-risk balance of the authorization, which we refer to as the annual EMA reassessment. In June 2022, the European Commission renewed our marketing authorization, making it effective, unless extended, through August 5, 2023. This marketing authorization is further subject to a specific obligation to conduct and submit the results of an 18-month, placebo-controlled trial, followed by an 18-month open-label extension, which we refer to together as Study 041. In June 2022, we announced top-line results from the placebo-controlled trial of Study 041. Within the placebo-controlled trial, Translarna showed a statistically significant treatment benefit across the entire intent to treat population as assessed by the 6-minute walk test, assessing ambulation and endurance, and in lower-limb muscle function as assessed by the North Star Ambulatory Assessment, a functional scale designed for boys affected by DMD. Additionally, Translarna showed a statistically significant treatment benefit across the intent to treat population within the 10-meter run/walk and 4-stair stair climb, each assessing ambulation and burst activity, while also showing a positive trend in the 4-stair stair descend although not statistically significant. Within the primary analysis group, Translarna demonstrated a positive trend across all endpoints, however, statistical significance was not achieved. Translarna was also well tolerated. We expect to submit a report on the placebo-controlled
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trial and the open-label extension data that has been collected to date to the EMA by the end of the third quarter of 2022, as required.
Each country, including each member state of the EEA, has its own pricing and reimbursement regulations. In order to commence commercial sale of product pursuant to our Translarna marketing authorization in any particular country in the EEA, we must finalize pricing and reimbursement negotiations with the applicable government body in such country. As a result, our commercial launch will continue to be on a country-by-country basis. We also have made, and expect to continue to make, product available under early access programs, or EAP Programs, both in countries in the EEA and other territories. Our ability to negotiate, secure and maintain reimbursement for product under commercial and EAP Programs can be subject to challenge in any particular country and can also be affected by political, economic and regulatory developments in such country.
There is substantial risk that if we are unable to renew our EEA marketing authorization during any annual renewal cycle, or if our product label is materially restricted, or if Study 041 does not provide the data necessary to maintain our marketing authorization, we would lose all, or a significant portion of, our ability to generate revenue from sales of Translarna in the EEA and other territories.
Translarna is an investigational new drug in the United States. During the first quarter of 2017, we filed a New Drug Application, or NDA, for Translarna for the treatment of nmDMD over protest with the United States Food and Drug Administration, or FDA. In October 2017, the Office of Drug Evaluation I of the FDA issued a Complete Response Letter for the NDA, stating that it was unable to approve the application in its current form. In response, we filed a formal dispute resolution request with the Office of New Drugs of the FDA. In February 2018, the Office of New Drugs of the FDA denied our appeal of the Complete Response Letter. In its response, the Office of New Drugs recommended a possible path forward for the ataluren NDA submission based on the accelerated approval pathway. This would involve a re-submission of an NDA containing the current data on effectiveness of ataluren with new data to be generated on dystrophin production in nmDMD patients’ muscles. We followed the FDA’s recommendation and collected, using newer technologies via procedures and methods that we designed, such dystrophin data in a new study, Study 045, and announced the results of Study 045 in February 2021. Study 045 did not meet its pre-specified primary endpoint. In June 2022, we announced top-line results from the placebo-controlled trial of Study 041. We are preparing to have discussion with the FDA regarding a potential a resubmission of the Translarna NDA.
UpstazaTM (eladocagene exuparvovec)
We have a pipeline of gene therapy product candidates for rare monogenic diseases that affect the CNS, including Upstaza for the treatment of AADC deficiency. In July 2022, the European Commission approved Upstaza for the treatment of AADC deficiency for patients 18 months and older within the EEA. We are also preparing a biologics license application, or BLA, for Upstaza for the treatment of AADC deficiency in the United States. In response to discussions with the FDA, we intend to provide additional information concerning the use of the commercial cannula for Upstaza in young patients. We expect to submit a BLA to the FDA in the fourth quarter of 2022.
Tegsedi® (inotersen) and Waylivra™ (volanesorsen)
We hold the rights for the commercialization of Tegsedi and Waylivra for the treatment of rare diseases in countries in Latin America and the Caribbean pursuant to a Collaboration and License Agreement, or the Tegsedi-Waylivra Agreement, dated August 1, 2018, by and between us and Akcea Therapeutics, Inc., or Akcea, a subsidiary of Ionis Pharmaceuticals, Inc. Tegsedi has received marketing authorization in the United States, European Union, or EU, and Brazil for the treatment of stage 1 or stage 2 polyneuropathy in adult patients with hereditary transthyretin amyloidosis, or hATTR amyloidosis. We began to make commercial sales of Tegsedi for the treatment of hATTR amyloidosis in Brazil in the second quarter of 2022 and we continue to make Tegsedi available in certain other countries within Latin America and the Caribbean through EAP Programs. In August 2021, ANVISA, the Brazilian health regulatory authority, approved Waylivra as the first treatment for familial chylomicronemia syndrome, or FCS, in Brazil and we began to make commercial sales of Waylivra in Brazil in the third quarter of 2022 while continuing to make Waylivra available in certain other countries within Latin America and the Caribbean through EAP programs. Waylivra has also received marketing authorization in the EU for the treatment of FCS. Additionally, we submitted an application to ANVISA in December 2021 for the approval
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of Waylivra for the treatment of familial partial lipodystrophy, or FPL, and we expect a regulatory decision on approval in the second half of 2022.
Evrysdi® (risdiplam)
We also have an SMA collaboration with Roche and the SMA Foundation. The SMA program has one approved product, Evrysdi, which was approved by the FDA in August 2020 for the treatment of SMA in adults and children two months and older and by the European Commission in March 2021 for the treatment of 5q SMA in patients two months and older with a clinical diagnosis of SMA Type 1, Type 2 or Type 3 or with one to four SMN2 copies. Evrysdi also received marketing authorization for the treatment of SMA in Brazil in October 2020 and Japan in June 2021. In May 2022, the FDA approved a label expansion for Evrysdi to include infants under two months old with SMA.
Diversified Development Pipeline
Splicing Platform
In addition to our SMA program, our splicing platform also includes PTC518, which is being developed for the treatment of Huntington’s disease, or HD. We announced the results from our Phase 1 study of PTC518 in healthy volunteers in September 2021 demonstrating dose-dependent lowering of huntingtin messenger ribonucleic acid and protein levels, that PTC518 efficiently crosses blood brain barrier at significant levels and that PTC518 was well tolerated. We initiated a Phase 2 study of PTC518 for the treatment of HD in the first quarter of 2022, which consists of an initial 12-week placebo-controlled phase focused on safety, pharmacology and pharmacodynamic effects followed by a nine-month placebo-controlled phase focused on PTC518 biomarker effect. We expect data from the initial 12-week phase of the Phase 2 study by the end of 2022.
Bio-e Platform
Our Bio-e platform consists of small molecule compounds that target oxidoreductase enzymes that regulate oxidative stress and inflammatory pathways central to the pathology of a number of CNS diseases. The two most advanced molecules in our Bio-e platform are vatiquinone and PTC857. We initiated a registration-directed Phase 2/3 placebo-controlled trial of vatiquinone in children with mitochondrial disease associated seizures in the third quarter of 2020. We have experienced additional delays in enrolling this trial due to the COVID-19 pandemic and anticipate results from this trial to be available in the first quarter of 2023. We also initiated a registration-directed Phase 3 trial of vatiquinone in children and young adults with Friedreich ataxia in the fourth quarter of 2020 and anticipate results from this trial to be available in the second quarter of 2023. In the third quarter of 2021, we completed a Phase 1 trial in healthy volunteers to evaluate the safety and pharmacology of PTC857. PTC857 was found to be well-tolerated with no reported serious adverse events while demonstrating predictable pharmacology. We initiated a Phase 2 trial of PTC857 for amyotrophic lateral sclerosis in the first quarter of 2022.
Metabolic Platform
The most advanced molecule in our metabolic platform is PTC923, an oral formulation of synthetic sepiapterin, a precursor to intracellular tetrahydrobiopterin, which is a critical enzymatic cofactor involved in metabolism and synthesis of numerous metabolic products, for orphan diseases. We initiated a registration-directed Phase 3 trial for PTC923 for phenylketonuria, or PKU, in the third quarter of 2021 and expect results from this trial to be available by the end of 2022.
Oncology Platform
We also have two oncology agents that are in clinical development, unesbulin and emvododstat. We completed our Phase 1 trials evaluating unesbulin in leiomyosarcoma, or LMS, and diffuse intrinsic pontine glioma, or DIPG, in the fourth quarter of 2021. We initiated a registration-directed Phase 2/3 trial of unesbulin for the treatment of LMS in the first quarter of 2022 and we expect to initiate a registration-directed Phase 2 trial of unesbulin for the treatment of DIPG in the third quarter of 2022. We completed our Phase 1 trial evaluating emvododstat in acute myelogenous leukemia, or AML, in the fourth quarter of 2021. We expect to provide further updates regarding our emvododstat program at a later date.
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Emvododstat for COVID-19
In June 2020, we initiated a Phase 2/3 clinical trial evaluating the efficacy and safety of emvododstat in patients hospitalized with COVID-19. In February 2021, we announced the completion of the first stage of the Phase 2/3 trial. Given the changing nature of the COVID-19 pandemic to the outpatient treatment setting, we concluded enrollment in the Phase 2/3 trial early to review the data collected to date and make a decision on next steps. Based upon our initial analyses of all randomized subjects, there was a trend towards emvododstat benefit across several disease relevant endpoints including reduced hospitalizations and time to reduction of fever. Additionally, within the cohort of patients enrolled within five days of infection, emvododstat demonstrated a benefit with respect to time to respiratory improvement, duration of hospitalization, dyspnea resolution and cough relief. We plan to complete the remaining data analyses and will then formulate a strategy for next steps.
Multi-Platform Discovery
In addition, we have a pipeline of product candidates and discovery programs that are in early clinical, pre-clinical and research and development stages focused on the development of new treatments for multiple therapeutic areas, including rare diseases and oncology.
Funding
The success of our products and any other product candidates we may develop, depends largely on obtaining and maintaining reimbursement from governments and third-party insurers. Our revenues are primarily generated from sales of Translarna for the treatment of nmDMD in countries where we were able to obtain acceptable commercial pricing and reimbursement terms and in select countries where we are permitted to distribute Translarna under our EAP Programs and from sales of Emflaza for the treatment of DMD in the United States. We have also recognized revenue associated with milestone and royalty payments from Roche pursuant to the SMA License Agreement under our SMA program.
To date, we have financed our operations primarily through our offering of 3.00% convertible senior notes due August 15, 2022, or the 2022 Convertible Notes, our offering of 1.50% convertible senior notes due September 15, 2026, or the 2026 Convertible Notes, and, together with the 2022 Convertible Notes, the Convertible Notes, our public offerings of common stock in February 2014, in October 2014, in April 2018, in January 2019, and in September 2019, the common stock issued in our “at the marketing offering”, our initial public offering of common stock in June 2013, proceeds from a Royalty Purchase Agreement dated as of July 17, 2020, by and among us, RPI 2019 Intermediate Finance Trust, or RPI, and, solely for the limited purposes set forth therein, Royalty Pharma PLC, or the Royalty Purchase Agreement, private placements of our preferred stock, collaborations, bank and institutional lender debt and convertible debt financings, and grants and clinical trial support from governmental and philanthropic organizations and patient advocacy groups in the disease areas addressed by our product candidates. Since 2014, we have also relied on revenue generated from net sales of Translarna for the treatment of nmDMD in territories outside of the United States, and since May 2017, we have generated revenue from net sales of Emflaza for the treatment of DMD in the United States. We have also relied on revenue associated with milestone and royalty payments from Roche pursuant to the SMA License Agreement.
The 2022 Convertible Notes consist of $150.0 million in aggregate principal amount of 3.00% convertible senior notes due 2022. The 2022 Convertible Notes bear cash interest payable on February 15 and August 15 of each year, beginning on February 15, 2016. The 2022 Convertible Notes are senior unsecured obligations of ours and will mature on August 15, 2022, unless earlier converted, redeemed or repurchased in accordance with their terms prior to such date. As of February 15, 2022, until the close of business on the business day immediately preceding the maturity date, holders may convert their 2022 Convertible Notes at any time. Upon conversion, we will pay and deliver a combination of cash and shares of our common stock. We received net proceeds from the offering of approximately $145.4 million, after deducting the initial purchasers’ discounts and commissions and the offering expenses payable by us.
In August 2019, we entered into an At the Market Offering Sales Agreement, or the Sales Agreement, with Cantor Fitzgerald and RBC Capital Markets, LLC, or together, the Sales Agents, pursuant to which, we may offer and sell shares of our common stock, having an aggregate offering price of up to $125.0 million from time to time through the Sales Agents by any method that is deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under
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the Securities Act of 1933, as amended, or the Securities Act. During the three and six months ended June 30, 2022, we did not issue or sell any shares of common stock pursuant to the Sales Agreement. The remaining shares of our common stock available to be issued and sold, under the Sales Agreement, have an aggregate offering price of up to $93.0 million as of June 30, 2022.
The 2026 Convertible Notes consist of $287.5 million aggregate principal amount of 1.50% convertible senior notes due 2026. The 2026 Convertible Notes bear cash interest at a rate of 1.50% per year, payable semi-annually on March 15 and September 15 of each year, beginning on March 15, 2020. The 2026 Convertible Notes will mature on September 15, 2026, unless earlier repurchased or converted. We received net proceeds of $279.3 million after deducting the initial purchasers’ discounts and commissions and the offering expenses payable by us.
As of June 30, 2022, we had an accumulated deficit of $2,376.8 million. We had a net loss of $278.8 million and $247.0 million for the six months ended June 30, 2022 and 2021, respectively.
We anticipate that our expenses will continue to increase in connection with our commercialization efforts in the United States, the EEA, Latin America and other territories, including the expansion of our infrastructure and corresponding sales and marketing, legal and regulatory, distribution and manufacturing, including expanding our direct manufacturing capabilities at our leased biologics manufacturing facility and administrative and employee-based expenses. In addition to the foregoing, we expect to continue to incur ongoing research and development expenses for our products and product candidates, including our splicing, gene therapy, Bio-e, metabolic and oncology programs, our studies of emvododstat for COVID-19 as well as studies in our products for maintaining authorizations, including Study 041, label extensions and additional indications. In addition, we may incur substantial costs in connection with our efforts to advance our regulatory submissions. We continue to seek marketing authorization for Translarna for the treatment of nmDMD in territories that we do not currently have marketing authorization in and we may also seek marketing authorization for Translarna for other indications. We are preparing a BLA for Upstaza for the treatment of AADC deficiency in the United States and we anticipate submitting a BLA to the FDA in the fourth quarter of 2022. We filed for marketing authorization for Waylivra with ANVISA for the treatment of FPL and we expect a regulatory decision on approval from ANVISA in the second half of 2022. These efforts may significantly impact the timing and extent of our commercialization expenses.
We may seek to expand and diversify our product pipeline through opportunistically in-licensing or acquiring the rights to products, product candidates or technologies and we may incur expenses, including with respect to transaction costs, subsequent development costs or any upfront, milestone or other payments or other financial obligations associated with any such transaction, which would increase our future capital requirements.
With respect to our outstanding 2022 Convertible Notes, cash interest payments are payable on a semi-annual basis in arrears, which require total funding of $4.5 million annually. The 2022 Convertible Notes will mature on August 15, 2022 and we will be required to pay any outstanding principal amount of the 2022 Convertible Notes at that time, unless earlier converted, redeemed or repurchased in accordance with their terms prior to such date. As of February 15, 2022, until the close of business on the business day immediately preceding the maturity date, holders may convert their 2022 Convertible Notes at any time. Upon conversion, we will pay and deliver a combination of cash and shares of our common stock. With respect to our outstanding 2026 Convertible Notes, cash interest payments are payable on a semi-annual basis in arrears, which will require total funding of $4.3 million annually.
We are obligated to pay the former equityholders of Agilis $50.0 million as a result of the European Commission’s marketing approval of Upstaza for the treatment of AADC deficiency in July 2022 and we expect to pay such former equityholders an additional $20.0 million upon the acceptance for filing by the FDA of a BLA for Upstaza for the treatment of AADC deficiency, which we expect to occur in the fourth quarter of 2022. We also expect to pay the former securityholders of Censa Pharmaceuticals, Inc., or Censa, a $30.0 million development milestone for the completion of enrollment of a Phase 3 clinical trial for PTC923 for PKU in 2022. If achieved, we have the option to pay such milestone payment in cash or shares of our common stock.
We also have certain significant contractual obligations and commercial commitments that require funding and we have disclosed these items under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Funding requirements” in our 2021 Annual Report on Form 10-K. In addition to those obligations previously
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disclosed, we entered into a Lease Agreement, or the Warren Lease, on May 24, 2022 with Warren CC Acquisitions, LLC, relating to the lease of two entire buildings comprised of approximately 360,000 square feet of shell condition, modifiable space, or the Premises, at a facility located in Warren, New Jersey. The rental term of the Warren Lease commenced on June 1, 2022, with an initial term of seventeen years, or the Initial Term, followed by three consecutive five-year renewal periods at our option. The aggregate base rent for the Initial Term will be approximately $163.0 million; provided, however, that if we are not subject to an Event of Default (as defined in the Warren Lease), we will be entitled to a base rent abatement over the first three years of the Initial Term of approximately $18.6 million, reducing our total base rent obligation to $144.4 million. The rental rate for the renewal periods will be at the Fair Market Rental Value (as defined in the Warren Lease) and determined at the time of the exercise of the renewal. Beginning in the second lease year, we are also responsible for the payment of all taxes and operating expenses for the Premises. There were no other material changes to the contractual obligations and commercial commitments set forth in our 2021 Annual Report on Form 10-K during the period ended June 30, 2022. Furthermore, since we are a public company, we have incurred and expect to continue to incur additional costs associated with operating as such including significant legal, accounting, investor relations and other expenses.
We have never been profitable and we will need to generate significant revenues to achieve and sustain profitability, and we may never do so. Accordingly, we may need to obtain substantial additional funding in connection with our continuing operations. Adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or our commercialization efforts.
Financial operations overview
Revenues
Net product revenues. To date, our net product revenues have consisted primarily of sales of Translarna for the treatment of nmDMD in territories outside of the United States and sales of Emflaza for the treatment of DMD in the United States. We recognize revenue when performance obligations with customers have been satisfied. Our performance obligations are to provide products based on customer orders from distributors, hospitals, specialty pharmacies or retail pharmacies. The performance obligations are satisfied at a point in time when our customer obtains control of the product, which is typically upon delivery. We invoice customers after the products have been delivered and invoice payments are generally due within 30 to 90 days of invoice date. We determine the transaction price based on fixed consideration in its contractual agreements. Contract liabilities arise in certain circumstances when consideration is due for goods not yet provided. As we have identified only one distinct performance obligation, the transaction price is allocated entirely to the product sale. In determining the transaction price, a significant financing component does not exist since the timing from when we deliver product to when the customers pay for the product is typically less than one year. Customers in certain countries pay in advance of product delivery. In those instances, payment and delivery typically occur in the same month.
We record product sales net of any variable consideration, which includes discounts, allowances, rebates related to Medicaid and other government pricing programs, and distribution fees. We use the expected value or most likely amount method when estimating variable consideration, unless discount or rebate terms are specified within contracts. The identified variable consideration is recorded as a reduction of revenue at the time revenues from product sales are recognized. These estimates for variable consideration are adjusted to reflect known changes in factors and may impact such estimates in the quarter those changes are known. Revenue recognized does not include amounts of variable consideration that are constrained. For the three months ended June 30, 2022 and 2021, net product sales outside of the United States were $86.9 million and $54.0 million, respectively consisting of Translarna, Tegsedi, Waylivra, and Upstaza. Upstaza sales commenced during the three months period ended June 30, 2022. Translarna net revenues made up $77.0 million and $52.6 million of the net product sales outside of the United States for the three months ended June 30, 2022 and 2021, respectively. For the three months ended June 30, 2022 and 2021, net product sales in the United States were $56.8 million and $49.1 million, respectively, consisting solely of Emflaza. For the six months ended June 30, 2022 and 2021, net product sales outside of the United States were $168.1 million and $101.7 million, respectively, consisting of Translarna, Tegsedi, Waylivra, and Upstaza. Upstaza sales commenced during the six months period ended June 30, 2022. Translarna net revenues made up $156.2 million and $99.1 million of the net product sales outside of the United States for
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the six months ended June 30, 2022 and 2021, respectively. For the six months ended June 30, 2022 and 2021, net product sales in the United States were $105.4 million and $92.7 million, respectively, consisting solely of Emflaza.
In relation to customer contracts, we incur costs to fulfill a contract but do not incur costs to obtain a contract. These costs to fulfill a contract do not meet the criteria for capitalization and are expensed as incurred. We consider any shipping and handling costs that are incurred after the customer has obtained control of the product as a cost to fulfill a promise. Shipping and handling costs associated with finished goods delivered to customers are recorded as a selling expense.
Roche and the SMA Foundation Collaboration. In November 2011, we entered into the SMA License Agreement pursuant to which we are collaborating with Roche and the SMA Foundation to further develop and commercialize compounds identified under our SMA program with the SMA Foundation. The research component of this agreement terminated effective December 31, 2014. We are eligible to receive additional payments from Roche if specified events are achieved with respect to each licensed product, including up to $135.0 million in research and development event milestones, up to $325.0 million in sales milestones upon achievement of specified sales events, and up to double digit royalties on worldwide annual net sales of a commercial product. As of June 30, 2022, we had recognized a total of $160.0 million in milestone payments and $100.1 million royalties on net sales pursuant to the SMA License Agreement. As of June 30, 2022, there are no remaining research and development event milestones that we can receive. The remaining potential sales milestones as of June 30, 2022 are $300.0 million upon achievement of certain sales events.
For the three months ended June 30, 2022 and 2021, we did not recognize collaboration revenue related to the SMA License Agreement with Roche. For the six months ended June 30, 2022 and 2021, we recognized $0.0 million and $20.0 million of collaboration revenue related to the SMA License Agreement with Roche, respectively. The first commercial sale of Evrysdi in the EU was made in March 2021. This event triggered a $20.0 million milestone payment to us from Roche for the six months ended June 30, 2021.
For the three months ended June 30, 2022 and 2021, we have recognized $21.8 million and $13.6 million of royalty revenue, respectively, related to Evrysdi. For the six months ended June 30, 2022 and 2021, we have recognized $40.7 million and $20.2 million of royalty revenue, respectively, related to Evrysdi.
Pursuant to the Royalty Purchase Agreement, we sold to RPI 42.933%, or the Assigned Royalty Payment, of our right to receive sales-based royalty payments, or the Royalty, on worldwide net sales of Evrysdi and any other product developed pursuant to the SMA License Agreement in consideration for $650.0 million. We have retained a 57.067% interest in the Royalty and all economic rights to receive the remaining potential regulatory and sales milestone payments under the SMA License Agreement. The Royalty Purchase Agreement will terminate 60 days following the earlier of the date on which Roche is no longer obligated to make any payments of the Royalty pursuant to the SMA License Agreement and the date on which RPI has received $1.3 billion in respect of the Assigned Royalty Payment.
Research and development expense
Research and development expenses consist of the costs associated with our research activities, as well as the costs associated with our drug discovery efforts, conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings. Our research and development expenses consist of:
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We use our employee and infrastructure resources across multiple research projects, including our drug development programs. We track expenses related to our clinical programs and certain preclinical programs on a per project basis.
We expect our research and development expenses to fluctuate in connection with our ongoing activities, particularly in connection with Study 041 and other studies for Translarna for the treatment of nmDMD, our activities under our splicing, gene therapy, Bio-e, metabolic and oncology programs and our studies of emvododstat for COVID-19 and performance of our post-marketing requirements imposed by regulatory agencies with respect to our products. The timing and amount of these expenses will depend upon the outcome of our ongoing clinical trials and the costs associated with our planned clinical trials. The timing and amount of these expenses will also depend on the costs associated with potential future clinical trials of our products or product candidates and the related expansion of our research and development organization, regulatory requirements, advancement of our preclinical programs, and product and product candidate manufacturing costs.
The following tables provide research and development expense for our most advanced principal product development programs, for the three and six months ended June 30, 2022 and 2021.
Three Months Ended June 30, | |||||||
| 2022 |
| 2021 | ||||
(in thousands) | |||||||
Global DMD Franchise | $ | 17,111 | $ | 17,887 | |||
Metabolic |
| 15,184 |
| 10,476 | |||
Gene Therapy |
| 49,556 |
| 35,619 | |||
Bio-e | 12,880 | 14,863 | |||||
Oncology |
| 8,979 |
| 3,625 | |||
Splicing |
| 18,355 | 12,008 | ||||
Emvododstat for COVID-19 | 7,459 | 9,273 | |||||
Discovery |
| 27,739 |
| 21,731 | |||
Total research and development | $ | 157,263 | $ | 125,482 | |||
Six Months Ended June 30, | ||||||
| 2022 |
| 2021 | |||
(in thousands) | ||||||
Global DMD Franchise | $ | 34,692 | $ | 36,258 | ||
Metabolic |
| 30,974 |
| 23,665 | ||
Gene Therapy |
| 91,547 |
| 76,585 | ||
Bio-e |
| 27,612 |
| 30,198 | ||
Oncology |
| 15,199 |
| 7,453 | ||
Splicing |
| 33,076 |
| 24,115 | ||
Emvododstat for COVID-19 | 9,831 | 21,489 | ||||
Discovery |
| 54,410 |
| 40,232 | ||
Total research and development | $ | 297,341 | $ | 259,995 | ||
The successful development of our products and product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
| ● | the scope, rate of progress and expense of our clinical trials and other research and development activities; |
| ● | the potential benefits of our products and product candidates over other therapies; |
| ● | our ability to market, commercialize and achieve market acceptance for any of our products or product candidates that we are developing or may develop in the future, including our ability to negotiate pricing and reimbursement terms acceptable to us; |
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| ● | clinical trial results; |
| ● | the terms and timing of regulatory approvals; and |
| ● | the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights. |
A change in the outcome of any of these variables with respect to the development of our products or product candidates could mean a significant change in the costs and timing associated with the development of that product or product candidate. For example, if the EMA or FDA or other regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of any of our products or product candidates or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. In addition, the uncertainty with respect to the duration, nature and extent of negative impacts of the COVID-19 pandemic and responsive measures relating thereto on our ability to successfully enroll our current and future clinical trials, has caused us to experience delays, and may cause us to experience further delays, in our clinical trials and regulatory submissions.
Selling, general and administrative expense
Selling, general and administrative expenses consist primarily of salaries and other related costs for personnel, including share-based compensation expenses, in our executive, legal, business development, commercial, finance, accounting, information technology and human resource functions. Other selling, general and administrative expenses include facility-related costs not otherwise included in research and development expense; advertising and promotional expenses; costs associated with industry and trade shows; and professional fees for legal services, including patent-related expenses, accounting services and miscellaneous selling costs.
We expect that selling, general and administrative expenses will increase in future periods in connection with our continued efforts to commercialize our products, including increased payroll, expanded infrastructure, commercial operations, increased consulting, legal, accounting and investor relations expenses.
Interest expense, net
Interest expense, net consists of interest expense from the liability for the sale of future royalties related to the Royalty Purchase Agreement, and from the Convertible Notes outstanding.
Critical accounting policies and significant judgments and estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions.
During the three and six months ended June 30, 2022, there were no material changes to our critical accounting policies as reported in our 2021 Annual Report on Form 10-K.
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Results of operations
Three months ended June 30, 2022 compared to three months ended June 30, 2021
The following table summarizes revenues and selected expense and other income data for the three months ended June 30, 2022 and 2021.
Three Months Ended | |||||||||
June 30, | Change | ||||||||
(in thousands) |
| 2022 |
| 2021 |
| 2022 vs. 2021 | |||
Net product revenue | $ | 143,701 | $ | 103,113 | $ | 40,588 | |||
Royalty revenue | 21,825 | 13,563 | 8,262 | ||||||
Cost of product sales, excluding amortization of acquired intangible asset |
| 9,639 |
| 7,358 | 2,281 | ||||
Amortization of acquired intangible asset |
| 26,294 |
| 12,751 | 13,543 | ||||
Research and development expense |
| 157,263 |
| 125,482 | 31,781 | ||||
Selling, general and administrative expense |
| 79,892 |
| 68,878 | 11,014 | ||||
Change in the fair value of deferred and contingent consideration |
| (15,200) |
| 700 | (15,900) | ||||
Interest expense, net |
| (21,976) |
| (22,559) | 583 | ||||
Other (expense) income, net |
| (34,357) |
| 3,170 | (37,527) | ||||
Income tax expense | (3,392) | (488) | (2,904) | ||||||
Net product revenues. Net product revenues were $143.7 million for the three months ended June 30, 2022, an increase of $40.6 million, or 39%, from $103.1 million for the three months ended June 30, 2021. The increase in net product revenue was primarily due to an increase in net product sales of Translarna and Emflaza. Translarna net product revenues were $77.0 million for the three months ended June 30, 2022, an increase of $24.4 million, or 46%, compared to $52.6 million for the three months ended June 30, 2021. These results reflect an increase in net product sales in existing markets as well as continued geographic expansion. Emflaza net product revenues were $56.8 million for the three months ended June 30, 2022, an increase of $7.7 million, or 16%, compared to $49.1 million for the three months ended June 30, 2021. These results reflect continued addition of new patients, broader access, continued high compliance, and appropriate weight-based dosing.
Royalty revenue. Royalty revenue was $21.8 million for the three months ended June 30, 2022, an increase of $8.3 million, or 61%, from $13.6 million for the three months ended June 30, 2021. The increase in royalty revenue was due to higher Evrysdi sales in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. In accordance with the SMA License Agreement, we are entitled to royalties on worldwide annual net sales of the product.
Cost of product sales, excluding amortization of acquired intangible asset. Cost of product sales, excluding amortization of acquired intangible asset, were $9.6 million for the three months ended June 30, 2022, an increase of $2.3 million, or 31%, from $7.4 million for the three months ended June 30, 2021. Cost of product sales consist primarily of royalty payments associated with Emflaza and Translarna net product sales, excluding contingent payments to Marathon Pharmaceuticals, LLC (now known as Complete Pharma Holdings, LLC), or Marathon, costs associated with Emflaza and Translarna product sold during the period, and royalty expense related to royalty revenues and collaboration milestone revenues. The increase in cost of product sales, excluding amortization of acquired intangible asset, is primarily due to the increase in net product revenue and royalty revenue.
Amortization of acquired intangible asset. Amortization of our intangible assets was $26.3 million for the three months ended June 30, 2022, an increase of $13.5 million, or over 100%, from $12.8 million for the three months ended June 30, 2021. These amounts are related to the acquisition of all rights to Emflaza acquired in May 2017, Marathon contingent payments, and our Waylivra and Tegsedi intangible assets. The increase is primarily related to additional Marathon contingent payments. The amount allocated to the Emflaza intangible asset is amortized on a straight-line basis over its estimated useful life of approximately seven years from the date of the completion of the acquisition of all rights to Emflaza, the period of estimated future cash flows. The Marathon contingent payments, including a $50.0 million contingent payment made in March 2022, are amortized prospectively as incurred, straight-line, over the remaining useful
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life of the Emflaza intangible asset. The Waylivra and Tegsedi assets are amortized on a straight-line basis over their estimated useful life of approximately ten years, respectively. Additionally, in August 2021, we made a $4.0 million milestone payment to Akcea upon regulatory approval of Waylivra from ANVISA. In accordance with the guidance for an asset acquisition, we recorded the milestone payment when it became payable to Akcea, and it increased the cost basis for the Waylivra intangible asset. This payment is being amortized to cost of product sales over the expected remaining useful life of the Waylivra asset on a straight line basis.
Research and development expense. Research and development expense was $157.3 million for the three months ended June 30, 2022, an increase of $31.8 million, or 25%, from $125.5 million for the three months ended June 30, 2021. The increase in research and development expenses is primarily related to increased investment in research programs and advancement of the clinical pipeline.
Selling, general and administrative expense. Selling, general and administrative expense was $79.9 million for the three months ended June 30, 2022, an increase of $11.0 million, or 16%, from $68.9 million for the three months ended June 30, 2021. The increase reflects our continued investment to support our commercial activities including our expanding commercial portfolio.
Change in the fair value of deferred and contingent consideration. The change in the fair value of deferred and contingent consideration was a gain of $15.2 million for the three months ended June 30, 2022, a change of $15.9 million, or over 100%, from a loss of $0.7 million for the three months ended June 30, 2021. The change is related to the fair valuation of the potential future consideration to be paid to former equityholders of Agilis as a result of our merger with Agilis which closed in August 2018. Changes in the fair value were due to the re-calculation of discounted cash flows for the passage of time and changes to certain other estimated assumptions.
Interest expense, net. Interest expense, net was $22.0 million for the three months ended June 30, 2022, a decrease of $0.6 million, or 3%, from $22.6 million for the three months ended June 30, 2021. The decrease in interest expense, net was primarily due to interest expense recorded from the liability for the sale of future royalties related to the Royalty Purchase Agreement.
Other (expense) income, net. Other expense, net was $34.4 million for the three months ended June 30, 2022, a change of $37.5 million, or over 100%, from other income, net of $3.2 million for the three months ended June 30, 2021. The change in other (expense) income, net resulted primarily from an unrealized foreign exchange loss from the remeasurement of our intercompany loan, offset by unrealized gains on our equity investments and convertible debt security in ClearPoint Neuro, Inc. of $3.4 million and $3.5 million, respectively.
Income tax expense. Income tax expense was $3.4 million for the three months ended June 30, 2022, an increase of $2.9 million, or over 100%, compared to income tax expense of $0.5 million for the three months ended June 30, 2021. The increase in income tax expense is primarily attributable to the capitalization and amortization of Section 174 expenditures which took effect in 2022 pursuant to TCJA amendments to IRC Section 174. We incur income tax expense in various foreign jurisdictions, and our foreign tax liabilities are largely dependent upon the distribution of pre-tax earnings among these different jurisdictions.
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Six months ended June 30, 2022 compared to six months ended June 30, 2021
The following table summarizes revenues and selected expense and other income data for the six months ended June 30, 2022 and 2021.
Six Months Ended | |||||||||
June 30, | Change | ||||||||
(in thousands) |
| 2022 |
| 2021 |
| 2022 vs. 2021 | |||
Net product revenue | $ | 273,534 | $ | 194,393 | $ | 79,141 | |||
Collaboration revenue |
| 7 |
| 20,007 | (20,000) | ||||
Royalty revenue | 40,721 | 20,220 | 20,501 | ||||||
Cost of product sales, excluding amortization of acquired intangible assets |
| 19,774 |
| 16,462 | 3,312 | ||||
Amortization of acquired intangible assets |
| 49,767 |
| 24,028 | 25,739 | ||||
Research and development expense |
| 297,341 |
| 259,995 | 37,346 | ||||
Selling, general and administrative expense |
| 153,162 |
| 129,973 | 23,189 | ||||
Change in the fair value of deferred and contingent consideration |
| (26,900) |
| 800 | (27,700) | ||||
Interest expense, net |
| (45,490) |
| (41,718) | (3,772) | ||||
Other expense, net |
| (46,214) |
| (7,716) | (38,498) | ||||
Income tax expense | (8,227) | (940) | (7,287) | ||||||
Net product revenues. Net product revenues were $273.5 million for the six months ended June 30, 2022, an increase of $79.1 million, or 41%, from $194.4 million for the six months ended June 30, 2021. The increase in net product revenue was primarily due to an increase in net product sales of Translarna and Emflaza. Translarna net product revenues were $156.2 million for the six months ended June 30, 2022, an increase of $57.1 million, or 58%, compared to $99.1 million for the six months ended June 30, 2021. These results reflect an increase in net product sales in existing markets as well as continued geographic expansion. Emflaza net product revenues were $105.4 million for the six months ended June 30, 2022, an increase of $12.7 million, or 14%, compared to $92.7 million for the six months ended June 30, 2021. These results reflect continued addition of new patients, broader access, continued high compliance, and appropriate weight-based dosing.
Collaboration revenues. Collaboration revenues was $0.0 million for the six months ended June 30, 2022, a decrease of $20.0 million, or 100%, from $20.0 million for the six months ended June 30, 2021. The decrease is due to a $20.0 million milestone that was triggered from Roche in the six months ended June 30, 2021 relating to the first commercial sale of Evrysdi in the EU, which was made in March 2021. No milestones were triggered in the six months ended June 30, 2022.
Royalty revenue. Royalty revenue was $40.7 million for the six months ended June 30, 2022, an increase of $20.5 million, or over 100%, from $20.2 million for the six months ended June 30, 2021. The increase in royalty revenue was due to higher Evrysdi sales in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. In accordance with the SMA License Agreement, we are entitled to royalties on worldwide annual net sales of the product.
Cost of product sales, excluding amortization of acquired intangible asset. Cost of product sales, excluding amortization of acquired intangible asset, were $19.8 million for the six months ended June 30, 2022, an increase of $3.3 million, or 20%, from $16.5 million for the six months ended June 30, 2021. Cost of product sales consist primarily of royalty payments associated with Emflaza and Translarna net product sales, excluding contingent payments to Marathon, costs associated with Emflaza and Translarna product sold during the period, and royalty expense related to royalty revenues and collaboration milestone revenues. The increase in cost of product sales, excluding amortization of acquired intangible asset, is primarily due to the increase in net product revenue, royalty revenue, and collaboration milestone revenue.
Amortization of acquired intangible asset. Amortization of our intangible assets was $49.8 million for the six months ended June 30, 2022, an increase of $25.7 million, or over 100%, from $24.0 million for the six months ended June 30, 2021. These amounts are related to the acquisition of all rights to Emflaza acquired in May 2017, Marathon contingent payments, and our Waylivra and Tegsedi intangible assets. The increase is primarily related to additional Marathon contingent payments. The amount allocated to the Emflaza intangible asset is amortized on a straight-line basis
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over its estimated useful life of approximately seven years from the date of the completion of the acquisition of all rights to Emflaza, the period of estimated future cash flows. The Marathon contingent payments, including a $50.0 million contingent milestone payment made in the six months ended June 30, 2022, are amortized prospectively as incurred, straight-line, over the remaining useful life of the Emflaza intangible asset. The Waylivra and Tegsedi assets are amortized on a straight-line basis over their estimated useful life of approximately ten years, respectively.
Research and development expense. Research and development expense was $297.3 million for the six months ended June 30, 2022, an increase of $37.3 million, or 14%, from $260.0 million for the six months ended June 30, 2021. The increase in research and development expenses is primarily related to increased investment in research programs and advancement of the clinical pipeline.
Selling, general and administrative expense. Selling, general and administrative expense was $153.2 million for the six months ended June 30, 2022, an increase of $23.2 million, or 18%, from $130.0 million for the six months ended June 30, 2021. The increase reflects our continued investment to support our commercial activities including our expanding commercial portfolio
Change in the fair value of deferred and contingent consideration. The change in the fair value of deferred and contingent consideration was a gain of $26.9 million for the six months ended June 30, 2022, a change of $27.7 million, or over 100%, from a loss of $0.8 million for the six months ended June 30, 2021. The change is related to the fair valuation of the potential future consideration to be paid to former equityholders of Agilis as a result of our merger with Agilis which closed in August 2018. Changes in the fair value were due to the re-calculation of discounted cash flows for the passage of time and changes to certain other estimated assumptions.
Interest expense, net. Interest expense, net was $45.5 million for the six months ended June 30, 2022, an increase of $3.8 million, or 9%, from $41.7 million for the six months ended June 30, 2021. The increase in interest expense, net was primarily due to additional interest expense recorded from the 2026 Convertible Notes and interest income from our investments.
Other expense, net. Other expense, net was $46.2 million for the six months ended June 30, 2022, an increase of $38.5 million, or over 100%, from other expense, net of $7.7 million for the six months ended June 30, 2021. The increase in other expense, net resulted primarily from an unrealized foreign exchange loss from the remeasurement of our intercompany loan, offset by unrealized gains on our equity investments and convertible debt security in ClearPoint Neuro, Inc. of $2.4 million and $2.0 million, respectively.
Income tax expense. Income tax expense was $8.2 million for the six months ended June 30, 2022, an increase of $7.3 million, or over 100%, compared to income tax expense of $0.9 million for the six months ended June 30, 2021. We incurred income tax expense in various foreign jurisdictions, and our foreign tax liabilities are largely dependent upon the distribution of pre-tax earnings among these different jurisdictions.
Liquidity and capital resources
Sources of liquidity
Since inception, we have incurred significant operating losses.
As a growing commercial-stage biopharmaceutical company, we are engaging in significant commercialization efforts for our products while also devoting a substantial portion of our efforts on research and development related to our products, product candidates and other programs. To date, our product revenue has been primarily attributable to sales of Translarna for the treatment of nmDMD in territories outside of the United States and from Emflaza for the treatment of DMD in the United States. Our ongoing ability to generate revenue from sales of Translarna for the treatment of nmDMD is dependent upon our ability to maintain our marketing authorizations in Brazil, Russia and in the EEA and secure market access through commercial programs following the conclusion of pricing and reimbursement terms at sustainable levels in the member states of the EEA or through EAP Programs in the EEA and other territories. The marketing authorization requires annual review and renewal by the European Commission following reassessment by the EMA of the benefit-risk balance
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of the authorization and is subject to the specific obligation to conduct Study 041. Our ability to generate product revenue from Emflaza will largely depend on the coverage and reimbursement levels set by governmental authorities, private health insurers and other third-party payors.
We have historically financed our operations primarily through the issuance and sale of our common stock in public offerings, our “at the market offering” of our common stock, proceeds from the Royalty Purchase Agreement, the private placements of our preferred stock, collaborations, bank and institutional lender debt, convertible debt financings and grants and clinical trial support from governmental and philanthropic organizations and patient advocacy groups in the disease areas addressed by our product candidates. We expect to continue to incur significant expenses and operating losses for at least the next fiscal year. The net losses we incur may fluctuate significantly from quarter to quarter.
In August 2015, we closed a private offering of $150.0 million in aggregate principal amount of 3.00% convertible senior notes due 2022 including the exercise by the initial purchasers of an option to purchase an additional $25.0 million in aggregate principal amount of the 2022 Convertible Notes. The 2022 Convertible Notes bear cash interest payable on February 15 and August 15 of each year, beginning on February 15, 2016. The 2022 Convertible Notes are senior unsecured obligations of ours and will mature on August 15, 2022, unless earlier converted, redeemed or repurchased in accordance with their terms prior to such date. We received net proceeds from the offering of approximately $145.4 million, after deducting the initial purchasers’ discounts and commissions and the estimated offering expenses payable by us.
In August 2019, we entered into the Sales Agreement, pursuant to which, we may offer and sell shares of our common stock, having an aggregate offering price of up to $125.0 million from time to time through the Sales Agents by any method that is deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Corporate Updates—Funding” for additional information.
In September 2019, we closed a private offering of $287.5 million aggregate principal amount of 1.50% convertible senior notes due 2026 including the full exercise by the initial purchasers of an option to purchase an additional $37.5 million in aggregate principal amount of the 2026 Convertible Notes. The 2026 Convertible Notes bear cash interest at a rate of 1.50% per year, payable semi-annually on March 15 and September 15 of each year, beginning on March 15, 2020. The 2026 Convertible Notes will mature on September 15, 2026, unless earlier repurchased or converted. We received net proceeds of $279.3 million after deducting the initial purchasers’ discounts and commissions and the offering expenses payable by us.
In July 2020, we entered into the Royalty Purchase Agreement. Pursuant to the Royalty Purchase Agreement, we sold to RPI the Assigned Royalty Payment in consideration for $650.0 million.
Cash flows
As of June 30, 2022, we had cash, cash equivalents and marketable securities of $505.5 million.
The following table provides information regarding our cash flows and our capital expenditures for the periods indicated.
Six Months Ended | |||||
June 30, | |||||
(in thousands) |
| 2022 |
| 2021 | |
Cash (used in) provided by: |
|
|
|
| |
Operating activities | (152,646) | (131,302) | |||
Investing activities | 121,297 | 86,204 | |||
Financing activities | 5,029 | 13,547 | |||
Net cash used in operating activities was $152.6 million for the six months ended June 30, 2022 and $131.3 million for the six months ended June 30, 2021. The net cash used in operating activities primarily relates to supporting clinical development and commercial activities.
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Net cash provided by investing activities was $121.3 million for the six months ended June 30, 2022 and $86.2 million for the six months ended June 30, 2021. Cash provided by investing activities for the six months ended June 30, 2022 and 2021 were primarily related net sales and redemption of marketable securities, partially offset by purchases of marketable securities, purchases of fixed assets and the acquisition of product rights.
Net cash provided by financing activities was $5.0 million for the six months ended June 30, 2022 and $13.5 million for the six months ended June 30, 2021. Cash provided by financing activities for the six months ended June 30, 2022 and 2021 were primarily attributable to cash received from the exercise of options and proceeds from our Employee Stock Purchase Plan partially offset by payments on our finance lease principal.
Funding requirements
We anticipate that our expenses will continue to increase in connection with our commercialization efforts in the United States, the EEA, Latin America and other territories, including the expansion of our infrastructure and corresponding sales and marketing, legal and regulatory, distribution and manufacturing and administrative and employee-based expenses. In addition to the foregoing, we expect to continue to incur significant costs in connection with the research and development of our splicing, gene therapy, Bio-e, metabolic and oncology programs and our studies of emvododstat for COVID-19 as well as studies in our products for maintaining authorizations, including Study 041, label extensions and additional indications. In addition, we may incur substantial costs in connection with our efforts to advance our regulatory submissions. We continue to seek marketing authorization for Translarna for the treatment of nmDMD in territories that we do not currently have marketing authorization in. We are preparing a BLA for Upstaza for the treatment of AADC deficiency in the United States and we expect to submit a BLA to the FDA in the fourth quarter of 2022. We filed for marketing authorization for Waylivra with ANVISA for the treatment of FPL and we expect a regulatory decision on approval from ANVISA in the second half of 2022. These efforts may significantly impact the timing and extent of our commercialization expenses.
In addition, our expenses will increase if and as we:
| ● | seek to satisfy contractual and regulatory obligations we assumed in connection with the Agilis Merger; |
| ● | seek to satisfy contractual and regulatory obligations in conjunction with the Tegsedi-Waylivra Agreement; |
| ● | satisfy contractual and regulatory obligations that we assumed through our other acquisitions and collaborations; |
| ● | execute our commercialization strategy for our products and product candidates that may receive marketing authorization; |
| ● | are required to complete any additional clinical trials, non-clinical studies or Chemistry, Manufacturing and Controls, or CMC, assessments or analyses in order to advance Translarna for the treatment of nmDMD in the United States or elsewhere; |
| ● | utilize the Hopewell Facility to manufacture program materials for certain of our gene therapy product candidates; |
| ● | initiate or continue the research and development of our splicing, gene therapy, Bio-e, metabolic and oncology programs and our studies of emvododstat for COVID-19 as well as studies in our products for maintaining authorizations, including Study 041, label extensions and additional indications; |
| ● | seek to discover and develop additional product candidates; |
| ● | seek to expand and diversify our product pipeline through strategic transactions; |
| ● | maintain, expand and protect our intellectual property portfolio; and |
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| ● | add operational, financial and management information systems and personnel, including personnel to support our product development and commercialization efforts. |
We believe that our cash flows from product sales, together with existing cash and cash equivalents, including our offerings of the Convertible Notes, public offerings of common stock, our “at the market offering” of our common stock, proceeds from the Royalty Purchase Agreement and marketable securities, will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next twelve months. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.
Our future capital requirements will depend on many factors, including:
| ● | our ability to commercialize and market our products and product candidates that may receive marketing authorization; |
| ● | our ability to negotiate, secure and maintain adequate pricing, coverage and reimbursement terms, on a timely basis, with third-party payors for our products and products candidates; |
| ● | our ability to maintain the marketing authorization for our products, including in the EEA for Translarna for the treatment of nmDMD and whether the EMA determines on an annual basis that the benefit-risk balance of Translarna supports renewal of our marketing authorization in the EEA, on the current approved label; |
| ● | the costs, timing and outcome of Study 041; |
| ● | the costs, timing and outcome of our efforts to advance Translarna for the treatment of nmDMD in the United States, including, whether we will be required to perform additional clinical trials, non-clinical studies or CMC assessments or analyses at significant cost which, if successful, may enable FDA review of an NDA re-submission by us and, ultimately, may support approval of Translarna for nmDMD in the United States; |
| ● | unexpected decreases in revenue or increases in expenses resulting from the COVID-19 pandemic; |
| ● | our ability to maintain orphan exclusivity in the United States for Emflaza; |
| ● | our ability to successfully complete all post-marketing requirements imposed by regulatory agencies with respect to our products; |
| ● | the progress and results of activities under our splicing, gene therapy, Bio-e, metabolic and oncology programs and our studies of emvododstat for COVID-19 as well as studies in our products for maintaining authorizations, label extensions and additional indications; |
| ● | the scope, costs and timing of our commercialization activities, including product sales, marketing, legal, regulatory, distribution and manufacturing, for any of our products and for any of our other product candidates that may receive marketing authorization or any additional territories in which we receive authorization to market Translarna; |
| ● | the costs, timing and outcome of regulatory review of our splicing, gene therapy, Bio-e, metabolic and oncology programs and our studies of emvododstat for COVID-19 and Translarna in other territories; |
| ● | our ability to utilize the Hopewell Facility to manufacture program materials for certain of our gene therapy product candidates; |
| ● | our ability to satisfy our obligations under the indentures governing the Convertible Notes; |
| ● | the timing and scope of growth in our employee base; |
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| ● | the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our other product candidates, including those in our splicing, gene therapy, Bio-e, metabolic and oncology programs; |
| ● | revenue received from commercial sales of our products or any of our product candidates; |
| ● | our ability to obtain additional and maintain existing reimbursed named patient and cohort EAP Programs for Translarna for the treatment of nmDMD on adequate terms, or at all; |
| ● | the ability and willingness of patients and healthcare professionals to access Translarna through alternative means if pricing and reimbursement negotiations in the applicable territory do not have a positive outcome; |
| ● | the costs of preparing, filing and prosecuting patent applications, maintaining, and protecting our intellectual property rights and defending against intellectual property-related claims; |
| ● | the extent to which we acquire or invest in other businesses, products, product candidates, and technologies, including the success of any acquisition, in-licensing or other strategic transaction we may pursue, and the costs of subsequent development requirements and commercialization efforts, including with respect to our acquisitions of Emflaza, Agilis, our Bio-E platform and Censa and our licensing of Tegsedi and Waylivra; and |
| ● | our ability to establish and maintain collaborations, including our collaborations with Roche and the SMA Foundation, and our ability to obtain research funding and achieve milestones under these agreements. |
With respect to our outstanding 2022 Convertible Notes, cash interest payments are payable on a semi-annual basis in arrears, which require total funding of $4.5 million annually. The 2022 Convertible Notes will mature on August 15, 2022 and we will be required to pay any outstanding principal amount of the 2022 Convertible Notes at that time, unless earlier converted, redeemed or repurchased in accordance with their terms prior to such date. As of February 15, 2022, until the close of business on the business day immediately preceding the maturity date, holders may convert their 2022 Convertible Notes at any time. Upon conversion, we will pay and deliver a combination of cash and shares of common stock. With respect to our outstanding 2026 Convertible Notes, cash interest payments are payable on a semi-annual basis in arrears, which will require total funding of $4.3 million annually.
We are obligated to pay the former equityholders of Agilis $50.0 million as a result of the European Commission’s marketing approval of Upstaza for the treatment of AADC deficiency in July 2022 and we expect to pay such former equityholders an additional $20.0 million upon the acceptance for filing by the FDA of a BLA for Upstaza for the treatment of AADC deficiency, which we expect to occur in the fourth quarter of 2022. We also expect to pay the former securityholders of Censa a $30.0 million development milestone for the completion of enrollment of a Phase 3 clinical trial for PTC923 for PKU in 2022. If achieved, we have the option to pay such milestone payment in cash or shares of our common stock.
We also have certain significant contractual obligations and commercial commitments that require funding and we have disclosed these items under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Funding requirements” in our 2021 Annual Report on Form 10-K. In addition to those obligations previously disclosed, we entered into the Warren Lease relating to the lease of two entire buildings comprised of approximately 360,000 square feet of shell condition, modifiable space at a facility located in Warren, New Jersey. The rental term of the Warren Lease commenced on June 1, 2022, with an initial term of seventeen years followed by three consecutive five-year renewal periods at our option. The aggregate base rent for the Initial Term will be approximately $163.0 million; provided, however, that if we are not subject to an Event of Default (as defined in the Warren Lease), we will be entitled to a base rent abatement over the first three years of the Initial Term of approximately $18.6 million, reducing our total base rent obligation to $144.4 million. The rental rate for the renewal periods will be at the Fair Market Rental Value (as defined in the Warren Lease) and determined at the time of the exercise of the renewal. Beginning in the second lease year, we are also responsible for the payment of all taxes and operating expenses for the Premises. There were no other material changes to the contractual obligations and commercial commitments set forth in our 2021 Annual Report on Form 10-K during the period ended June 30, 2022. Furthermore, since we are a public company, we have incurred and expect to
57
continue to incur additional costs associated with operating as such including significant legal, accounting, investor relations and other expenses.
We will need to generate significant revenues to achieve and sustain profitability, and we may never do so. We may need to obtain substantial additional funding in connection with our continuing operations. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs primarily through a combination of equity offerings, debt financings, collaborations, strategic alliances, grants and clinical trial support from governmental and philanthropic organizations and patient advocacy groups in the disease areas addressed by our product and product candidates and marketing, distribution or licensing arrangements. Adequate additional financing may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our shareholders ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.
If we are unable to raise additional funds through equity, debt or other financings when needed or on attractive terms, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
During the period ended June 30, 2022, there were no material changes in our market risk or how our market risk is managed, compared to those disclosed under the heading “Quantitative and Qualitative Disclosures about Market Risk” in our 2021 Annual Report on Form 10-K.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2022. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred during the quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time in the ordinary course of our business, we are subject to claims, legal proceedings and disputes, including as a result of patients seeking to participate in our clinical trials or otherwise gain access to our product candidates. We are not currently aware of any material legal proceedings to which we are a party or of which any of our property is subject.
Item 1A. Risk Factors
We have set forth in Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2021, risk factors relating to our business, our industry, our structure and our common stock. Readers of this Quarterly Report on Form 10-Q are referred to such Item 1A for a more complete understanding of risks concerning us.
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Item 6. Exhibits.
Exhibit Number |
| Description of Exhibit |
10.1*† | Lease Agreement dated May 24, 2022, between Warren CC Acquisitions, LLC and PTC Therapeutics, Inc. | |
10.2* | ||
10.3 | ||
31.1 |
| |
31.2 |
| |
32.1 |
| |
32.2 |
| |
101.INS |
| Inline XBRL Instance Document* |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document* |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document* |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Database* |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document* |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document* |
104 | The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL |
* Submitted electronically herewith.
† Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PTC THERAPEUTICS, INC. | |
|
|
|
|
|
|
Date: August 4, 2022 | By: | /s/ Emily Hill |
Emily Hill | ||
Chief Financial Officer | ||
(Principal Financial Officer and Duly Authorized Signatory) | ||
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BETWEEN
WARREN CC ACQUISITIONS, LLC,
a Delaware limited liability company,
LANDLORD,
-AND-
PTC THERAPEUTICS, INC.,
a Delaware Corporation,
TENANT
DATED: May 24, 2022
134265652.4
Table of Contents
Page
| -i- | |
134265652.4
Table of Contents
(continued)
Page
ARTICLE 36 INTENTIONALLY OMITTED……………………………………………. 83
ARTICLE 37 LANDLORD’S REPRESENTATIONS AND WARRANTIES…………… 83
Schedule A | Site Plan Showing the Land and Metes and Bounds Description of the Land |
Schedule BLandlord’s Base Building Work
Schedule B-1Office Use Finish Work and Laboratory Use Finish Work
Schedule C | [Intentionally Left Blank] |
Schedule D | [Intentionally Left Blank] |
Schedule EOperating Expense Exclusions
Schedule F | General Description of the Building Specifications of Building 400 and Building 500 |
Schedule GMemorandum of Lease
Schedule HList of Furniture as of the Commencement Date - Courtyard
Appendix IDefinitions
| -ii- | |
134265652.4
LEASE AGREEMENT
This LEASE AGREEMENT (this “Lease”) is dated May 24, 2022 and is between WARREN CC ACQUISITIONS, LLC, a Delaware limited liability company (“Landlord”) and PTC THERAPEUTICS, INC., a Delaware corporation (“Tenant”).
BASIC LEASE PROVISIONS
(1)Land: | The land containing approximately 71.2 acres as shown on the site plan attached hereto as part of Schedule A and as described by metes and bounds in the legal description also attached hereto as part of Schedule A and currently designated as (i) Block 37, Lot 13.07 (the “Building 400 Land”), and (ii) Block 37, Lot 13.05 (the “Building 500 Land”), in each case, on the official tax map of the Township of Warren. |
(2)Buildings: | (i) The four (4) story building having an address of 400 Warren Corporate Center Drive, Warren, New Jersey on the Building 400 Land (“Building 400”), and (ii) the four (4) story building having an address of 500 Warren Corporate Center Drive, Warren, New Jersey on the Building 500 Land (“Building 500”), in each case, together with all fixtures, equipment and installations, which at the commencement of or during the Term, are thereto attached, and any and all renewals and replacements thereof, additions thereto and substitutes therefor made in accordance with the provisions of this Lease. |
(3)Parking Deck: | Three (3) story parking deck located partially on the Building 400 Land and partially on the Building 500 Land serving both Building 400 and Building 500 and containing One Thousand Three Hundred Ninety-Five (1,395) total parking spaces (1,370 regular parking spaces and 25 handicapped parking spaces) (the “Parking Deck”). |
(4) Premises: | The Land and all improvements thereon, including, but not limited to, the Buildings, and the Parking Deck. |
(5) Phase I Premises: | A total of six (6) floors within the Buildings, currently contemplated to consist of two (2) floors in Building 400, and all four (4) floors in Building 500, but subject to Tenant’s rights under Section 2.9. |
(6) Phase II Premises: | A total of two (2) floors within the Buildings, currently |
134265652.4
contemplated to consist of two (2) floors in Building 400, but subject to Tenant’s rights under Section 2.9. | |
(7)Term: | From the Commencement Date through the Expiration Date: Seventeen (17) years. |
(8)Commencement Date: | June 1, 2022. |
(9)Expiration Date: | The day immediately preceding the seventeenth (17th) year anniversary of the Commencement Date, or such earlier date upon which the Term may expire or be terminated, or such later date if the Term is extended pursuant to Section 31.1. |
(10)Basic Rent: | |
PERIOD | ANNUAL RATE PSF | ANNUAL BASIC RENT | MONTHLY BASIC RENT |
From Commencement Date until the day immediately preceding the first (1st) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the first (1st) anniversary of the Commencement Date until the day immediately preceding the second (2nd) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the second (2nd) anniversary of the Commencement Date until the day immediately preceding the third (3rd) anniversary of the Commencement Date: | $ [**] | $[**] | $[**] |
From the third (3rd) anniversary of the Commencement Date until the day immediately preceding the fourth (4th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
| 2 | |
134265652.4
From the fourth (4th) anniversary of the Commencement Date until the day immediately preceding the fifth (5th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the fifth (5th) anniversary of the Commencement Date until the day immediately preceding the sixth (6th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the sixth (6th) anniversary of the Commencement Date until the day immediately preceding the seventh (7th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the seventh (7th) anniversary of the Commencement Date until the day immediately preceding the eighth (8th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the eighth (8th) anniversary of the Commencement Date until the day immediately preceding the ninth (9th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the ninth (9th) anniversary of the Commencement Date until the day immediately preceding the tenth (10th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the tenth (10th) anniversary of the Commencement Date until the day immediately preceding the eleventh (11th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
| 3 | |
134265652.4
From the eleventh (11th) anniversary of the Commencement Date until the day immediately preceding the twelfth (12th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the twelfth (12th) anniversary of the Commencement Date until the day immediately preceding the thirteenth (13th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the thirteenth (13th) anniversary of the Commencement Date until the day immediately preceding the fourteenth (14th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the fourteenth (14th) anniversary of the Commencement Date until the day immediately preceding the fifteenth (15th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the fifteenth (15th) anniversary of the Commencement Date until the day immediately preceding the sixteenth (16th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
From the sixteenth (16th) anniversary of the Commencement Date until the day immediately preceding the seventeenth (17th) anniversary of the Commencement Date: | $[**] | $[**] | $[**] |
Notwithstanding the foregoing, provided that no Event of Default has occurred, Tenant shall receive the following abatements of Basic Rent and Additional Rent for the following applicable periods: (i) the Basic Rent for the Phase I Premises with respect to the period beginning on the Commencement Date and ending on the day immediately preceding the second (2nd) anniversary
| 4 | |
134265652.4
of the Commencement Date will be abated; (ii) the Basic Rent for the Phase II Premises with respect to the period beginning on the Commencement Date and ending on the day immediately preceding the third (3rd) anniversary of the Commencement Date will be abated; and (iii) Tenant’s obligation to pay Taxes and Operating Expenses with respect to the entire Premises (i.e. both the Phase I Premises and the Phase II Premises) for the period beginning on the Commencement Date and ending on the day immediately preceding the first (1st) anniversary of the Commencement Date will be abated (collectively, the “Abated Rent”), except that Tenant’s obligation to pay all utility costs for the Premises pursuant to Article 6 of this Lease shall not be abated and shall be effective as of the Commencement Date. If an Event of Default has occurred, the abatement of Basic Rent, Taxes and Operating Expenses provided to Tenant pursuant to this paragraph shall be stayed until such time that Tenant has cured the Event of Default, after which the rent abatement shall be reinstated in full and the time period such rent abatement shall have been stayed shall be added to the periods set forth in this paragraph so that Tenant receives the full rent abatement contemplated by this paragraph.
Notwithstanding the immediately preceding paragraph, Tenant and Landlord shall each have the right, on written notice (a “Conversion Notice”) given to the other party no earlier than January 1, 2023, and no later than the day immediately preceding the third (3rd) year anniversary of the Commencement Date, to convert all or any portion of the value of the abatement of Basic Rent provided in the immediately preceding paragraph into additional Allowance for use in connection with the construction of the Office Use Finish Work and/or the Laboratory Use Finish Work subject to the terms, conditions and requirements provided herein on a dollar-for-dollar basis, or if Landlord shall send the Conversion Notice the amount converted shall be paid to Tenant or as Tenant shall direct for use for either the payment of Basic Rent and/or Additional Rent, or the construction of Tenant Improvements subject to the terms, conditions and requirements provided herein, as Tenant shall determine. Tenant will inform Landlord in writing from time to time how the converted Basic Rent abatement was used by Tenant so that the parties can account for the converted Basic Rent abatement for tax purposes in a consistent manner. If the converted Basic Rent abatement is used by Tenant to pay for Tenant Improvements, it shall be treated as part of Tenant’s financial contribution to the cost of constructing Tenant Improvements (and thus Tenant will own and depreciate such Tenant Improvements) and the provisions of Section 7.6(a) shall apply. Upon such conversion by either party, and regardless of whether Tenant elects to use all or any portion of the converted Basic Rent abatement for the construction of Tenant Improvements, clauses (i) and (ii) in the immediately preceding paragraph with respect to the abatement of Basic Rent shall be null and void and of no further force or effect with respect to the amount so converted, and Tenant shall be obligated to pay all Basic Rent under this Lease as if clauses (i) and (ii) in the immediately preceding paragraph had never been a part of this Lease (or as applicable to the amount converted, with the balance of the abatement of Basic Rent continuing as provided in the preceding paragraph), but clause (iii) in the immediately preceding paragraph with respect to the abatement of Taxes and Operating Expenses shall continue to apply and remain in force and effect notwithstanding the delivery by either party of a Conversion Notice to the other party. If as of the date that Landlord or Tenant provides a Conversion Notice to the other party the Office Use Finish Work and the Laboratory Use Finish Work has been Substantially Completed and there are no unpaid Reimbursable Costs in connection therewith, Landlord shall pay the outstanding amount of abated Basic Rent otherwise available to Tenant pursuant to the immediately preceding paragraph, which payment shall be equal to the present value (determined as of the date of such
| 5 | |
134265652.4
payment by Landlord to Tenant) of the unapplied abated Basic Rent using a discount rate of [**] percent ([**]%) per annum for such purpose and shall be paid in full by Landlord to Tenant within thirty (30) days of Landlord’s giving or receipt of a Conversion Notice; provided, however, that if Landlord shall not timely pay said amount, the immediately preceding paragraph shall be reinstated and Tenant shall be entitled to the rent abatement as contemplated thereby. In the event of a conversion of abated Basic Rent to additional Allowance as provided herein, Tenant agrees to enter into an amendment to this Lease with Landlord for the purpose of evidencing the foregoing.
(11) Parking Spaces: | All of the parking spaces in the Parking Deck. |
(12) Security: | $8,138,655.00, subject to a fifty percent (50%) reduction on June 1, 2027 (the “Reduction Date”), and thereafter for the remainder of the Term on the terms more specifically set forth in Article 28. The Security shall be provided to Landlord in the form of a letter of credit pursuant to Article 28. |
(13) Permitted Use: | General office and administrative use (collectively, “Office Use”), research and development use (including, without limitation, [**]) (collectively, “Laboratory Use”), and uses ancillary to Tenant’s business including, without limitation, kitchen and pantry areas, to the extent such ancillary uses are permitted under applicable Legal Requirements (including, without limitation, the zoning ordinance of the Township of Warren) and are of a kind found in other Class A mixed use laboratory and office buildings of similar age, size and types of laboratory use situated in office parks and occupied by users of space and not owners in Northern New Jersey (“Comparable Buildings”). |
(14) Tenant’s Campus Proportionate Share: | 44.22%, derived from a fraction, the numerator of which is the total rentable square feet in Buildings 400 and 500 (i.e. 361,718 r.s.f.) that are part of the Premises, and the denominator of which is the total rentable square feet in Buildings 100, 200, 300, 400 and 500 (i.e. 817,971 r.s.f.) that are part of the Campus. |
(15) Brokers: | Zell Partnership, Inc. and Cushman and Wakefield, Inc. of New Jersey. |
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134265652.4
(16) Enumeration of Schedules / Appendix: | Schedules A, B, B-1, C, D, E, F, G and H, and Appendix I attached hereto are incorporated into this Lease. |
(17) Governing Law: | This Lease is governed by the laws of the State of New Jersey. |
(18) Landlord’s Notice Address: | Warren CC Acquisitions, LLC c/o Vision Real Estate Partners, LLC 1 Bloomfield Avenue Mountain Lakes, New Jersey 07046 Attn: Property Manager and: Warren CC Acquisitions, LLC c/o Rubenstein Partners Circa Centre 2929 Arch Street, 28th Floor Philadelphia, PA 19104-2868 Attn: [**] with a copy to: Fox Rothschild LLP 49 Market Street Morristown, NJ 07960-5122 Attn: Robert A. Klausner, Esq. |
(19) Tenant’s Notice Address: | PTC Therapeutics, Inc. 100 Corporate Court South Plainfield, NJ 07080 Attention: Legal With a required email copy to: [email protected] With a copy to: Chiesa Shahinian Giantomasi PC 1 Boland Drive West Orange, NJ 07052 Attention: Jeffrey M. Gussoff, Esq. |
(20) Tenant’s NAICS Code: (21) Furniture: | 325414. The furniture listed on Schedule H, which remains in the Premises on the Commencement Date for Tenant’s use without cost. Tenant shall be entitled to sell or otherwise dispose of the furniture listed on Schedule H |
| 7 | |
134265652.4
and shall not be required to account therefor to Landlord, nor shall such furniture be required to be surrendered upon the expiration or sooner termination of this Lease. |
Capitalized terms used in this Lease but not otherwise defined have the meanings set forth in Appendix I.
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(b)Tenant Delays and Excusable Delays. Tenant acknowledges and agrees that Landlord’s obligation to timely complete any required element of Landlord’s Base Building Work shall be extended one day for each day of a Tenant Delay and/or an Excusable Delay. A “Tenant Delay” will be deemed to have occurred if the completion of the Landlord’s Base Building Work is delayed due to any act or omission by Tenant or Tenant’s Visitors, including, but not limited to, delays due to changes in or additions to the Landlord’s Base Building Work requested and authorized by Tenant, delays in submission of information by Tenant, Tenant’s delays in giving authorizations or approvals, or delays due to the postponement of any work at the request of Tenant.
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UTILITIES
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(a)Landlord shall complete all maintenance, repairs and replacements to the foundation, the structural columns and beams, structural elevator and stairwell shafts, the exterior walls, the exterior windows, and the structural elements of the Parking Deck, and all exterior drive aisles, circulation areas, and exterior lighting on the Premises in a manner consistent with Comparable Buildings. The costs and expenses incurred by Landlord in connection with such
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maintenance, repairs and replacements constitute Operating Expenses for which Tenant is responsible pursuant to Section 5.1(a) above and shall be paid by Tenant in accordance with the provisions of Article 5. Nothing contained in this Section 7.2(a) shall in any way alter or modify the obligations of the Association to maintain, repair or replace the Common Facilities as set forth in the Declaration.
(b)
(i)If, during the last [**] years of the Term, Landlord reasonably believes that any one (1) or more of those components of the Buildings, the Parking Deck, or any other portion of the Premises that Landlord is required to maintain and repair pursuant to Section 7.2(a) above require a repair or replacement which is typically capitalized, rather than expensed, in accordance with the IRC, and the useful life of such capital repair or replacement as determined under the IRC extends beyond the Term (such capital repair or replacement being herein referred to as a “Late Term Landlord Capital Repair and Replacement”), Landlord shall provide written notice of such determination to Tenant together with reasonable support for such determination and a budget for performing the Late Term Landlord Capital Repair and Replacement (including, without limitation, all design and installation costs). Landlord and Tenant shall use commercially reasonable efforts to agree upon the work and the budget.
(ii)Landlord shall bid the Late Term Landlord Capital Repair and Replacement work to either (A) three (3) general contractors (one of which may be Vision Construction, as defined below), where the nature of the work would customarily be done by a general contractor, or (B) three (3) contractors for the particular type of work, if the nature of the work would customarily be done by a contractor experienced in the trade without the use of a general contractor. In either case, Landlord shall forward copies of such bids to Tenant for informational purposes only. Within five (5) business days of receiving the bids, Landlord shall notify Tenant in writing which of the three (3) general contractors or contractors, as the case may be, Landlord shall use to perform the Late Term Landlord Capital Repair and Replacement work. If Landlord selects a general contractor or contractor which is not the lowest bid, then together with its notice selecting the general contractor or contractor, Landlord shall provide Tenant with a detailed explanation for the reasons for such selection; provided, however, that Landlord shall not accept as the general contractor Vision Construction or another Affiliate of Landlord, unless (x) Tenant shall consent to such affiliated general contractor, which consent shall not be unreasonably withheld, conditioned or delayed, and (y) the affiliated general contractor’s own charges for overhead, profit, insurance and general conditions are consistent with market. Landlord shall enter into a guaranteed maximum price or fixed price contract with the general contractor or contractor selected in an amount not to exceed the bid submitted by the selected general contractor or contractor for the Late Term Landlord Capital Repair and Replacement work, and all such contracts having a value of $25,000.00 or more shall be on an “open book” basis with respect to all material elements thereof (including, but not limited to, subcontractor bids and procurement, labor and materials costs, equipment costs, supervision, overhead, profit, insurance and general conditions).
(iii)Upon completion, Landlord shall deliver to Tenant evidence of the actual costs of making the Late Term Landlord Capital Repair and Replacement, together with (A) a
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certification from Landlord’s architect or engineer certifying that the Late Term Landlord Capital Repair and Replacement has been completed in accordance with the plans and specifications therefor, and (B) a copy of the certificate of occupancy and/or any other permit or approval required in connection with the completion of the Late Term Landlord Capital Repair and Replacement. Within thirty (30) days after the delivery of such evidence, Tenant shall pay Landlord Tenant’s Share of the costs of performing the Late Term Landlord Capital Repair and Replacement. For purposes hereof, “Tenant’s Share” of the cost of the Late Term Landlord Capital Repair and Replacement shall equal a fraction of the cost of the Late Term Landlord Capital Repair and Replacement, with the numerator of such fraction being the portion of the useful life of the Late Term Landlord Capital Repair and Replacement determined under the IRC paid for by such expense that will occur during the Term of this Lease, and the denominator of such fraction being the useful life of the Late Term Landlord Capital Repair and Replacement determined under the IRC paid for by such expense. If Tenant extends the Term of this Lease pursuant to Section 31.1, Tenant shall pay the balance of Tenant’s Share of the cost of the Late Term Landlord Capital Repair and Replacement not previously paid for by Tenant using the same formula set forth in the immediately preceding sentence upon the delivery of the notice extending the Lease.
(iv) Disputes regarding this Section 7.2 shall be resolved by the dispute resolution procedures of Article 33.
(c)All maintenance and repair, and each addition, improvement or alteration, performed by or on behalf of Landlord must be completed expeditiously and in a good and workmanlike manner, and in compliance with all applicable Legal Requirements and Insurance Requirements.
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(a)To the maximum extent possible under applicable Legal Requirements, Tenant’s financial contribution to the cost of constructing Tenant Improvements will fund (and thus Tenant will own and depreciate) the components that are identified as IRC Section 1245 Property. To the maximum extent possible under applicable Legal Requirements, Landlord’s financial contribution to the cost of constructing Tenant Improvements will fund (and thus Landlord will own and depreciate) the components that are identified as IRC Section 1250 Property.
(b)All Tenant Improvements shall, upon installation and completion, be the property of Landlord or Tenant as shall be consistent with the provisions of Section 7.6(a). All Tenant Improvements (other than Tenant’s trade fixtures, trade equipment, furniture and other personal property) shall remain upon and be surrendered with the Premises at the end of the Term in good condition and repair, reasonable wear and tear and damage by casualty and condemnation excepted. Notwithstanding anything in this Lease to the contrary, Tenant shall not be required to remove any Tenant Improvements, and shall not be required to restore any of the laboratory areas, [**], or office space within any portion of the Premises. At the expiration or earlier termination of this Lease, (i) Tenant shall surrender possession of the Premises in good order and condition, reasonable wear and tear and damage by casualty and condemnation excepted; (ii) Tenant, at Tenant’s sole cost and expense, shall discontinue all laboratory operations and clean and decontaminate all laboratory areas throughout the Premises, and seal any connection points of any
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laboratory systems to the Premises, pursuant to a decommissioning and hazardous materials “closure plan” for the Premises that is reasonably acceptable to Landlord and in compliance with all applicable Legal Requirements; and (iii) Tenant shall provide Landlord with true and complete copies of all governmental releases and permit closures required by all applicable Legal Requirements in connection with the cessation of Tenant’s Permitted Use of the Premises.
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(b)Prior to occupying the Premises for the conduct of business, Tenant shall initially enter into a Property Management Agreement (the “Property Management Agreement”) with Vision Management to oversee the operation of the Premises on terms that are reasonably satisfactory to Tenant. Tenant and Vision Management (as instructed by Landlord) shall negotiate the Property Management Agreement in good faith incorporating market terms and conditions. If Tenant and Vision Management are unable to agree to the Property Management Agreement within 30 days after the Commencement Date, the parties shall meet to attempt to resolve all open issues. If the Property Management Agreement isn’t executed within 60 days after the Commencement Date then Tenant and Vision Management (as instructed by Landlord) shall use the dispute resolution procedure of Article 33 to resolve any open issues, and the costs incurred by engaging in such dispute resolution procedure that are not payable by Tenant pursuant to Article 33 shall be payable by Vision Management.
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Within thirty (30) days after receipt of notice thereof, Tenant shall discharge (by payment or bonding such lien) any Lien on the Premises (other than those relating to the Landlord’s Base Building Work or other work performed by Landlord or its Affiliates) and/or attaching to the Basic Rent, Additional Rent or any other sums payable under this Lease caused by or arising out of Tenant’s acts or Tenant’s failure to perform any obligation under this Lease.
Tenant may, on Landlord’s behalf, but at Tenant’s expense, by appropriate proceedings, contest the amount, validity or application of any Legal Requirement which Tenant is obligated to comply with or any Lien which Tenant is obligated to discharge, provided that (a) such proceedings suspend the collection thereof, or if collection is not suspended, Tenant pays any charges and removes any Lien by bonding or otherwise, (b) no part of the Premises, Basic Rent or Additional Rent or any other sum payable hereunder is subject to loss, sale or forfeiture during such proceedings, (c) Landlord is not subject to any civil or criminal liability for failure to pay or perform, as the case may be, (d) such proceedings do not affect the payment of Basic Rent, Additional Rent or any other sum payable to Landlord hereunder, and (e) Tenant notifies Landlord of such proceedings not less than ten (10) days prior to the commencement thereof and describes such proceedings in reasonable detail. Tenant shall conduct all such contests in good faith and with due diligence and shall, promptly after the determination of such contest, pay all amounts required to be paid by Tenant. Tenant shall indemnify, defend and hold Landlord Indemnified Parties harmless from and against all Liabilities that may arise or be imposed upon Landlord in connection with any such proceeding and any Liabilities resulting therefrom. This obligation shall survive the expiration or sooner termination of this Lease for a period of [**] years.
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All of the insurance limits required in this Section 14.1 shall be adjusted on the January 1st following the fifth (5th) anniversary of the Commencement Date and thereafter at five (5) year intervals by multiplying the dollar amount to be adjusted by a fraction, the numerator of which is the Current Index Number and the denominator of which is the Base Index Number. The term “Current Index Number” means the level of the Index of the month of December of the year preceding the adjustment year. The term “Base Index Number” means the level of the Index for the month during which this Lease is dated. The term “Index” means the Consumer Price Index for all Urban Consumers, New York, northern New Jersey, Long Island areas published by the Bureau of Labor Statistics of United States Department of Labor (base year 1982-84=100), or any successor index thereto as hereinafter provided. If publication of the Index is discontinued, or if the basis of calculating the Index is materially changed, then Landlord shall substitute for the Index comparable statistics as computed by an agency of the United States government or, if none, by a substantial and responsible periodical or publication of recognized authority most closely approximating the result which would have been achieved by the Index.
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(a)Upon not less than twenty (20) business days’ prior notice by Landlord, Tenant shall execute and deliver to Landlord, at no cost to Landlord, a statement certifying (i) the Commencement Date, (ii) the Expiration Date, (iii) the date of this Lease and the dates of any amendments or modifications to this Lease, (iv) that this Lease was properly executed by Tenant and is in full force and effect without amendment or modification, or, alternatively, that this Lease and all amendments and modifications have been properly executed and are in full force and effect, (v) the current annual Basic Rent, the current monthly installments of Basic Rent and the date on which Tenant’s obligation to pay Basic Rent commenced, (vi) the current amounts of Taxes paid by Tenant, (vii) the date to which Basic Rent and Additional Rent have been paid, (viii) the amount of the security deposit, if any, (ix) if applicable, that all work to be done to the Premises by Landlord has been completed in accordance with this Lease and has been accepted by Tenant, except as specifically provided in the estoppel certificate, (x) that no installment of Basic Rent or Additional Rent has been paid more than thirty (30) days in advance, except as specifically provided in the estoppel certificate, (xi) that Tenant is not in arrears in the payment of any Basic Rent or Additional Rent, except as specifically provided in the estoppel certificate, (xii) that, to Tenant’s actual knowledge, neither party to this Lease is in default in the keeping, observance or performance of any covenant, agreement, provision or condition contained in this Lease, and no event has occurred which, with the giving of notice or the passage of time, or both, would result in a default by either party, except as specifically provided in the estoppel certificate, (xiii) that, to Tenant’s actual knowledge, Tenant currently has no existing defenses, offsets, liens, claims or credits against the Basic Rent or Additional Rent or against enforcement of this Lease by Landlord,
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except as specifically provided in the estoppel certificate, (xiv) that Tenant has not been granted any options or rights of first refusal to extend the Term, to lease additional space, to terminate this Lease before the Expiration Date or to purchase the Premises or any part thereof, except as specifically provided in this Lease, (xv) that Tenant has not received any notice of violation of any Legal Requirement or Insurance Requirement relating to the Premises, except as specifically provided in the estoppel certificate, (xvi) that Tenant has not assigned this Lease or sublet all or any portion of the Premises, except as specifically provided in the estoppel certificate, and (xvii) such other reasonable factual matters as reasonably requested by Landlord. Tenant hereby acknowledges and agrees that such statement may be relied upon by any holder of an Underlying Encumbrance, Master Landlord and/or any prospective purchaser, tenant, subtenant, mortgagee or assignee of any mortgage, of the Premises or any part thereof.
(b)Upon not less than twenty (20) business days’ prior notice by Tenant, Landlord shall execute and deliver to Tenant, at no cost to Tenant, a statement certifying (i) the Commencement Date, (ii) the Expiration Date, (iii) the date of this Lease and the dates of any amendments or modifications to this Lease, (iv) that this Lease was properly executed by Landlord and is in full force and effect without amendment or modification, or, alternatively, that this Lease and all amendments and modifications have been properly executed and are in full force and effect, (v) the current annual Basic Rent, the current monthly installments of Basic Rent and the date on which Tenant’s obligation to pay Basic Rent commenced, (vi) the current amounts of Taxes paid by Tenant, (vii) the date to which Basic Rent and Additional Rent have been paid, (viii) the amount of the security deposit, if any, (ix) if applicable, that all work to be done to the Premises by Landlord has been completed in accordance with this Lease, except as specifically provided in the estoppel certificate, (x) that no installment of Basic Rent or Additional Rent has been paid more than thirty (30) days in advance, except as specifically provided in the estoppel certificate, (xi) that Tenant is not in arrears in the payment of any Basic Rent or Additional Rent, except as specifically provided in the estoppel certificate, (xii) that, to Landlord’s Knowledge, neither party to this Lease is in default in the keeping, observance or performance of any covenant, agreement, provision or condition contained in this Lease, and no event has occurred which, with the giving of notice or the passage of time, or both, would result in a default by either party, except as specifically provided in the estoppel certificate, (xiii) confirming Tenant’s renewal options and right to purchase the Premises as specifically provided in this Lease, (xiv) that Landlord has not received any notice of violation of any Legal Requirement or Insurance Requirement relating to the Premises, except as specifically provided in the estoppel certificate, and (xv) such other reasonable factual matters as reasonably requested by Tenant. Landlord hereby acknowledges and agrees that such statement may be relied upon by any prospective purchaser, tenant, subtenant, lender or assignee of any lender of Tenant.
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If the same default shall occur three (3) or more times in any consecutive twelve (12) month period, regardless if any such default is cured within the applicable notice and cure period, then there shall be deemed to be an Event of Default as of the fourth (4th) occurrence of such default, without the requirement that Landlord deliver a notice of such default, and Landlord shall have the right to exercise any remedies it may have at law or in equity or under this Lease.
In the event that Landlord sends a default notice to Tenant at any time during the Extension Option Exercise Notice Period, the default notice shall include the following statement in bold, capitalized letters: “THIS DEFAULT NOTICE IS BEING SENT DURING THE EXTENSION OPTION EXERCISE NOTICE PERIOD AS DEFINED IN SECTION 31.1 OF THE LEASE. FAILURE TO CURE THE DEFAULT NOTICED HEREIN PRIOR TO THE EXPIRATION OF THE TIME PERIODS SET FORTH IN SECTION 31.1 OF THE LEASE SHALL NULLIFY ANY TENANT’S EXTENSION OPTION EXERCISE NOTICE SEEKING TO EXTEND THE CURRENT TERM, ALL REMAINING EXTENSION OPTIONS NOT PREVIOUSLY AND VALIDLY EXERCISED BY TENANT SHALL BE RENDERED NULL AND VOID, AND THE TERM OF THE LEASE SHALL EXPIRE AT THE EXPIRATION OF THE CURRENT TERM.”
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Notwithstanding anything contained in this Section 19.1 to the contrary, in the event of an Emergency, the provisions of Section 19.1 regarding the time period within which to correct a non-monetary default will be deemed to be “as soon as possible” with diligent, continuous prosecution of corrective action; provided, however, that because of the indefinite nature of a cure period that is “as soon as possible” no Emergency default shall become an Event of Default until the expiration of the stated time periods in Section 19.1. “Emergency” means a condition or potential condition that requires prompt action to (i) preserve the safety of persons or property, (ii) prevent the interruption or suspension of services deemed reasonably critical by Landlord to the operation of the Buildings or by Tenant of its business, or (iii) avoid or correct a violation of any Legal Requirement that is of a material nature.
(b)If Landlord terminates this Lease pursuant to this Article 20, Tenant will remain liable for (i) the sum of (x) all Basic Rent, Additional Rent and other amounts payable by Tenant hereunder until the date this Lease would have expired had such termination not occurred, and (y) all reasonable expenses incurred by Landlord in re-entering the Premises, repossessing the same, making good any default of Tenant, painting, altering or dividing the Premises, putting the same in proper repair, reletting the same (including any and all reasonable attorneys’ fees and disbursements and reasonable brokerage fees incurred in so doing), removing and storing any property left in the Premises following such termination and any and all reasonable expenses which Landlord may incur during the occupancy of any new tenant (other than expenses of a type that are Landlord’s responsibility under the terms of this Lease); less (ii) the net proceeds of any reletting actually received by Landlord. Landlord shall use commercially reasonable efforts to mitigate its damages. Tenant agrees to pay to Landlord the difference between items (i) and (ii) above with respect to each month during the period that would have constituted the balance of the Term, at the end of each such month. Any suit brought by Landlord to enforce collection of such
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difference for any one month will not prejudice Landlord’s right to enforce the collection of any difference for any subsequent month. Tenant’s liability under this Section 20.2(b) will survive the institution of summary proceedings and the issuance of any warrant thereunder.
(c)If Landlord terminates this Lease pursuant to Article 20, Landlord will have the right to require Tenant to pay to Landlord, on demand, as liquidated and agreed final damages in lieu of Tenant’s liability under Section 20.2(b), an amount equal to the difference between (i) the Basic Rent and Additional Rent, computed on the basis of the then current annual rate of Basic Rent and Additional Rent and all fixed and determinable increases in Basic Rent, which would have been payable from the date of such demand to the date when this Lease would have expired if it had not been terminated, and (ii) the then fair rental value of the Premises (taking into account the fair market rental value of laboratory and other scientific research space of the type and quality located at the Premises) for the same period, less the costs of all reletting expenses, including the cost to paint, alter or divide the space, put the same in proper repair, reasonable attorneys’ fees and disbursements and reasonable brokerage fees. Upon payment of such liquidated and agreed final damages, Tenant will be released from all further liability under this Lease with respect to the period after the date of such demand, except for those obligations that expressly survive the termination of this Lease. If, after the Event of Default giving rise to the termination of this Lease, but before presentation of proof of such liquidated damages, the Premises, or any part thereof, are relet by Landlord for a term of one (1) year or more, in an arms-length transaction, the amount of rent reserved upon such reletting will be deemed to be the fair rental value for the part of the Premises relet during the term of such reletting.
(d)Landlord shall in no event be responsible or liable for any failure to relet the Premises or any part thereof, or for any failure to collect any rent due upon a reletting, except to the extent of Landlord’s obligations under law, including Landlord’s obligation to mitigate its damages. Landlord shall have no obligation to relet all or any portion of the Premises in preference or priority to any other space Landlord may have available in the Campus for rent or lease and Landlord shall not be deemed to have failed to mitigate its damages if Landlord or any employee, agent or representative of Landlord leases any other space in the Campus (or any other building owned by Landlord or an Affiliate of Landlord) before reletting the Premises or any portion thereof. Furthermore, Tenant recognizes that the value of the Premises depends upon rental rates, terms of leases, and quality of tenants, and acknowledges that Landlord’s rejection of a prospective replacement tenant (which, in Landlord’s sole judgment, is financially unacceptable, is incompatible, inconsistent, or unacceptable with the character, use and/or image of the Buildings or the Campus, or would otherwise fail to satisfy any of the minimum criteria for a prospective transferee as set forth in Section 16.3 above) or of lease terms which are less favorable to Landlord than those contained herein, or of an offer to lease for a rental below Landlord’s published rates for new leases of comparable space in the Campus or the Comparable Buildings, shall not give rise to any claim that Landlord has failed to adequately mitigate Landlord’s damages. In addition, in the event of any default hereunder by Landlord, Tenant shall, subject to the terms of this Lease, exercise commercially reasonable efforts to mitigate any damages incurred by Tenant as a result of such default.
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No payment by Tenant or receipt by Landlord of a lesser amount than the rent herein stipulated will be deemed to be other than on account of the earliest stipulated rent. No endorsement or statement on any check or any letter accompanying any payment of rent will be deemed an accord and satisfaction and Landlord may accept any such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy provided in this Lease.
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Landlord and Tenant each represents and warrants to the other that neither has had any dealings or entered into any agreements with any person, entity, realtor, broker, agent or finder in connection with the negotiation of this Lease other than Brokers. Landlord and Tenant each hereby indemnify and hold harmless the other from and against any loss, claim, damage, expense (including costs of suit and reasonable attorneys’ fees) or liability for any compensation, commission or charges claimed by any other realtor, broker, agent or finder claiming to have dealt with the indemnifying party in connection with this Lease. The provisions of this Article 25 will survive the expiration
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or sooner termination of this Lease. Landlord agrees that it will be responsible for any commission due to Brokers in connection with the execution of this Lease pursuant to the terms of a separate agreement between Landlord and Brokers. Landlord’s failure to timely pay Tenant’s Broker prior to the expiration of any applicable notice and cure period set forth in the commission agreement between Landlord and Tenant’s Broker (the “Tenant’s Broker Commission Agreement”) shall constitute a Specified Landlord Default entitling Tenant to its self-help and offset rights pursuant to Section 20.8 above. The portion of Tenant’s Broker’s commission payable to Tenant in the amount of $4,963,403.65 pursuant to the Tenant’s Broker Commission Agreement and defined therein as the “Third Installment” (the “Broker’s Contribution to Tenant’s TI Fund”) shall be deposited by Landlord into Tenant’s TI Fund upon the first issuance of a Certificate of Occupancy (or Temporary Certificate of Occupancy, if applicable) for any part of the Premises which permits Tenant to occupy any part of the Premises, and shall be used for the same purposes and disbursed in the same manner and subject to the same procedures and requirements as other funds in Tenant’s TI Fund account in accordance with Schedule B-1.
Every notice or other communication required or contemplated by this Lease shall be in writing and sent by: (a) certified or registered mail, postage prepaid, return receipt requested, or (b) nationally recognized overnight courier, such as Federal Express or UPS, in each case addressed to the intended recipient at the address set forth in the Basic Lease Provisions or at such other address as the intended recipient previously designated by written notice to the other party. Any notice delivered by the attorney for Landlord or Tenant shall be deemed to be delivered by Tenant or Landlord, as the case may be. The date of the giving of a notice or other communication shall be deemed to be the date of receipt, or refusal to accept delivery, if mailed, or the next business day if sent by overnight courier for next business day delivery. Email notices shall also be sent to email addresses provided in the Basic Lease Provisions, if any, but shall not be deemed sufficient notice and must be sent in addition to notice in accordance with subparts (a) or (b) above.
Tenant will have no recourse against any individual or entity comprising Landlord or any of the Landlord Indemnified Parties (other than Landlord) in connection with this Lease or the occupancy and/or use of the Premises by Tenant and Tenant’s Visitors; rather, Tenant agrees to look solely to Landlord’s interest and estate in the Buildings (including without limitation any rent, insurance, sale or condemnation proceeds) for the satisfaction of Tenant’s remedies arising out of or related to this Lease.
Landlord will have no recourse against any individual or entity comprising Tenant or any of the Tenant Indemnified Parties (other than Tenant) in connection with this Lease or the occupancy and/or use of the Premises by Tenant and Tenant’s Visitors; rather, Landlord agrees to look solely to the assets of Tenant for the satisfaction of Landlord’s remedies arising out of or related to this Lease.
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(b)If at any time during the Term (as the same may be extended) Landlord determines reasonably and in good faith that the financial condition of the issuer of the then current letter of credit is such that Landlord's ability to draw upon such letter of credit is impaired, restricted, refused or otherwise adversely affected, Tenant shall, within thirty (30) days of Landlord's written request to Tenant, obtain a replacement letter of credit in substitution for the then current letter of credit in the form and amount required herein from an issuer acceptable to Landlord in Landlord's reasonable discretion. If Tenant fails to timely provide Landlord with such replacement letter of credit, Landlord will have the right to cash the letter of credit and to retain the proceeds as security hereunder, subject to the provisions of Section 28.1(a). In addition, if at any time during the Term (as the same may be extended) a receiver is appointed for any issuer of a letter of credit held by Landlord hereunder, Landlord will have the right to cash such letter of credit and to retain the proceeds as security hereunder, subject to the provisions of Section 28.1(a).
28.2Reduction of Security. On the Reduction Date, provided that Tenant has not been in default of any monetary obligations or any material non-monetary obligations under this Lease beyond any applicable notice and cure periods within the twelve (12) month period prior to the Reduction Date and Landlord has not delivered to Tenant a notice of default of its monetary obligations or any material non-monetary obligations more than three (3) times prior to the Reduction Date, Tenant shall be entitled to reduce the amount of the Security by fifty percent (50%) so that the Security shall be $4,069,327.50 for the remainder of the Term, as the same may be extended pursuant to Section 31.1. If Tenant is entitled to a reduction in the Security, Tenant shall replace the Security then being held by Landlord with a letter of credit in the reduced amount set forth in the immediately preceding sentence. All terms applicable to the Security under this Article 28 shall otherwise apply.
28.3Return of Security. Provided that Tenant has not received a written notice of default of any monetary obligations or any material nonmonetary obligations under this Lease which default remains uncured as of the expiration of the Term, as the same may be extended pursuant to Section 31.1, the part of the Security (or the remaining undrawn letter of credit) not used, applied, or retained by Landlord in connection with an Event of Default by Tenant under this Lease shall be returned, without interest, to Tenant within thirty (30) days after the end of the Term, as the same may be extended pursuant to Section 31.1, subject to Landlord’s final inspection of the Premises. Notwithstanding the foregoing, if Landlord, in its sole discretion, has sufficient evidence that the Security has been assigned to an assignee of this Lease, Landlord shall return the Security to such assignee and, upon such return, will be released from all liability with respect to the Security.
28.4Bankruptcy. In the event of bankruptcy or other debtor-creditor proceeding against Tenant, the Security will be deemed to be applied first to the payment of rent and other charges due Landlord for all periods prior to filing of such proceedings.
28.5Transfer of Security. In the event of any transfer of title to the Premises or the Buildings or any assignment of Landlord’s interest under this Lease, Landlord will have the right
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to transfer the Security to such transferee, provided that Landlord gives Tenant the name and address of such transferee and satisfies the applicable requirements of the issuer. The fee for the transfer of the Security shall be paid by Landlord. Following any such transfer of the Security, Landlord will be automatically released from all liability for the return of the Security. The provisions of this Section 28.5 will apply to every transfer of the Security to a new transferee.
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29.15Quiet Enjoyment. Landlord covenants that if Tenant shall timely perform all of its obligations hereunder then, subject to the provisions of this Lease, Tenant shall, during the Term, peaceably and quietly occupy and enjoy the full possession of the Premises without hindrance by Landlord or any party claiming through or under Landlord.
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(a)Tenant shall pay to Landlord, as Basic Rent during each Extension Period, the Fair Market Rental Value of the Premises. “Fair Market Rental Value” means the fair market base rent payable by renewing tenants for comparable Office Use space and Laboratory Use space in Comparable Buildings (taking into account fair market landlord-provided concessions then being offered and accepted for similar transactions in Comparable Buildings, and that Landlord is not providing such concessions for the Extension Period, and other relevant factors) as of the first day of the applicable Extension Period. In determining Fair Market Rental Value, Landlord and Tenant shall take into account applicable lengths of lease term, differences in size of the space demised, the then current break-down of Office Use space and Laboratory Use space in the Premises, the quality of the Buildings compared to the other Comparable Buildings, the location of the Comparable Buildings, amenities in the Buildings and Comparable Buildings, the ages of the Comparable Buildings, differences in base years or stop amounts for operating expenses and tax escalations and other factors normally taken into account in determining fair market rent. Fair Market Rental Value will not include the cost of improvements or alterations to the Premises which were paid for by Tenant and not reimbursed by Landlord or any of Tenant’s trade fixtures. Fair Market Rental Value shall be determined after taking into account any capital expenditures Tenant is required to pay for an Extension Period that market tenants in Comparable Buildings would not be obligated to pay, including, but not limited to, the Extension Period Late Term Building System Capital Repair and Replacement Costs and/or the balance of Tenant’s Share of the cost of any Late Term Landlord Capital Repair and Replacement not previously paid for by Tenant, as applicable, as may be due to Landlord pursuant to clause (b) in Section 31.1 above.
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(b)If Tenant timely exercises Tenant’s ROFO Right, Landlord and Tenant shall have [**] days to negotiate, in good faith, the terms of a purchase and sale agreement that shall govern Tenant’s purchase of the Sale Property. During the longer of [**] days or the period in the Revised Sale Offer Notice, Tenant shall conduct its due diligence investigation of the Sale Property. If, during such [**] day period, Landlord and Tenant fail to agree upon the terms of a purchase and sale agreement after using reasonable and good faith efforts, then Tenant shall be deemed to have waived Tenant’s ROFO Rights.
LANDLORD’S REPRESENTATIONS AND WARRANTIES
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Landlord’s representations and warranties set forth in this Article 37 shall survive for a period of [**] following the Commencement Date, except for Landlord’s representations and warranties set forth in Section 37.1(ix) and (x), which shall survive until [**].
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IN WITNESS WHEREOF, the parties have executed this Lease as of the date first above written.
WITNESS: | LANDLORD: WARREN CC ACQUISITIONS, LLC, a Delaware limited liability company |
/s/ Maxine Bickings ____________________ Maxine Bickings | By:/s/ Stephen Card_____________________ Name: Stephen Card Title: Authorized Signatory |
ATTEST: | TENANT: PTC THERAPEUTICS, INC., a Delaware corporation |
/s/ Ellen Welch_________________________ Ellen Welch | By:/s/ Stuart Peltz_______________________ Name: Stuart Peltz Title: CEO |
134265652.4
Schedule B-1
OFFICE USE FINISH WORK AND LABORATORY USE FINISH WORK
1.Tenant hereby advises Landlord that Tenant desires to perform certain office-related work (the “Office Use Finish Work”) to the Premises as well as certain laboratory-related work (the “Laboratory Use Finish Work”) to the Premises in accordance with schematic drawings to be prepared by Tenant and approved by Landlord ( “Preliminary Plans”) and Working Plans (as defined below). Tenant shall construct the Office Use Finish Work and the Laboratory Use Finish Work in a good and workmanlike manner and in compliance with all applicable Legal Requirements and the Working Plans.
2.The parties acknowledge that Tenant has not yet developed plans for the Office Use Finish Work or Laboratory Use Finish Work. After Tenant develops such plans, Tenant shall deliver to Landlord four (4) sets of the Preliminary Plans for the Office Use Finish Work. Tenant shall deliver to Landlord four (4) sets of the Preliminary Plans for the Laboratory Use Finish Work promptly upon completion, and such Preliminary Plans for the Laboratory Use Finish Work may be submitted separately from the Preliminary Plans for the Office Use Finish Work. Landlord, acting reasonably, shall notify Tenant whether it approves or disapproves of such Preliminary Plans for the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable, within ten (10) business days after Landlord’s receipt thereof. If Landlord notifies Tenant of any reasonable objections to such Preliminary Plans for the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable, (such notice, an “Objection Notice”), Tenant shall make necessary revisions and resubmit the same to Landlord within seven (7) days of Tenant’s receipt of the Objection Notice. Landlord shall reasonably approve or disapprove such revised Preliminary Plans for the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable, within five (5) business days after Tenant submits the same to Landlord. Landlord’s approval will be evidenced by endorsement to that effect on one set of the Preliminary Plans for the Office Use Finish Work and the Laboratory Use Finish Work, as applicable, and the return of such signed set to Tenant. If Landlord fails to respond to the proposed Preliminary Plans for the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable, or any revisions thereof submitted by Tenant with its approval or request for revisions/modification within the time period(s) provided in this Paragraph 2, and such failure continues for more than three (3) business days after receipt by Landlord of the notice from Tenant described in the immediately following sentence, then Landlord shall be deemed to have approved of the proposed Preliminary Plans for the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable. The notice provided by Tenant to Landlord shall state in bold or CAPITALIZED LETTERS that “Landlord has failed to respond to Tenant’s submission of the proposed Preliminary Plans as required by Schedule B-1 of the Lease and the continued failure by Landlord to respond for more than three (3) business days after the delivery of this notice shall be deemed Landlord’s consent to the proposed Preliminary Plans”.
3.(a) After the approval of the Preliminary Plans for the Office Use Finish Work, Tenant shall cause working plans and specifications to be prepared in conformity with the Preliminary Plans for the Office Use Finish Work. When completed, Tenant shall deliver to Landlord four (4) sets working plans and specifications of the Office Use Finish Work. After the approval of the Preliminary Plans for the Laboratory Use Finish Work, Tenant shall cause working plans and
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specifications to be prepared in conformity with the Preliminary Plans for the Laboratory Use Finish Work. When completed, Tenant shall deliver to Landlord four (4) sets of working plans and specifications of the Laboratory Use Finish Work. The working plans and specifications for the Laboratory Use Finish Work may be submitted separately from the working plans and specifications for the Office Use Finish Work. The working plans and specifications for both the Office Use Finish Work and the Laboratory Use Finish Work shall: (i) be prepared and stamped by a licensed professional engineer and/or architect, both of whom have been approved by Landlord, such approval not to be unreasonably withheld, conditioned or delayed; (ii) be in compliance with all applicable Legal Requirements; and (iii) include, without limitation, construction working drawings, mechanical, electrical, and plumbing drawings (MEPs), fire protection system, safety systems, and other technical specifications, and the finishing details, including without limitation, a list of the types and quality of materials to be used in constructing the Office Use Finish Work and the Laboratory Use Finish Work. Landlord, acting reasonably, shall notify Tenant whether it approves or disapproves of such working plans and specifications with respect to the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable, within ten (10) business days after Landlord’s receipt thereof. If Landlord notifies Tenant of any reasonable objections to such working plans and specifications with respect to the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable (such notice, a “Working Plans Objection Notice”), Tenant shall use commercially reasonable efforts to make necessary revisions and resubmit the same to Landlord within ten (10) business days of Tenant’s receipt of the Working Plans Objection Notice with respect to the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable. Landlord shall approve or disapprove such revised working plans and specifications with respect to the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable, within five (5) business days after Tenant submits the same to Landlord. Landlord’s approval shall be evidenced by endorsement to that effect on one set of the working plans and specifications with respect to the Office Use Finish Work and the Laboratory Use Finish Work, as applicable, and the return of such signed set to Tenant. If Landlord fails to respond to the proposed working plans and specifications with respect to the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable, or any revisions thereof submitted by Tenant with its approval or request for revisions/modification within the time period(s) provided in this Paragraph 3(a), and such failure continues for more than three (3) business days after receipt by Landlord of the notice from Tenant described in the immediately following sentence, then Landlord shall be deemed to have approved of the proposed working plans and specifications with respect to the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable. The notice provided by Tenant to Landlord shall state in bold or CAPITALIZED LETTERS that “Landlord has failed to respond to Tenant’s submission of the proposed working plans and specifications as required by Schedule B-1 of the Lease and the continued failure by Landlord to respond for more than three (3) business days after the delivery of this notice shall be deemed Landlord’s consent to the proposed working plans and specifications”. The working plans and specifications approved or deemed approved by Landlord with respect to the Office Use Finish Work and the Laboratory Use Finish Work, as applicable, are hereinafter referred to as the “Working Plans”.
(b)If Tenant desires any changes to the Working Plans with respect to the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable (each such change shall be referred to herein as a “Change Order”), Tenant shall submit such proposed Change Order to Landlord. Within five (5) business days after receipt of any proposed Change Order from Tenant,
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Landlord shall approve all Tenant reasonably requested Change Orders. In the event of a rejection by Landlord of any proposed Change Order, Tenant may revise such Change Order and re-submit same pursuant hereto. If Landlord fails to respond to a proposed Change Order with respect to the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable, or any revisions thereof submitted by Tenant with its approval or request for revisions/modification within the time period provided in this Paragraph 3(b), and such failure continues for more than three (3) business days after receipt by Landlord of the notice from Tenant described in the immediately following sentence, then Landlord shall be deemed to have approved of the proposed Change Order with respect to the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable. The notice provided by Tenant to Landlord shall state in bold or CAPITALIZED LETTERS that “Landlord has failed to respond to Tenant’s submission of the proposed Change Order as required by Schedule B-1 of the Lease and the continued failure by Landlord to respond for more than three (3) business days after the delivery of this notice shall be deemed Landlord’s consent to the proposed Change Order”. All plans submitted by Tenant to Landlord must be signed and sealed. All Change Order requests and information pertaining thereto shall be conveyed to Landlord by Tenant’s designated representative. Tenant shall designate Tenant’s designated representative contemporaneously with submission of the Preliminary Plans and may change its designated representative by notice to Landlord.
4.Tenant agrees that it shall enter into a guaranteed maximum (fixed) price contract with Vision Construction pursuant to an AIA Form A102 and A201 contract (“Construction Contract”) subject to the reasonable approval of Tenant, for the performance of the Office Use Finish Work and at Tenant’s discretion, the Laboratory Use Finish Work. Landlord shall instruct Vision Construction to negotiate, and Tenant agrees to negotiate, the terms of the Construction Contract in good faith in a prompt and diligent manner. At a minimum, the Construction Contract shall be a guaranteed maximum price subject to competitive bidding of subcontractors and other trades, all fees, insurance costs, overhead and markup shall be consistent with market for tenant improvement work to accommodate similar uses in Comparable Buildings located in the Central New Jersey geographic area, and shall contain liquidated damages for late delivery. If the Construction Contract is not executed within a reasonable time after the Commencement Date, then Tenant and Vision Construction (as instructed by Landlord) shall use the dispute resolution procedure of Article 33 to resolve any open issues and the costs incurred by engaging in such dispute resolution procedure that are not payable by Tenant pursuant to Article 33 shall be payable by Vision Construction. Tenant shall have the right to recommend inclusion in bids of its designated qualified subcontractors, subject to the terms and conditions of the Construction Contract. Tenant shall have the right to designate its preferred subcontractors for the performance of specialty work that is part of the Laboratory Use Finish Work, which designated subcontractors shall be subject to Landlord’s approval which shall not be unreasonably withheld, conditioned or delayed. Tenant shall have the right to choose its own Laboratory Use Finish Work general contractor in its reasonable discretion.
5.Tenant agrees that, if requested by Landlord, Tenant’s contractors shall not be labor union members; provided that sufficiently skilled non-union labor is available and competitively priced. If Tenant’s contractors do not work in harmony with, or interfere with, other labor employed by Landlord, by Landlord’s contractors, or by Vision Construction or its contractors, or in the event of the occurrence of any work stoppage, strike or other labor dispute on the Premises or the Campus
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arising out of or in connection with Tenant’s contractors, then Landlord will have the right to require Tenant to remove or to cause the removal of those contractors designated by Landlord.
6.Prior to entering upon the Premises, Tenant shall submit proof to Landlord’s satisfaction that Tenant has in full force and effect the insurances required under Article 14 of the Lease.
7.(a)Within thirty (30) days of Landlord’s approval of the Preliminary Plans with respect to the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable, Tenant shall provide Landlord with an estimate of the cost of constructing the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable (the “Estimated Cost” of the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable). Tenant agrees within five (5) business days after the date of this Lease to fund into an account held by Landlord in a segregated tenant security type account, an amount equal to $3,617,180.00 which shall be administered by Landlord and utilized by Tenant for Reimbursable Costs (“Tenant’s TI Fund”) which Tenant shall be entitled to requisition from time to time as Tenant shall determine. Landlord agrees to pay to Tenant an amount equal to the lesser of (i) Thirty-Six Million One Hundred Seventy-One Thousand Eight Hundred and 00/100 Dollars ($36,171,800.00) ($100.00 per rentable square foot of the Premises), and (ii) the actual out-of-pocket Reimbursable Costs incurred by Tenant in connection with the construction of the Office Use Finish Work and the Laboratory Use Finish Work (such lesser amount being hereinafter referred to as the “Allowance”). “Reimbursable Costs” means the cost of labor and materials, architectural fees, engineering fees, construction management fees, design fees, permit fees, insurance premiums, and other similar “hard costs” and “soft costs” in connection with the construction of the Office Use Finish Work and the Laboratory Use Finish Work and furniture, fixtures and equipment for the Premises. Tenant shall be permitted to allocate the Allowance between the cost of constructing the Office Use Finish Work and the Laboratory Use Finish Work as reasonably determined by Tenant. Landlord shall also grant Tenant an additional allowance in an amount not to exceed $[**] for Tenant’s construction of a “Grab and Go” food service facility in a location mutually acceptable to Landlord and Tenant, pursuant to plans and having a size, configuration and specifications mutually acceptable to Landlord and Tenant, which additional amount shall be added to the Allowance. Tenant and Landlord shall also each have the right, following delivery of a Conversion Notice given to the other party no earlier than January 1, 2023, and no later than the day immediately preceding the third (3rd) year anniversary of the Commencement Date, to convert all or any portion of the value of the abatement of Basic Rent provided in the Basic Lease Provisions into additional Allowance for use by Tenant in connection with the construction of the Office Use Finish Work and the Laboratory Use Finish Work on a dollar for dollar basis and Tenant shall have access to such amounts so converted in the same manner and subject to the same procedures and requirements as provided herein with respect to the Allowance. It is acknowledged that the Office Use Finish Work and Laboratory Use Finish Work shall be two separate projects and that the process described herein for the disbursement of Allowance and Tenant’s TI Fund shall apply to all Reimbursable Costs submitted by Tenant to Landlord in accordance with this Section. Notwithstanding anything in this Schedule B-1 to the contrary, Reimbursable Costs in connection with the performance of the Office Use Finish Work and/or the Laboratory Use Finish Work shall first be requisitioned by Tenant and disbursed by Landlord from the Tenant’s TI Fund until the full amount of the Tenant’s TI Fund has been utilized. Upon full expenditure of Tenant’s TI Fund, Tenant shall be entitled to draw on the full amount of the Allowance to pay for any other
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Reimbursable Costs it incurs. For the sake of clarity, if, after Tenant’s initial payment of $3,617,180.00 into Tenant’s TI Fund is fully utilized and disbursements from the Allowance to pay Reimbursable Costs have commenced, Broker’s Contribution to Tenant’s TI Fund is made into Tenant’s TI Fund, then from that point forward all disbursements for payment of Reimbursable Costs shall be made from Tenant’s TI Fund, as replenished by Broker’s Contribution to Tenant’s TI Fund, until such time that the full amount of Tenant’s TI Fund has again been utilized, at which point disbursements from the Allowance to pay Reimbursable Costs shall resume. Tenant shall be responsible to pay directly to its contractor or vendors any excess of the actual cost of the Office Use Finish Work and the Laboratory Use Finish Work over the Allowance and Tenant’s TI Fund (the “Excess”). The Allowance shall be utilized in full before Tenant is required to pay for any Excess out of its own funds.
(b)Provided there shall exist no Event of Default by Tenant at such time, Landlord shall pay to Tenant the Allowance in the manner set forth in this Section 7(b). If an Event of Default results in nonpayment of the Allowance, upon the curing of the Event of Default the payments of the Allowance shall resume. Landlord shall make monthly progress payments of the Allowance for the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable, either directly to specified vendors of Tenant or to Tenant, as specified by Tenant, equal to the total amount of invoices for the Office Use Finish Work and/or the Laboratory Use Finish Work, as applicable which are covered by the applicable monthly requisition by Tenant’s architect plus any other Reimbursable Costs incurred by Tenant for which invoices are provided, less a retainage equal to the lesser of (i) [**] percent ([**]%), or (ii) the retainage set forth in the applicable construction contract (but in any event such retainage shall not be less than [**] percent ([**]%) except upon Substantial Completion when it may be reduced to a percentage of the value of the work remaining to be completed). Landlord shall make such progress payments within the time period set forth in the applicable construction contract for the performance of the Office Use Finish Work and the Laboratory Use Finish Work, as applicable, from and after receipt of a complete AIA Form No. G702 therefor signed by Tenant’s architect (but not more frequently than one time per month), which requisition shall set forth the names of each vendor, supplier, consultant, contractor, subcontractor, materialman, architect and engineer to whom payment is due and the amount due to each of them, and shall include (i) a certificate from Tenant’s architect which certifies that the portion of the Office Use Finish Work or the Laboratory Use Finish Work, as applicable, described in such requisition has been substantially completed in accordance with the Working Plans with respect to the Office Use Finish Work or the Laboratory Use Finish Work, as applicable, and that all materials for which payment is requested in such requisition have actually been delivered to the Premises or bonded storage, (ii) with the exception of the first requisition, copies of waivers of lien, in form and substance reasonably satisfactory to Landlord, from all contractors, subcontractors, materialmen, architects and engineers covering all work, materials and services which were the subject of all previous requisitions that have been paid, or lien waivers to be held in escrow for requisitions that have not yet been paid.
(c)Landlord shall disburse the [**] percent ([**]%) retainage (or such other retainage amount as may be set forth in the applicable construction contract) to Tenant after Substantial Completion of the Office Use Finish Work or the Laboratory Use Finish Work, as applicable, acknowledging that each of the Office Use Finish Work and Laboratory Use Finish Work shall be
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treated as separate projects with separate budgets and retainage. “Substantial Completion” with respect to the Office Use Finish Work and the Laboratory Use Finish Work, as applicable, shall mean delivery to Landlord of all of the following (i) invoices or other evidence (including, without limitation, lien waivers) reasonably satisfactory to Landlord of the amounts paid by Tenant from the Excess, or by Landlord from the Allowance or Tenant’s TI Fund, as applicable, for the Reimbursable Costs incurred by Tenant for the Office Use Finish Work or the Laboratory Use Finish Work, as applicable, if not directly paid by Landlord at Tenant’s request, (ii) a certificate from a financial officer of Tenant which certifies that Tenant incurred such costs, (iii) a certificate from Tenant’s architect which certifies that the Office Use Finish Work or the Laboratory Use Finish Work, as applicable, has been completed substantially in accordance with the Working Plans with respect to the Office Use Finish Work or the Laboratory Use Finish Work, as applicable, and in compliance with all applicable Legal Requirements, and (iv) a temporary or other certificate of occupancy issued by the Township of Warren evidencing that the Office Use Finish Work or the Laboratory Use Finish Work, as applicable, has been completed; provided, however, that if Tenant delivers a temporary certificate of occupancy, Tenant shall diligently complete all unfinished work as required by the Township of Warren in order to obtain a permanent certificate of occupancy, and shall deliver to Landlord a copy of permanent certificates of occupancy covering the entire Premises promptly following Tenant’s receipt of same. Following final completion of the Office Use Finish Work or Laboratory Use Finish Work, as applicable, Tenant shall provide to Landlord final working drawings, with amendments, or the As Built Plans, and the disk carrying the same.
(d)If Tenant fails to pay a contractor, subcontractor, materialman, architect or engineer in connection with the Office Use Finish Work and/or the Laboratory Use Finish Work, Landlord shall have the right, but not the obligation, to pay to such contractor, subcontractor, materialman, architect or engineer at such time as Landlord shall determine in its discretion, all sums so due from and payable by Tenant, and Landlord shall have all remedies available to Landlord at law or in equity for collection of all sums so paid by Landlord and due to Landlord from Tenant and Landlord may use all or any portion of the retainage to make such a payment. Notwithstanding the provisions of the immediately preceding sentence, Landlord shall give Tenant no less than thirty (30) days’ notice prior to making any payment to a contractor, subcontractor materialman, architect or engineer. If within ten (10) days after the giving of such notice, Tenant notifies Landlord in writing that, in good faith, it is disputing the right of such contractor, subcontractor, materialmen or engineer to receive such payment, Landlord shall not make any such payment to the contractor, subcontractor materialman, architect or engineer. Tenant agrees that it shall comply with the provisions of Article 13 of the Lease as a result of such non-payment.
(e)Landlord shall have no responsibility to, nor privity of agreement with, any contractors, subcontractors, suppliers or third party vendors by reason of reimbursement to Tenant of an amount equal to the Allowance.
Schedule B-1
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APPENDIX I
DEFINITIONS
As used in this Lease, the following terms have the following meanings:
AAA: defined in Section 5.2(b).
Abated Rent: defined in the Basic Lease Provisions.
Acceptable Subtenant: defined in Section 16.15.
Acceptable Net Worth Threshold: defined in Section 14.1(c).
Acceptance Notice: defined in Section 33.1(b).
Additional Insureds: defined in Section 14.1(a).
Additional Rent: defined in Section 3.2.
Adverse Variance Result: defined in Section 32.1(a).
Affiliate: any entity controlled by, under common control with or which controls a party or in which such party, directly or indirectly, has a twenty-five percent (25%) or greater voting or ownership interest.
Allowance: defined in Schedule B-1.
Allowance and Excess Percentage: defined in Schedule B-1.
Amenity Building: defined in Section 2.2.
Anticipated Restoration Date: defined in Section 17.2.
Arbitrator: defined in Section 33.1(a).
Association: defined in Section 2.6.
Audit Period: defined in Section 5.2(a).
Bankruptcy Code: Title 11 of the United States Code, as amended, and all rules and regulations promulgated pursuant thereto.
Base Index Number: defined in Section 14.1(a).
Basic Rent: defined in the Basic Lease Provisions.
Broker: defined in the Basic Lease Provisions.
Broker’s Contribution to Tenant’s TI Fund: defined in Article 25.
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Building 400: defined in the Basic Lease Provisions.
Building 400 Land: defined in the Basic Lease Provisions.
Building 400 Prep Work: defined in Schedule B.
Building 500: defined in the Basic Lease Provisions.
Building 500 Land: defined in the Basic Lease Provisions.
Building System: defined in Section 7.1(a).
Building System Demands Summary: defined in Section 7.1(a).
Buildings: defined in the Basic Lease Provisions.
By-Laws: means the corporate “By-Laws” of the Association.
Campus: defined in Section 2.6.
Campus Monument Sign: defined in Section 32.1(c).
Change Order: defined in Schedule B-1.
Commencement Date: defined in the Basic Lease Provisions.
Common Facilities: defined in Section 2.6.
Common Utility Lines: any sanitary sewer, domestic and fire water systems, electric power, telephone cables and lines, and other utility connections exclusive of the portion of such lines and connections that are exclusively serving the Buildings, the Parking Decks or any other buildings and parking decks in the Campus.
Comparable Buildings: defined in the Basic Lease Provisions.
Conversion Notice: defined in the Basic Lease Provisions.
Critical Default Cure Period: defined in Section 20.8.
Critical Specified Landlord Default: Any default or breach of Landlord’s performance obligations under this Lease that has more than a de minimis adverse effect or would adversely impact or interrupt (beyond a de minimis amount) the following key business operations at the Premises: (a) [**], (b) data center operations, (c) laboratory operations, (d) temperature controlled laboratory equipment operations or (e) parking in the Parking Deck (but only if Landlord is unable to provide a temporary, alternative parking arrangement that is reasonably acceptable to Tenant at no additional cost to Tenant).
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Current Index Number: defined in Section 14.1(a).
Declaration: defined in Section 2.6.
Declaration Charges: defined in Section 5.1.
Default Interest Rate: [**] percentage points over the Prime Rate.
Emergency: defined in Section 19.1.
Environmental Laws: all current and future statutes, regulations, codes and ordinances of any governmental entity, authority, agency and/or department relating to (i) air emissions, (ii) water discharges, (iii) noise emissions, (iv) air, water or ground pollution, or (v) any other environmental or health matter.
Environmental Reports: that certain Final Phase I Environmental Site Assessment/Preliminary Assessment for Warren Corporate Center, 283-291 King George Road, Block 37, Lots 13.02, 13.03, 13.04, 13.05, 13.07, 19, 22, 23 and 24 and Block 35, Lot 6.01, Township of Warren, Somerset County, New Jersey prepared by EcolSciences, Inc. and dated February 3, 2016.
Estimated Cost: defined in Schedule B-1.
Event of Default: defined in Section 19.1.
Excess: defined in Schedule B-1.
Excluded Transactions: defined in Section 35.1.
Exclusive Period: defined in Section 35.1.
Excusable Delay: any delay caused by governmental action, or lack thereof (including, without limitation, delays in providing inspections, approvals or certificates); shortages or unavailability of materials; labor disputes (including, but not limited to, strikes, slowdowns, job actions, picketing and/or secondary boycotts but not against Landlord); fire, explosion or other casualty; delays in transportation; delays due to adverse weather conditions, acts of God; national or global pandemic (including but not limited to COVID-19), regional epidemic; quarantine restrictions. directives or requests by any governmental entity, authority, agency or department; any court or administrative orders or regulations; adjustments of insurance; acts of declared or undeclared war, warlike conditions in this or any foreign country, acts of terrorism, public disorder, riot or civil commotion; or by anything else beyond the reasonable control of Landlord or Tenant, as applicable, including delays caused directly or indirectly by an act or a failure to act by Tenant or Tenant’s Visitors or Landlord or Landlord’s Agents, as applicable.
Expense Arbiter: defined in Section 5.2(b).
Expiration Date: defined in the Basic Lease Provisions.
Extended Restoration Period: defined in Section 17.4(b).
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Extension Option Exercise Notice Period: defined in Section 31.1.
Extension Period: defined in Section 31.1.
Extension Period Late Term Building System Capital Repairs and Replacement Costs: defined in Section 7.1(c)(iv).
Fair Market Rental Value: defined in Section 31.2(a).
Generators: the emergency generators serving the Buildings.
HVAC: the ventilating, air-conditioning and cooling in the Buildings.
Index: defined in Section 14.1(a).
Index Number: defined in Section 14.1(a).
Insurance Payments: defined in Section 14.1(g).
Insurance Requirements: all terms of any insurance policy maintained by Landlord or Tenant with respect to the Premises and all requirements of the National Board of Fire Underwriters (or any other body exercising similar function) applicable to or affecting all or any part of the Premises.
IRC: defined in Section 7.1(c).
ISRA: defined in Section 11.1.
Laboratory Use: defined in the Basic Lease Provisions.
Laboratory Use Finish Work: defined in Schedule B-1.
Land: defined in the Basic Lease Provisions.
Landlord: the party defined as such in the first paragraph of this Lease, including at any time after the date hereof, the then owner of Landlord’s interest in the Premises.
Landlord Indemnified Parties: defined in Section 11.6.
Landlord Payment Default: defined in Section 20.8.
Landlord Useful Life Warranty Period: defined in Section 7.1(c)(v).
Landlord Useful Life Warranty Period Work: defined in Section 7.1(c)(v).
Landlord’s Agents: defined in Section 11.9.
Landlord’s Base Building Work: defined in Schedule B.
Landlord’s Default Dispute Notice: defined in Section 20.8.
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Landlord’s Knowledge: defined in Section 2.2(c).
Landlord’s Share: defined in Section 7.1(c)(v).
Late Term Building System Capital Repair and Replacement: defined in Section 7.1(c)(i).
Late Term Landlord Capital Repair and Replacement: defined in Section 7.2(b)(i).
Lease Year: each calendar year, or partial calendar year, during the Term.
Legal Requirements: all statutes, codes, ordinances, regulations, rules, orders, directives and requirements of any governmental or quasi-governmental entity, authority, agency, bureau, board, office, commission and/or department (or official thereof), and including covenants and restrictions of record, which now or at any time hereafter may be applicable to the Premises or any part thereof, including, but not limited to, all Environmental Laws.
Liabilities: defined in Section 11.6.
Lien: any mortgage, pledge, lien, charge, encumbrance or security interest of any kind, including any inchoate mechanic’s or materialmen’s lien.
Lot Owner: means each owner of a separate taxable parcel included within the Campus as defined in the Declaration.
Major Work: defined in Section 7.3(b).
Management Standard: defined in Section 9.2(a).
Master Landlord: the landlord under any ground lease or lease of all or any portion of the Premises, subject to the space leases, which may now or hereafter affect all or any portion of the Premises.
Maximum Late Term Restoration Period: defined in Section 17.4(a).
Maximum Restoration Period: defined in Section 17.4(b).
Minor Alterations: defined in Section 7.3(a).
Net Award: any insurance proceeds or condemnation award payable in connection with any damage, destruction or Taking, less any reasonable expenses incurred by Landlord in recovering such amount.
Net Rental Proceeds: in the case of a sublease, the amount by which the aggregate of all rents, additional charges or other consideration payable under a sublease to Tenant by the subtenant (including sums paid for the sale or rental of leasehold improvements, but not for Tenant’s trade fixtures, trade equipment, furniture or other personal property to the extent that the sums paid for these items do not exceed the fair market value of such items) exceeds the sum of (i) the Basic Rent plus all amounts payable by Tenant pursuant to the provisions hereof during the term of the sublease in respect of the subleased space, (ii) actual brokerage commissions, providing same are
APPENDIX I
134265652.4
at prevailing rates, due and owing to a real estate brokerage firm, (iii) reasonable legal fees incurred by Tenant in connection with the sublease, (iv) free rent granted to the subtenant, (v) cost of work incurred by Tenant in preparing the any portion of the Buildings for the sublease,(vi) the then net unamortized or undepreciated cost of the fixtures, leasehold improvements, equipment, furniture or other personal property included in the subletting, (vii) cash allowances and (viii) other consultant costs actually incurred; and in the case of an assignment, the amount by which all sums and other considerations paid to Tenant by the assignee of this Lease for or by reason of such assignment (including sums paid for the sale of Tenant’s fixtures, leasehold improvements, equipment, furniture or other personal property) exceeds the sum of (i) actual brokerage commissions, provided same are at prevailing rates due and owing to a real estate brokerage firm, (ii) the then net unamortized or undepreciated cost of the fixtures, leasehold improvements, equipment, furniture or other personal property sold to the assignee, (iii) reasonable legal fees incurred by Tenant in connection with the assignment, (iv) free rent, cash payments and other concessions granted to the assignee, and (v) other consultant costs actually incurred.
Non-Disturbance Agreement: defined in Section 23.1(b).
NJDEP: defined in Section 11.5(a).
Objection Notice: defined in Schedule B-1.
OFAC: defined in Article 30.
Offer Notice: defined in Section 33.1.
Office Use: defined in the Basic Lease Provisions.
Office Use Finish Work: defined in Schedule B-1.
Offset Amount: defined in Section 20.8.
Offset Notice: defined in Section 20.8.
Operating Expense Exclusions: defined in Schedule E.
Operating Expenses: defined in Section 5.1(a).
Order or Orders: defined in Article 30.
Outside Offer: defined in Section 35.1.
Parking Deck: defined in the Basic Lease Provisions.
Payment Resolution Date: defined in Section 20.8.
Permitted Use: defined in the Basic Lease Provisions.
Phase I Premises: defined in the Basic Lease Provisions.
APPENDIX I
134265652.4
Phase II Premises: defined in the Basic Lease Provisions.
Preliminary Plans: defined in Schedule B-1.
Premises: defined in the Basic Lease Provisions.
Premises Monument Signs: defined in Section 32.1(b).
Prime Rate: the prime commercial lending rate publicly announced from time to time by Citibank N.A. or its successor bank.
Property Insurance: defined in Section 14.1(g).
Property Management Agreement: defined in Section 9.2.
property manager: defined in Section 9.2(a).
Reimbursable Costs: defined in Schedule B-1.
Reimbursable Portion of Late Term Building System Capital Repairs and Replacements: defined in Section 7.1(c)(iv).
Rent Payment Date: the first day of each consecutive calendar month during the Term.
Resolution Date: defined in Section 20.8.
Restoration: the restoration, replacement or rebuilding of the Premises or any portion thereof (other than the Office Use Finish Work and the Laboratory Use Finish Work and any other Tenant Improvements) as nearly as practicable to its value, condition, design, and character immediately prior to any damage, destruction, or Taking, in accordance with plans and specifications reasonably approved by Landlord immediately prior to the commencement thereof.
Restoration Period: defined in Section 17.4(b).
Restoration Shortfall Deficiency: defined in Section 17.2(b).
Restoration Shortfall Excess: defined in Section 17.2(b).
Revised Sale Offer Notice: defined in Section 35.1.
Rooftop Equipment: defined in Section 34.1.
Sale Offer Notice: defined in Section 35.1.
Sale Property: defined in Section 35.1.
Second Self Help Notice: defined in Section 20.8.
Secured Area: defined in Section 21.5.
APPENDIX I
134265652.4
Self Help Cure Period: defined in Section 20.8.
Self Help Notice: defined in Section 20.8.
Self Help Reimbursement Cost: defined in Section 20.8.
Self Help Reimbursement Notice: defined in Section 20.8.
Security: defined in the Basic Lease Provisions.
Specified Landlord Default: defined in Section 20.8.
Substantial Completion: defined in Schedule B-1.
Successor Entity: defined in Section 16.6.
Supervisory Fee: defined in Schedule B-1.
System Maintenance Contract: defined in Section 7.1(a).
Tail Amount: defined in Section 7.1(c)(v).
Taking: a taking or transfer of all or any part of the Premises, or any interest therein or right accruing thereto, as the result of, or in lieu of, or in anticipation of, the exercise of the right of condemnation or eminent domain pursuant to any law, general or special, or by reason of the temporary requisition of the use or occupancy of the Premises or any part thereof, by any governmental authority, civil or military.
Taxes: with respect to each governmental authority levying or imposing the same, all taxes and assessments (general, special, betterment, ordinary or extraordinary, foreseen and unforeseen) levied, charged, assessed, imposed upon or which become due and payable out of or in respect of and become a lien on the Land, the Buildings, the Parking Decks and all improvements constructed on the Land from time to time (whether or not the Land and the improvements are billed separately), including, without limitation, charges imposed in respect of the ownership, operation, management, use, leasing or alteration of the Premises, or any portion thereof; the various estates in and to the Premises, or any portion thereof; the Basic Rent and Additional Rent payable to Landlord pursuant to this Lease; all water and sewer rents and charges; and all franchise, income, profit or other taxes, fees and charges, however designated, which, due to a future change in the method of taxation, may be levied or imposed on Landlord in substitution in whole or in part for, or in lieu of, or in addition to, any tax which would otherwise constitute Taxes, as heretofore defined, including, without limitation, so called “Pilot payments” under financial agreements with the Town of Warren. Nothing contained in this Lease shall require Tenant to pay any sales, use, estate, inheritance, gift, succession, capital stock, excess profit, corporate franchise or income tax of Landlord, any fines, interest or penalties resulting from delinquent payments in respect of such excluded taxes, and any transfer tax incurred due to Landlord’s transfer of ownership to the Premises, in whole or in in part, nor shall any of same be deemed Taxes, except as provided in the immediately preceding sentence. Notwithstanding anything in this Lease to the contrary, Tenant
APPENDIX I
134265652.4
shall have no obligation to pay for any Taxes assessed against the Premises that are attributable to a period of time prior to the Commencement Date or after the Expiration Date.
Tenant: the party defined as such in the first paragraph of this Lease.
Tenant Delay: defined in Section 2.4(b).
Tenant Improvements: defined in Section 7.3(b).
Tenant’s Broker Commission Agreement: defined in Article 25.
Tenant’s Campus Proportionate Share: defined in the Basic Lease Provisions.
Tenant’s C.O. Request Date: defined in Schedule B.
Tenant’s Extension Option Exercise Notice: defined in Section 31.1.
Tenant’s Financed Property: defined in Section 23.2(a).
Tenant’s Notice: defined in Section 16.2.
Tenant’s ROFO Right: defined in Section 35.1.
Tenant’s Share: defined in Section 7.2(b)(iii).
Tenant’s TI Fund: defined in Section 7(a) of Schedule B-1.
Tenant’s Visitors: Tenant’s agents, servants, employees, subtenants, contractors, invitees, licensees and all other persons invited by Tenant onto and/or into the Premises as guests or doing lawful business with Tenant.
Term: defined in the Basic Lease Provisions.
Underlying Encumbrance: defined in Section 23.1(a).
Vision Construction: defined in Section 7.3(b).
Vision Management: defined in Section 5.1(a).
Wiring: defined in Section 7.8.
Working Plans: defined in Schedule B-1.
Working Plans Objection Notice: defined in Schedule B-1.
APPENDIX I
134265652.4
Exhibit 10.2
| Page:1 / 6 |
| DATE OF ISSUE: |
| |
| 22JUN2022 |
IRREVOCABLE TRANSFERABLE STANDBY DOC. CREDIT NO. SDCMTN582868
| | |||||
BENEFICIARY: | APPLICANT: | | ||||
| | | ||||
WARREN CC AQUISITIONS LLC | PTC THERAPEUTICS INC | | ||||
| | | ||||
C/O VISION REAL ESTATE PARTNERS. | 100 CORPORATE CT | | ||||
| | | ||||
LLC,1 BLOOMFIELD AVENUE | SOUTH PLAINFIELD. NJ 07080 | | ||||
| | | ||||
MOUNTAIN LAKES. NEW JERSEY 07046 | | | ||||
| | | ||||
| | | ||||
| | |||||
| | |||||
ADVISING BANK: | AMOUNT: USD | 8,138,655.00 | | |||
| | | ||||
• | | | ||||
| | | ||||
• | USD EIGHT MILLION ONE HUNDRED AND | | ||||
| | | ||||
| THIRTY EIGHT THOUSAND SIX HUNDRED | | ||||
| | | ||||
| FIFTY FIVE.00 ONLY | | ||||
| | | ||||
| | | ||||
| | | ||||
| | | | | | |
| | | | | | |
| | | ||||
DATE AND PLACE OF EXPIRY: | | | ||||
| | | ||||
21JUN2023 | | | ||||
| | | ||||
AT COUNTER OF ISSUING BANK | | | ||||
| Page:2 / 6 |
| |
• | |
| |
WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER | |
| |
SDCMTN582868 IN YOUR FAVOR FOR THE ACCOUNT OF THE ABOVE | |
| |
REFERENCED APPLICANT IN THE AMOUNT OF USD 8,138,655.00 (U.S. | |
| |
DOLLARS EIGHT MILLION ONE HUNDRED THIRTY-EIGHT THOUSAND SIX | |
| |
HUNDRED FIFTY-FIVE AND 00/100 ONLY). | |
| |
• | |
| |
THIS CREDIT IS AVAILABLE WITH HSBC BANK USA, N.A., GLOBAL TRADE | |
| |
AND RECEIVABLES FINANCE (GTRF) TRANSACTION SERVICES, 452 FIFTH | |
| |
AVENUE, NEW YORK, NY 10018, ATTN: STANDBY UNIT BY PAYMENT | |
| |
AGAINST PRESENTATION OF BENEFICIARY'S DRAFT(S) AT SIGHT DRAWN ON | |
| |
HSBC BANK USA, N.A. | |
| |
• | |
| |
DRAFT(S) MUST BE ACCOMPANIED BY: | |
| |
• | |
| |
1. THE ORIGINAL LETTER OF CREDIT AND ALL AMENDMENTS, IF ANY. | |
| |
• | |
| |
2. BENEFICIARY'S DATED STATEMENT PURPORTEDLY SIGNED BY AN | |
| |
AUTHORIZED SIGNATORY OR AGENT READING: ''THIS DRAW IN THE AMOUNT | |
| |
OF USD . . . . (. . . . . ONLY). UNDER YOUR IRREVOCABLE STANDBY | |
| |
LETTER OF CREDIT NO. SDCMTN582868 REPRESENTS FUNDS DUE AND OWING | |
| |
TO US PURSUANT TO THE TERMS OF THAT CERTAIN LEASE BY AND BETWEEN | |
| |
WARREN CC AQUISITIONS LLC, AS LANDLORD, AND PTC THERAPEUTICS | |
| |
| Page:3 / 6 |
| |
INC, AS TENANT, AND/OR ANY AMENDMENT TO THE LEASE .'' | |
| |
• | |
| |
PARTIAL AND MULTIPLE DRAWINGS ARE PERMITTED. THE FACE AMOUNT OF | |
| |
THIS LETTER OF CREDIT SHALL BE REDUCED BY THE AMOUNT OF ANY AND | |
| |
ALL PARTIAL DRAWING(S) HONORED BY US UNDER THIS LETTER OF CREDIT. | |
| |
• | |
| |
DRAFTS DRAWN HEREUNDER MUST BE MARKED ''DRAWN UNDER HSBC BANK | |
| |
USA, N.A. STANDBY LETTER OF CREDIT NO.SDCMTN582868 | |
| |
DATED JUNE 22, 2022. | |
| |
• | |
| |
EACH DRAFT PRESENTED HEREUNDER MUST BE ACCOMPANIED BY THIS | |
| |
ORIGINAL CREDIT FOR ENDORSEMENT THEREON OF THE AMOUNT OF SUCH | |
| |
DRAFT. | |
| |
• | |
| |
DRAFT(S) AND DOCUMENTS MUST BE PRESENTED AT OUR OFFICES AT HSBC | |
| |
BANK USA, N.A., GLOBAL TRADE AND RECEIVABLES FINANCE (GTRF) | |
| |
TRANSACTION SERVICES, 452 FIFTH AVENUE, NEW YORK, NY 10018 | |
| |
ATTN: STANDBY UNIT. | |
| |
• | |
| |
IT IS A CONDITION OF THIS IRREVOCABLE STANDBY LETTER OF CREDIT | |
| |
THAT IT IS DEEMED TO BE AUTOMATICALLY EXTENDED WITHOUT AMENDMENT | |
| |
FOR PERIOD(S) OF ONE YEAR EACH FROM THE CURRENT EXPIRY DATE | |
| |
HEREOF, OR ANY FUTURE EXPIRATION DATE, UNLESS AT LEAST SIXTY | |
| |
(60) DAYS PRIOR TO ANY EXPIRATION DATE, WE NOTIFY YOU IN WRITING | |
| |
BY CERTIFIED MAIL RETURN RECEIPT REQUESTED OR BY RECOGNIZED | |
| Page:4 / 6 |
OVERNIGHT COURIER SERVICE, AT THE ABOVE LISTED ADDRESS THAT WE | |
| |
ELECT NOT TO CONSIDER THIS LETTER OF CREDIT RENEWED FOR ANY SUCH | |
| |
ADDITIONAL PERIOD. IN ADDITION TO THE FOREGOING, WE AGREE THAT | |
| |
YOU SHALL BE ENTITLED TO DRAW UPON THIS IRREVOCABLE STANDBY | |
| |
LETTER OF CREDIT IN ACCORDANCE WITH 1 AND 2 ABOVE IN THE EVENT | |
| |
THAT WE ELECT NOT TO RENEW THIS IRREVOCABLE STANDBY LETTER OF | |
| |
CREDIT AND, IN ADDITION, YOU PROVIDE US WITH A DATED STATEMENT | |
| |
PURPORTEDLY SIGNED BY AN AUTHORIZED SIGNATORY OR AGENT OF | |
| |
BENEFICIARY STATING THAT THE APPLICANT HAS FAILED TO PROVIDE YOU | |
| |
WITH AN ACCEPTABLE SUBSTITUTE IRREVOCABLE STANDBY LETTER OF | |
| |
CREDIT IN ACCORDANCE WITH THE TERMS OF THE ABOVE REFERENCED | |
| |
LEASE. IN NO EVENT SHALL THIS LETTER OF CREDIT AUTOMATICALLY | |
| |
EXTEND BEYOND JULY 31, 2039. | |
| |
• | |
| |
THIS CREDIT IS TRANSFERABLE IN FULL, BUT NOT IN PART, AND MAY BE | |
| |
TRANSFERRED SUCCESSIVELY. WE SHALL NOT RECOGNIZE ANY TRANSFER OF | |
| |
THIS CREDIT UNTIL A TRANSFER APPLICATION IN THE FORM OF EXHIBIT | |
| |
(A) ATTACHED HERETO IS FILED WITH US, AND OUR TRANSFER CHARGES | |
| |
HAVE BEEN PAID BY THE APPLICANT. OUR TRANSFER FEE IS USD 300. | |
| |
THE ORIGINAL LETTER OF CREDIT AND ANY ORIGINAL AMENDMENTS MUST | |
| |
ACCOMPANY THE TRANSFER APPLICATION. THE SIGNATURE AND THE TITLE | |
| |
OF THE PERSON SIGNING THE TRANSFER APPLICATION MUST BE VERIFIED | |
| |
BY YOUR BANK. | |
| |
• | |
| |
THE ISSUING BANK WILL NOT EFFECT A TRANSFER OR MAKE ANY PAYMENT | |
| |
UNDER THIS STANDBY LETTER OF CREDIT TO ANY PERSON WHO IS LISTED | |
| Page:5 / 6 |
| |
ON A UNITED NATIONS, EUROPEAN UNION OR UNITED STATES OF AMERICA | |
| |
SANCTIONS LIST, NOR TO ANY PERSON WITH WHOM THE ISSUING BANK IS | |
| |
PROHIBITED FROM ENGAGING IN TRANSACTIONS UNDER APPLICABLE UNITED | |
| |
STATES FEDERAL OR STATE ANTI-BOYCOTT, ANTI-TERRORISM OR ANTI- | |
| |
MONEY LAUNDERING LAWS OR US SANCTIONS LAWS. | |
| |
• | |
| |
WE HEREBY ENGAGE WITH YOU TO HONOR DRAFTS AND DOCUMENTS DRAWN | |
| |
UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS IRREVOCABLE | |
| |
STANDBY LETTER OF CREDIT. | |
| |
• | |
| |
THIS STANDBY LETTER OF CREDIT SHALL BE GOVERNED BY, AND | |
| |
CONSTRUED IN ACCORDANCE WITH THE TERMS OF THE INTERNATIONAL | |
| |
STANDBY PRACTICES (ISP98), INTERNATIONAL CHAMBER OF COMMERCE | |
| |
PUBLICATIONS NO. 590. AS TO MATTERS NOT GOVERNED BY THE ISP98, | |
| |
THIS STANDBY LETTER OF CREDIT SHALL BE GOVERNED BY AND CONSTRUED | |
| |
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, | |
| |
WITHOUT LIMITATION, THE UNIFORM COMMERCIAL CODE, AS IN EFFECT IN | |
| |
THE STATE OF NEW YORK. | |
| |
• | |
| |
PLEASE SEND ALL CLAIMS AND CORRESPONDENCE AS PER SBLC TERMS AND | |
| |
CONDITIONS TO FOLLOWING ADDRESS: | |
| |
HSBC BANK USA, N.A., | |
| |
GTRF TRANSACTIONS SERVICES | |
| |
452 FIFTH AVENUE | |
| |
NEW YORK, NY 10018 | |
| Page:6 / 6 |
| |
ATTN: STANDBY UNIT | |
| |
• | |
| |
FOR ANY QUERIES, PLEASE CONTACT OUR CLIENT SERVICES TEAM AT: | |
| |
[email protected] OR PHONE NO.18663270763 | |
| |
OR FAX NO.17184884909. | |
| |
• | |
| |
| |
| |
| |
Exhibit 31.1
CERTIFICATIONS
I, Stuart W. Peltz, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of PTC Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 4, 2022 | By: | /s/ STUART W. PELTZ |
|
| Stuart W. Peltz |
|
| Chief Executive Officer |
|
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, Emily Hill, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of PTC Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 4, 2022 | By: | /s/ EMILY HILL |
|
| Emily Hill |
|
| Chief Financial Officer |
|
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of PTC Therapeutics, Inc. (the “Company”) for the period ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Stuart W. Peltz, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that to his knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 4, 2022 | By: | /s/ STUART W. PELTZ |
|
| Stuart W. Peltz |
|
| Chief Executive Officer |
|
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of PTC Therapeutics, Inc. (the “Company”) for the period ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Emily Hill, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that to her knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 4, 2022 | By: | /s/ EMILY HILL |
| | Emily Hill |
|
| Chief Financial Officer |
|
| (Principal Financial Officer) |
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