16. COMMITMENTS AND CONTINGENCIES

Lease Obligations

In June 2013, the Company entered into a lease agreement (“Cambridge lease”) for its headquarters located in Cambridge, Massachusetts. As of December 31, 2016, the Company had entered into six amendments to the Cambridge lease, increasing its total rental space for its headquarters to 88,459 square feet. The Cambridge lease and its amendments will expire in January 2021. The agreement calls for a security deposit in the form of a letter of credit totaling $0.6 million. The Company purchased a certificate of deposit (“CD”) to meet the requirement and it is recorded as a long-term restricted investment in the consolidated balance sheets as of December 31, 2016 and 2015.

In June 2014, the Company entered into an agreement to sublease from an unrelated third party 10,939 square feet of office space. The sublease was terminated on December 31, 2016.

In January 2014, the Company entered into an agreement to sublease 15,077 square feet of office space to an unrelated third party. The sublease expired in July 2015. In August 2015, the Company entered into an agreement to sublease this space to another unrelated third party. The sublease will expire in September 2017.

In February 2015, the Company entered into an agreement to sublease 7,461 square feet of office space to an unrelated third party. The sublease expired February 2016. In December 2016, the Company entered into an agreement to sublease this space to another unrelated third party. The sublease will expire in December 2017.

The Company also leases laboratory and office space in Corvallis, Oregon which will expire in December 2020. As of December 31, 2016, the Company vacated and exited one floor of its two floors at its facility in Corvallis, Oregon.

The following table summarizes the aggregate non-cancelable future minimum payments under the Company’s leases:

	As of December 31, 2016 (in thousands)
2017	$	4,737
2018		4,854
2019		4,975
2020		5,097
2021		344
Thereafter		167
Total minimum lease payments	$	20,174

Royalty Obligations

The Company is obligated to pay royalties on net sales of certain of its products. The royalty rates are in the low to high teens percentages for both inside and outside the United States. For example, under the Collaboration Agreement with Summit signed in October 2016, the Company may be required to make tiered royalty payments ranging from a low to high teens percentage of net sales on a product-by-product basis in the Licensed Territory. Under the Amended and Restated License Agreement with UWA signed in April 2013, the Company may be obligated to pay a low-single-digit percentage of royalty on the net sales of products exceeding certain amounts, which includes EXONDYS 51.

Milestone Obligations

The Company has collaboration and license agreements for which it could be obligated to pay up-front, development, regulatory and commercial milestones as a product candidate proceeds from the submission of an IND application through approval for commercial sale and beyond. As of December 31, 2016, for product candidates that are currently in various research and development stages, the Company may be obligated to make up to $712.6 million of future development, up-front royalty and sales milestone payments associated with its collaboration and license agreements. For the years ended December 31, 2016, 2015 and 2014, the Company recognized approximately $47.6 million, $0.2 million and $0 relating to certain up-front and development milestone payments as research and development expense, respectively, under these agreements. For the year ended December 31, 2016, the Company also recorded $1.0 million as an in-licensed right corresponding to the first sale of EXONDYS 51.

Other Funding Commitments

As of December 31, 2016, the Company has several on-going clinical studies in various clinical trial stages. Its most significant clinical trial expenditures are to contract research organizations (“CROs”). The CRO contracts are generally cancellable at the Company’s option. For the years ended December 31, 2016, 2015 and 2014, the Company recognized approximately $8.1 million, $8.5 million and $4.4 million, respectively, for expenditures incurred by CROs.

Litigation

In the normal course of business, the Company may from time to time be named as a party to various legal claims, actions and complaints, including matters involving securities, employment, intellectual property, effects from the use of therapeutics utilizing its technology, or others. For example, purported class action complaints were filed against the Company and certain of its officers in the U.S. District Court for the District of Massachusetts on January 27, 2014 and January 29, 2014. The complaints were consolidated into a single action (Corban v. Sarepta, et. al., No. 14-cv-10201) by order of the court on June 23, 2014. Plaintiffs’ consolidated amended complaint, filed on July 21, 2014, asserted violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Securities and Exchange Commission Rule 10b-5 against the Company, and Chris Garabedian, Sandy Mahatme, and Ed Kaye (“Individual Defendants,” and collectively with the Company, the “Corban Defendants”), and violations of Section 20(a) of the Exchange Act against the Individual Defendants. Plaintiffs alleged that the Corban Defendants made material misrepresentations or omissions during the putative class period of July 24, 2013 through November 12, 2013, regarding a data set for a Phase 2b study of eteplirsen and the likelihood of the FDA accepting the Company’s new drug application for eteplirsen for review based on that data set. Plaintiffs sought compensatory damages and fees. On August 18, 2014, the Corban Defendants filed a motion to dismiss, which the Court granted on March 31, 2015. Plaintiffs subsequently sought leave to file a second amended complaint, which the Corban Defendants opposed. On September 2, 2015, the Court denied Plaintiffs’ motion for leave to amend as futile. Plaintiffs filed a notice of appeal on September 29, 2015, seeking review of the Court’s March 31, 2015 order dismissing the case and the Court’s September 2, 2015 order denying leave to amend. On January 27, 2016, Plaintiffs filed in the district court a motion for relief from judgment pursuant to Federal Rule of Civil Procedure 60(b)(2), arguing that the FDA Briefing Document published on or about January 15, 2016, was material and would have changed the Court’s ruling. On February 26, 2016, the First Circuit stayed the appeal pending the district court’s ruling on the 60(b)(2) motion. Defendants opposed the 60(b)(2) motion, and on April 21, 2016, the Court denied Plaintiffs’ motion for relief from judgment. On May 19, 2016, Plaintiffs filed a motion to alter or amend the April 21, 2016 order pursuant to Federal Rule of Civil Procedure 59(e). On May 20, 2016, the Court denied Plaintiffs’ motion, and Plaintiffs filed a notice of appeal of the Court’s April 21, 2016 denial of their 60(b)(2) motion and May 20, 2016 denial of their 59(e) motion. On June 13, 2016, the First Circuit granted Plaintiffs’ motion to consolidate the two appeals. Oral argument is scheduled for March 7, 2017. An estimate of the possible loss or range of loss cannot be made at this time.

Another complaint was filed in the U.S. District Court for the District of Massachusetts on December 3, 2014 styled William Kader, Individually and on Behalf of All Others Similarly Situated v. Sarepta Therapeutics Inc., Christopher Garabedian, and Sandesh Mahatme (Kader v. Sarepta et.al 1:14-cv-14318). On March 20, 2015, Plaintiffs filed an amended complaint asserting violations of Section 10(b) of the Exchange Act and Securities and Exchange Commission Rule 10b-5 against the Company, and Chris Garabedian and Sandy Mahatme (“Individual Defendants,” and collectively with the Company, the “Kader Defendants”), and violations of Section 20(a) of the Exchange Act against the Individual Defendants. Plaintiffs alleged that the Kader Defendants made material misrepresentations or omissions during the putative class period of April 21, 2014 through October 27, 2014, regarding the sufficiency of the Company’s data for submission of an NDA for eteplirsen and the likelihood of the FDA accepting the NDA based on that data. Plaintiffs sought compensatory damages and fees. The Kader Defendants moved to dismiss the amended complaint on May 11, 2015. On April 5, 2016, following oral argument on March 29, 2016, the Court granted Defendants’ motion to dismiss. On April 8, 2016, Lead Plaintiffs filed a motion for leave to file an amended complaint, which Defendants opposed. On January 6, 2017, the Court denied Plaintiffs’ motion for leave to amend and dismissed the case. Plaintiffs filed a notice of appeal on February 3, 2017. A briefing schedule has not yet been set. An estimate of the possible loss or range of loss cannot be made at this time.

On February 5, 2015, a derivative suit was filed in the 215th Judicial District of Harris County, Texas against the Company’s Board of Directors (David Smith, derivatively on behalf of Sarepta Therapeutics, Inc., v. Christopher Garabedian et al., No. 2015-06645). The claims allege that Sarepta’s directors caused Sarepta to disseminate materially false and/or misleading statements in connection with disclosures concerning the Company’s submission of the NDA for eteplirsen. Plaintiff seeks unspecified compensatory damages, actions to reform and improve corporate governance and internal procedures, disgorgement of profits, benefits and other compensation obtained by the directors, and attorneys’ fees. The parties have agreed to stay the case pending resolution of the Corban and Kader cases. An estimate of the possible loss or range of loss cannot be made at this time.

On March 16, 2016, a derivative suit was filed in the U.S. District Court for the District of Massachusetts against the Company’s Board of Directors (Dawn Cherry, on behalf of nominal defendant Sarepta Therapeutics, Inc., v. Behrens et al., No. 16-cv-10531). The claims allege that the defendants authorized the Company to make materially false and misleading statements about the Company’s business prospects in connection with its development of eteplirsen from July 10, 2013 to the present. Plaintiffs seek unspecified damages, actions to reform and improve corporate governance and internal procedures, and attorneys’ fees. The parties have agreed to stay the case pending resolution of the Corban and Kader cases. An estimate of the possible loss or range of loss cannot be made at this time.

Additionally, on September 23, 2014, a derivative suit was filed against the Company’s Board of Directors with the Court of Chancery of the State of Delaware (Terry McDonald, derivatively on behalf of Sarepta Therapeutics, Inc., et al. v. Goolsbee et al., No. 10157). The claims allege, among other things, that (i) the Company’s non-employee directors paid themselves excessive compensation fees for 2013, (ii) that the compensation for the Company’s former CEO, Christopher Garabedian, was also excessive and such fees were the basis for Mr. Garabedian’s not objecting to or stopping the excessive fees for the non-employee directors and (iii) that the disclosure in the 2013 proxy statement was deficient. The relief sought, among others, includes disgorgement and rescindment of allegedly excessive or unfair payments and equity grants to Mr. Garabedian and the directors, unspecified damages plus interest, a declaration that the Company’s Amended and Restated 2011 Equity Plan at the 2013 annual meeting was ineffective and a revote for approved amendments, correction of misleading disclosures and plaintiff’s attorney fees. The parties have agreed to a Memorandum of Understanding concerning the settlement terms and do not believe that disposition of the McDonald suit will have a material financial impact on the Company. The parties are now engaged in the confirmatory discovery process that, when complete, will allow plaintiffs’ counsel to represent to the court that the terms of the settlement are fair. Defendants have provided documents to plaintiffs, who are now in the process of reviewing the materials. An estimate of the possible loss or range of loss cannot be made at this time.

Purchase Commitments

The Company has entered into long-term contractual arrangements from time to time for the provision of goods and services.

The following table presents non-cancelable contractual obligations arising from these arrangements:

	As of December 31, 2016 (in thousands)
2017		47,212
2018		28,521
2019		11,408
Total purchase commitments	$	87,141

In connection with an amendment to a supply agreement, in September 2015, the Company issued an irrevocable standby letter of credit totaling $10.7 million to a contract manufacturing vendor. The obligation secured by the letter of credit will be fulfilled upon full payment of all deposits and purchase payments by February 2017. To meet the requirement of the letter of credit, the Company purchased $10.7 million in a certificate of deposit with a September 2017 maturity date. The Company has recorded this $10.7 million as a restricted investment on the consolidated balance sheet as of December 31, 2016.