In June 2013, the Company entered into a lease agreement (“Cambridge lease”) for its headquarters located in Cambridge, Massachusetts. In April and September 2018, the Company entered into the seventh and eighth amendment, respectively, to its Cambridge lease which extended the original term of the lease to September 30, 2025 and increased the total rental space to approximately 163,842 square feet. The agreement calls for a security deposit in the form of a letter of credit totaling $1.0 million. The Company purchased a certificate of deposit to meet the requirement and it is recorded as a long-term restricted investment in the consolidated balance sheets as of December 31, 2018 and 2017.

In March and July of 2018, the Company entered into sublease agreements in Andover, Massachusetts, to lease a total of 23,102 square feet of additional office space. These subleases expires in December 2020.

In November 2018, the Company entered into a sublease agreement in Burlington, Massachusetts, to lease 44,740 square feet of additional office and lab space. The sublease expires in January 2022.

In December 2018, the Company entered into lease agreements in Dublin and Columbus, Ohio, to lease 22,600 square feet and 77,679 square feet, respectively, of additional office and lab space. The leases expire in November 2019 and June 2026, respectively.

In August 2015 and December 2016, the Company entered into agreements to sublease 15,077 square feet and 7,461 square feet, respectively, of office space to two unrelated third parties. The subleases expired in March and December 2017, respectively.

The Company also leased laboratory and office space in Corvallis, Oregon which would expire in December 2020. The second floor and the first floor of the facility were vacated and closed and made available for sub-leasing in December 2016 and April 2017, respectively. The lease was terminated in June 2018.

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

	As of December 31, 2018 (in thousands)
2019	$	11,588
2020		11,395
2021		12,558
2022		10,757
2023		10,898
Thereafter		20,524
Total minimum lease payments	$	77,720

The Company is obligated to pay royalties on net sales of certain of its products. The royalty rates range from the low-single-digit to high teens percentages for both inside and outside the U.S. Under the license agreement with BioMarin signed in July 2017, the Company is required to make a mid-single-digit percentage of royalty on the net product sales inside the U.S. and maybe required to make a high-single-digit percentage of royalty on net product sales outside the U.S. 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. For the years ended December 31, 2018 and 2017, the Company recorded $15.1 and $4.7 million, respectively, of royalty payments to BioMarin on its consolidated statements of operations and comprehensive loss.

The Company has collaboration and license agreements for which it could be obligated to pay up-front, development, regulatory and sales milestones as a product candidate proceeds from the submission of an investigational new drug application through approval for commercial sale and beyond. As of December 31, 2018, the Company may be obligated to make up to $378.8 million of future development, regulatory, up-front royalty and sales milestone payments associated with its collaboration and license agreements. For the years ended December 31, 2018, 2017 and 2016, the Company recognized approximately $142.4million, $22.0 million and $47.6 million relating to certain up-front and development milestone payments as research and development expense, respectively, under these agreements. As of December 31, 2017 and 2016, the Company also recorded $6.6 million and $1.0 million as in-licensed right assets, respectively, corresponding to the execution of the settlement and license agreements with BioMarin and the first sale of EXONDYS 51, with no similar activity as of December 31, 2018.

The Company has several on-going clinical trials 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. As of December 31, 2018, the Company has approximately $71.6 million in cancellable future commitments based on existing CRO contracts. For the years ended December 31, 2018, 2017 and 2016, the Company recognized approximately $19.6 million, $13.9 million and $8.5 million, respectively, for expenditures incurred by CROs.

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

In June 2018, the Company entered into a Development, Commercial Manufacturing and Supply Agreement (“Brammer Manufacturing Agreement”), with Brammer Bio MA, LLC (“Brammer”). Pursuant to the terms of the Brammer Manufacturing Agreement, Brammer agreed to provide the Company with access to clinical and commercial manufacturing capacity for its gene therapy programs.

As part of the Brammer Manufacturing Agreement, the Company will purchase product in batches from Brammer, subject to minimum and maximum annual purchase requirements. Further, the Company: (i) was required to make a $20.0 million advance payment to Brammer upon execution of the agreement, (ii) was required to make two non-refundable payments of $5.0 million each to Brammer in the third and fourth quarter of 2018 to be used in the specification, selection, and procurement of the related process equipment to be utilized under the agreement, and (iii) is required to make a $10.0 million quarterly capacity access fee payment to Brammer throughout the term of the agreement. However, through June 30, 2019, a reduced quarterly capacity access fee will be in effect as Brammer works towards achieving full capacity at its facility. In addition, one-tenth of the $20.0 million advance payment will be applied as a credit to the quarterly capacity access fees due and payable from July 1, 2019 through December 31, 2021, resulting in a net capacity access fee of $8.0 million.

The term of the Brammer Manufacturing Agreement will continue for a period of six years following the first regulatory approval of a product manufactured under the agreement. The term will automatically renew for successive two years unless the Company notifies Brammer of its intention not to renew (no less than twenty-four months prior to the expiration of the term). The Company also has the ability to terminate the agreement prior to expiration but would be required to continue remitting capacity access fees to Brammer for up to eight additional quarters.

The Company has determined that the Brammer Manufacturing Agreement does not contain an embedded lease because it does not convey the right to control the use of the facility or related equipment. This conclusion was based on the Company’s inability or right to control physical access to Brammer’s facility and the related equipment, and the ability of one or more parties, other than the Company, to take more than a minor amount of the output that will be produced during the term of the agreement.

As of December 31, 2018, the Company has made payments totaling $40.0 million to Brammer under the Brammer Manufacturing Agreement consisting of: (i) the $20.0 million advance payment made in June 2018, (ii) the two $5.0 million process equipment fees paid in July 2018 and October 2018, and (iii) the first two reduced quarterly capacity access fee payments of $5.0 million made in July 2018 and September 2018. Of the cumulative amount paid of $40.0 million, $5.0 million was recorded as an other current asset and $35.0 million as an other non-current asset, in the accompanying consolidated balance sheets.

The advance payment and process equipment fees were capitalized and will be amortized over their expected economic benefit to research and development expense, prior to regulatory approval of the related product, commencing upon the first batch delivery to the Company, which is currently estimated to occur in July 2019. Upon regulatory approval, amortization expense will be classified to cost of inventory with the recognition in cost of sales as the sales of product occur. Capacity access fee payments made prior to the first batch delivery to the Company will be capitalized and amortized to expense in a manner similar to the advance payment and process equipment fees. Capacity access fee payments made subsequent to the first batch delivery to the Company will be expensed as incurred to research and development expense, prior to regulatory approval of the related product. Upon regulatory approval, the expense associated with capacity access fee payments will be classified to cost of inventory with the recognition in cost of sales as the sales of product occur. In the event the Company does not expect services under the Brammer Manufacturing Agreement to be rendered, the capitalized payments will be charged to expense.

In October 2018, the Company entered into a manufacturing collaboration agreement (“Paragon Collaboration Agreement”) with Paragon Bioservices, Inc. (“Paragon”). Pursuant to the terms of the Paragon Collaboration Agreement, Paragon agreed to provide the Company with two dedicated clean room suites and an option to reserve two additional clean room suites (“Optional Clean Room Suites”) for its gene therapy programs.

As part of the Paragon Collaboration Agreement, the Company will purchase product in batches from Paragon subject to minimum annual purchase requirements. Further, the Company is required to pay Paragon: (i) use fees of $1.0 million per year per clean room suite after the clean rooms are fully qualified and validated to manufacture the Company’s materials, and (ii) clean room reservation fees, which could total up to $48.0 million if the Company exercises the option to reserve the Optional Clean Room Suites. Additional use fees and reservation fees are required if the Company has equipment needs beyond the basic equipment package included in the initial clean room suites. In addition, Paragon will provide the Company with a credit of up to 100% of the clean room use fee if certain clean room capacity utilization thresholds are met.

The term of the Paragon Collaboration Agreement will continue until the earlier of: (i) the latest expiration date of any commercial supply agreement in effect, or (ii) December 31, 2025. The Company has the ability to terminate the Paragon Collaboration Agreement prior to expiration, subject to potential additional financial consideration.

The Company has concluded that the Paragon Collaboration Agreement contains an embedded lease as the Company has the right to operate the clean room suites in a manner it determines while also controlling more than a minor amount of the output during the term of the agreement. The Company also concluded that it is not the deemed owner during construction of the clean room suites nor does the agreement represent a capital lease under ASC 840, “Leases”. As a result, the Paragon Collaboration Agreement will be accounted for as an operating lease. As of December 31, 2018, the Company has made reservation fee payments totaling $26.0 million to Paragon, which was recorded as an other non-current asset in the accompanying consolidated balance sheets. This amount, along with any additional reservation fee payments made, will be amortized on a straight-line basis as rent expense over the term of the embedded lease, commencing upon the date that the Company controls the physical use of the clean room suites, currently anticipated to occur in the fourth quarter of 2019. Use fees associated with the clean room suites are considered contingent rental payments, and will be charged to rent expense when (and if) incurred. Rent expense recognized prior to regulatory approval of the related product will be classified to research and development expense. Upon regulatory approval, rent expense will be classified to cost of inventory with the recognition in cost of sales as the sales of product occur.

In December 2018, the Company entered into a Clinical and Commercial Supply Agreement (the “CCSA”) with Aldevron LLC (“Aldevron”) for the supply of plasmid DNA to fulfill its needs for gene therapy clinical trials and commercial supply. Pursuant to the terms of the CCSA, Aldevron agreed to reserve a certain number of manufacturing slots (“Reserved Slots”) on a quarterly basis. The initial term of the CCSA expires on December 31, 2019. The Company has an option to extend the CCSA to December 31, 2020 (the “2020 Option”) and other option to extend the term of the CCSA for an additional year to December 31, 2021 (the “2021 Renewal Right”).

The Company may be required to make up to $60.0 million in prepayments associated with the CCSA should the Company exercise both the 2020 Option and the 2021 Renewal Right. The prepayments will be credited back to Sarepta, until exhausted, for each batch of product delivered by Aldevron, in an amount equal to 50% of the batch invoice amount. The Company has determined that the CCSA does not contain an embedded lease because it does not convey the right to control the use of Aldevron’s facility or related equipment therein. As of December 31, 2018, the Company has made a prepayment of $10.0 million to Aldevron under the CCSA, which was recorded as an other current asset in the accompanying consolidated balance sheets. In the event the Company does not expect services under the CCSA to be rendered to fully exhaust any prepayments made to Aldevron, the applicable balance will be charged to expense at the time this determination is made.

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

	As of December 31, 2018 (in thousands)
2019	$	182,352
2020		34,000
2021		34,000
2022		42,000
2023		42,000
Thereafter		124,000
Total manufacturing commitments	$	458,352

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, a 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. Oral argument took place on December 4, 2017 and the First Circuit affirmed the District Court’s dismissal of this case on April 4, 2018. The period for filing a petition with the U.S. Supreme Court for a writ of certiorari has elapsed without a filing from the plaintiffs. As such, there is no risk of loss in connection with this litigation.

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 alleged 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 sought 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. On July 10, 2018, Plaintiff filed a Notice of Nonsuit as to all causes of action asserted in the complaint. On July 11, 2018, the court accepted the Notice of Nonsuit and all causes of action asserted in the complaint were dismissed with prejudice. As such, there is no risk of loss in connection with this litigation.

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 alleged 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 through the date of the complaint. Plaintiffs sought unspecified damages, actions to reform and improve corporate governance and internal procedures, and attorneys’ fees. On July 23, 2018, Plaintiffs filed a Notice of Voluntary Dismissal and dismissed their claims without prejudice. As such, there is no risk of loss in connection with this litigation.

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 Chief Executive Officer, 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 agreed to a settlement, which was approved by the Delaware Court of Chancery on September 4, 2018. The Company does not believe that disposition of the McDonald suit will have a material financial impact on the Company.