Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the quarterly period ended June 30, 2013
OR
 
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the transition period from                      to                     
Commission file number 001-14895

SAREPTA THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)

 
 	 	 	
Delaware	 	93-0797222	
(State or other jurisdiction of
incorporation or organization)	 	(I.R.S. Employer
Identification No.)	
 	 	
215 First Street Suite 7, Cambridge, Massachusetts	 	02142	
(Address of principal executive offices)	 	(Zip Code)	
Registrant’s telephone number, including area code: (857) 242-3700

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.    Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer	 	¨	  	Accelerated filer	 	x	
 	 	 	 	
Non-accelerated filer	 	¨  (Do not check if a smaller reporting company)	  	Smaller Reporting Company	 	¨	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock with $0.0001 par value	 	33,527,880	
(Class)	 	(Outstanding as of July 31, 2013)	

 

Table of Contents
SAREPTA THERAPEUTICS, INC.
FORM 10-Q
INDEX

 	 	 	  	Page	 	
PART I — FINANCIAL INFORMATION	  	
Item 1.	 	Financial Statements	  	 	3	 	
 	 	Unaudited Condensed Consolidated Balance Sheets — June 30, 2013 and December 31, 2012	  	 	3	 	
 	 	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) — Three Months Ended and Six Months Ended June 30, 2013 and 2012 and from July 22, 1980 (Inception) through June 30, 2013	  	 	4	 	
 	 	Unaudited Condensed Consolidated Statements of Cash Flows — Six Months Ended June 30, 2013 and 2012 and from July 22, 1980 (Inception) through June 30, 2013	  	 	5	 	
 	 	Notes to Unaudited Condensed Consolidated Financial Statements	  	 	6	 	
Item 2.	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	  	 	16	 	
Item 3.	 	Quantitative and Qualitative Disclosures about Market Risk	  	 	24	 	
Item 4.	 	Controls and Procedures	  	 	24	 	
PART II — OTHER INFORMATION	  	
Item 1.	 	Legal Proceedings	  	 	25	 	
Item 1A.	 	Risk Factors	  	 	25	 	
Item 2.	 	Unregistered Sales of Equity Securities and Use of Proceeds	  	 	38	 	
Item 3.	 	Defaults Upon Senior Securities	  	 	38	 	
Item 4.	 	Mine Safety Disclosures	  	 	38	 	
Item 5.	 	Other Information	  	 	38	 	
Item 6.	 	Exhibits	  	 	39	 	
Signatures	 	 	  	 	41	  	
Exhibits	 	 	  	 	42	  	
 
2

Table of Contents
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
SAREPTA THERAPEUTICS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share amounts)

 	  	June 30,
2013	 	 	December 31,
2012	 	
Assets	  	 	 	 	 	 	 	 	
Current assets:	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	156,185	  	 	$	187,661	  	
Accounts receivable	  	 	3,788	  	 	 	4,713	  	
Restricted investments	  	 	7,250	  	 	 	—  	  	
Other current assets	  	 	5,683	  	 	 	1,534	  	
 	  	 	 	 	 	 	 	 	
Total current assets	  	 	172,906	  	 	 	193,908	  	
Restricted investments	  	 	557	  	 	 	—  	  	
Property and equipment, net of accumulated depreciation and amortization of $17,173 and $16,708	  	 	3,359	  	 	 	3,397	  	
Patent Costs, net of accumulated amortization of $1,439 and $2,626	  	 	5,186	  	 	 	4,913	  	
Other assets	  	 	1,625	  	 	 	2,775	  	
 	  	 	 	 	 	 	 	 	
Total assets	  	$	183,633	  	 	$	204,993	  	
 	  	 	 	 	 	 	 	 	
Liabilities and Stockholders’ Equity	  	 	 	 	 	 	 	 	
Current liabilities:	  	 	 	 	 	 	 	 	
Accounts payable	  	$	6,727	  	 	$	7,532	  	
Accrued employee compensation	  	 	1,986	  	 	 	2,741	  	
Long-term debt, current portion	  	 	90	  	 	 	89	  	
Warrant liability	  	 	79,116	  	 	 	65,193	  	
Deferred revenue	  	 	4,499	  	 	 	3,304	  	
Other current liabilities	  	 	15	  	 	 	27	  	
 	  	 	 	 	 	 	 	 	
Total current liabilities	  	 	92,433	  	 	 	78,886	  	
Long-term debt, non-current portion	  	 	1,622	  	 	 	1,668	  	
Other long-term liabilities	  	 	757	  	 	 	760	  	
 	  	 	 	 	 	 	 	 	
Total liabilities	  	 	94,812	  	 	 	81,314	  	
Commitments and contingencies	  	 	 	 	 	 	 	 	
Stockholders’ equity:	  	 	 	 	 	 	 	 	
Preferred stock, $.0001 par value, 3,333,333 shares authorized; none issued and outstanding	  	 	—  	  	 	 	—  	  	
Common stock, $.0001 par value, 50,000,000 shares authorized; 32,433,083 and 31,703,817 issued and outstanding	  	 	3	  	 	 	3	  	
Additional paid-in capital	  	 	581,204	  	 	 	554,927	  	
Deficit accumulated during the development stage	  	 	(492,386	) 	 	 	(431,251	) 	
 	  	 	 	 	 	 	 	 	
Total stockholders’ equity	  	 	88,821	  	 	 	123,679	  	
 	  	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	  	$	183,633	  	 	$	204,993	  	
 	  	 	 	 	 	 	 	 	
See accompanying notes to condensed consolidated financial statements.
 
3

Table of Contents
SAREPTA THERAPEUTICS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)
(in thousands, except per share amounts)

 	  	 
Three months ended
June 30,	 	 	 
Six months ended
June 30,	 	 	July 22, 1980
(Inception)
through
June 30, 2013	 	
 	  	2013	 	 	2012	 	 	2013	 	 	2012	 	 	 	 	
Revenues from license fees, grants and research contracts	  	$	2,951	  	 	$	11,207	  	 	$	7,425	  	 	$	22,419	  	 	$	180,973	  	
 	 	 	 	 	 	
Operating expenses:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Research and development	  	 	12,984	  	 	 	13,849	  	 	 	26,746	  	 	 	28,654	  	 	 	412,414	  	
General and administrative	  	 	7,054	  	 	 	2,915	  	 	 	13,181	  	 	 	6,196	  	 	 	132,268	  	
Acquired in-process research and development	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	29,461	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	  	 	(17,087	) 	 	 	(5,557	) 	 	 	(32,502	) 	 	 	(12,431	) 	 	 	(393,170	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other (loss) income:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income and other, net	  	 	(19	) 	 	 	107	  	 	 	218	  	 	 	203	  	 	 	9,741	  	
(Loss) income on change in warrant valuation	  	 	(1,945	) 	 	 	13,488	  	 	 	(28,851	) 	 	 	2,562	  	 	 	(95,819	) 	
Realized gain on sale of short-term securities — available-for-sale	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	3,863	  	
Write-down of short-term securities — available-for-sale	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(17,001	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	 	(1,964	) 	 	 	13,595	  	 	 	(28,633	) 	 	 	(2,765	) 	 	 	(99,216	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income	  	$	(19,051	) 	 	$	8,038	  	 	$	(61,135	) 	 	$	(9,666	) 	 	$	(492,386	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other comprehensive (loss) income:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Write-down of short-term securities — available-for-sale	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	17,001	  	
Realized gain on sale of short-term securities — available-for-sale	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(3,863	) 	
Unrealized loss on short-term securities — available-for-sale	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(13,138	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive (loss) income	  	$	(19,051	) 	 	$	8,038	  	 	$	(61,135	) 	 	$	(9,666	) 	 	$	(492,386	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income per share — basic	  	$	(0.60	) 	 	$	0.36	  	 	$	(1.92	) 	 	$	(0.43	) 	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income per share — diluted	  	$	(0.60	) 	 	$	0.35	  	 	$	(1.92	) 	 	$	(0.43	) 	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of common shares outstanding for computing basic (loss) income per share	  	 	31,984	  	 	 	22,624	  	 	 	31,899	  	 	 	22,624	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of common shares outstanding for computing diluted (loss) income per share	  	 	31,984	  	 	 	22,658	  	 	 	31,899	  	 	 	22,624	  	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to condensed consolidated financial statements.
 
4

Table of Contents
SAREPTA THERAPEUTICS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

 	  	 
Six months ended June 30,	 	 	For the Period
July 22, 1980
(Inception)
through June 30,
2013	 	
 	  	2013	 	 	2012	 	 	 	 	
Cash flows from operating activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Net loss	  	$	(61,135	) 	 	$	(9,666	) 	 	$	(492,386	) 	
Adjustments to reconcile net loss to net cash flows used in operating activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	  	 	711	  	 	 	715	  	 	 	22,681	  	
Loss on disposal of property and equipment	  	 	334	  	 	 	123	  	 	 	2,970	  	
Realized gain on sale of short-term securities — available-for-sale	  	 	—  	  	 	 	—  	  	 	 	(3,863	) 	
Write-down of short-term securities — available-for-sale	  	 	—  	  	 	 	—  	  	 	 	17,001	  	
Impairment charge on real estate owned	  	 	—  	  	 	 	—  	  	 	 	1,445	  	
Stock-based compensation	  	 	3,989	  	 	 	1,148	  	 	 	36,062	  	
Acquired in-process research and development	  	 	—  	  	 	 	—  	  	 	 	29,461	  	
Increase (decrease) on warrant liability	  	 	28,851	  	 	 	(2,562	) 	 	 	95,819	  	
Net (increase) decrease in accounts receivable, other current assets and other assets	  	 	549	  	 	 	(3,537	) 	 	 	(8,212	) 	
Net increase (decrease) in accounts payable, accrued employee compensation, and other liabilities	  	 	(294	) 	 	 	(952	) 	 	 	12,119	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in operating activities	  	 	(26,995	) 	 	 	(14,731	) 	 	 	(286,903	) 	
Cash flows from investing activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Purchase of restricted investments	  	 	(7,807	) 	 	 	—  	  	 	 	(7,807	) 	
Purchase of property and equipment	  	 	(435	) 	 	 	(143	) 	 	 	(20,422	) 	
Patent costs	  	 	(931	) 	 	 	(498	) 	 	 	(11,460	) 	
Purchase of marketable securities	  	 	—  	  	 	 	—  	  	 	 	(112,993	) 	
Sale of marketable securities	  	 	—  	  	 	 	—  	  	 	 	117,724	  	
Acquisition costs	  	 	—  	  	 	 	—  	  	 	 	(2,389	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in investing activities	  	 	(9,173	) 	 	 	(641	) 	 	 	(37,347	) 	
Cash flows from financing activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from sale of common stock, warrants, and partnership units, net of offering costs, and exercise of options and warrants	  	 	4,915	  	 	 	1	  	 	 	481,474	  	
Repayments of long-term debt	  	 	(45	) 	 	 	(42	) 	 	 	(475	) 	
Other financing activities, net	  	 	(178	) 	 	 	—  	  	 	 	(654	) 	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	  	 	4,692	  	 	 	(41	) 	 	 	480,435	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Increase (decrease) in cash and cash equivalents	  	 	(31,476	) 	 	 	(15,413	) 	 	 	156,185	  	
Cash and cash equivalents:	  	 	 	 	 	 	 	 	 	 	 	 	
Beginning of period	  	 	187,661	  	 	 	39,904	  	 	 	—  	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
End of period	  	$	156,185	  	 	$	24,491	  	 	$	156,185	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	  	 	 	 	 	 	 	 	 	 	 	 	
Cash paid during the year for interest	  	$	102	  	 	$	43	  	 	$	677	  	
Supplemental schedule of noncash investing activities and financing activities:	  	 	 	 	 	 	 	 	 	 	 	 	
Short-term securities — available-for-sale received in connection with the private offering	  	$	—  	  	 	$	—  	  	 	$	17,897	  	
Issuance of common stock and warrants in satisfaction of liabilities	  	$	14,928	  	 	$	—  	  	 	$	47,762	  	
Receivable for warrants exercised	  	$	2,624	  	 	$	—  	  	 	$	2,624	  	
Issuance of common stock for building purchase	  	$	—  	  	 	$	—  	  	 	$	750	  	
Assumption of long-term debt for building purchase	  	$	—  	  	 	$	—  	  	 	$	2,200	  	
Issuance of common stock to acquire assets	  	$	—  	  	 	$	—  	  	 	$	8,075	  	
Assumption of liabilities to acquire assets	  	$	—  	  	 	$	—  	  	 	$	2,124	  	
See accompanying notes to condensed consolidated financial statements.
 
5

Table of Contents
SAREPTA THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Business
Sarepta Therapeutics, Inc. and its wholly-owned subsidiaries (“Sarepta” or the “Company”) is a biopharmaceutical company focused on the discovery and development of unique RNA-based therapeutics for the treatment of rare and infectious diseases. Applying the Company’s proprietary platform technologies, the Company is able to target a broad range of diseases and disorders through distinct RNA-based mechanisms of action. The Company is focused on advancing the development of its Duchenne muscular dystrophy drug candidates, including its lead product candidate, eteplirsen, for which the Company is currently conducting an ongoing open label extension study following completion of its initial Phase IIb clinical trials. The Company is also focused on developing therapeutics for the treatment of infectious diseases, including its lead infectious disease program aimed at the development of a drug candidate for the Marburg hemorrhagic fever virus for which the Company has historically received significant financial support from U.S. government research contracts.
The accompanying unaudited condensed consolidated financial statements reflect the accounts of Sarepta and its consolidated subsidiaries. The accompanying unaudited condensed consolidated balance sheet data as of December 31, 2012 was derived from audited financial statements not included in this report. The accompanying unaudited condensed consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and the rules and regulations of the U.S. Securities and Exchange Commission (SEC) pertaining to interim financial statements. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2012. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
Management has determined that the Company operates in one segment: the development of pharmaceutical products on its own behalf or in collaboration with others.
Since its inception in 1980, the Company has incurred losses of $492.4 million, substantially all of which resulted from expenditures related to research and development, general and administrative charges and losses on change in warrant valuation partially offset by revenue generated from research contracts with and grants primarily from the U.S. Department of Defense (DoD). As of June 30, 2013, the Company has completed all of its contracts with the DoD except for the July 2010 contract and the August 2012 contract for the development of therapeutics against the Marburg virus. The current period of performance for the August 2012 contract is scheduled to conclude in the second half of 2013 subject to additional extensions that may be agreed upon by the Company and the DoD. In November 2012, the Company also entered into an agreement with the European Commission (EC) Health Innovation for development and study related activities for a Duchenne muscular dystrophy (DMD) therapeutic for which minimal revenues have been earned to date. The Company has not generated any material revenue from product sales to date, and there can be no assurance that revenues from product sales will be achieved. Moreover, even if the Company does achieve revenue from product sales, the Company is likely to continue to incur operating losses in the near term.
As of June 30, 2013, we had $164.0 million of cash equivalents and invested cash, comprised of $156.2 million of cash and cash equivalents and $7.8 million of restricted investments, which the Company believes, taking into consideration our current stock price and outstanding warrants, is sufficient to fund our current operational plan for the next twelve months. Should the Company’s funding from the DoD cease or be delayed, the Company would likely curtail certain of its infectious disease research and development efforts unless additional funding was obtained. The Company is also likely to pursue additional cash resources through public or private financings, including the $37.9 million raised in our at the market offering described in note 6, seeking additional government contracts, and from establishing collaborations or licensing its technology to other companies.
 
6

Table of Contents
Estimates and Uncertainties
The preparation of financial statements in conformity with GAAP requires management 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 and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Commitments and Contingencies
The Company is not a party to any material legal proceedings with respect to itself, its subsidiaries, or any of its material properties as of June 30, 2013. 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 employment, intellectual property, and effects from the use of therapeutics utilizing its technology, professional services or others. It is impossible to predict whether any resulting liability would have a material adverse effect on the Company’s financial position, results of operations or cash flows.
In February 2013, the Company issued two letters of credit totaling $7.3 million to a contract manufacturing vendor in connection with certain manufacturing agreements. To meet the requirement of the letters of credit, the Company purchased $7.3 million in certificates of deposit with April 2014 maturity dates in February 2013. The Company has recorded this $7.3 million as restricted investments in the condensed consolidated balance sheet as of June 30, 2013.
In April 2013, the Company and the University of Western Australia (UWA) entered into an agreement under which an existing exclusive license agreement between the Company and UWA was amended and restated. Under the terms of this agreement, UWA granted the Company an exclusive license to certain UWA intellectual property rights in exchange for up to $7.1 million in upfront and development milestone payments. During the three and six months ended June 30, 2013, the Company recognized $1.0 million relating to certain upfront payments required under the agreement within research and development in the condensed consolidated statement of operations.
In June 2013, the Company entered into a lease agreement for its Cambridge location. 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 to meet the requirement. The initial term of the lease agreement is for seven years with an average base rent of approximately $2.4 million per year.
2. NET (LOSS) INCOME PER SHARE
Basic net (loss) income per share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding. Diluted net (loss) income per share is computed by dividing net (loss) income by the weighted-average number of common shares and dilutive common stock equivalent shares outstanding.

 	  	Three Months Ended June 30,	 	  	Six Months Ended June 30,	 	
 	  	2013	 	 	2012	 	  	2013	 	 	2012	 	
 	  	(in thousands, except
per share amounts)	 	  	(in thousands, except
per share amounts)	 	
Net (loss) income	  	$	(19,051	)	 	$	8,038	 	  	$	(61,135	)	 	$	(9,666	)	
Weighted-average number of shares of common stock and common stock equivalents outstanding:	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Weighted-average number of common shares outstanding for computing basic earnings per share	  	 	31,984	 	 	 	22,624	 	  	 	31,899	 	 	 	22,624	 	
Dilutive effect of outstanding warrants and stock awards after application of the treasury stock method*	  	 	—  	  	 	 	34	 	  	 	—  	  	 	 	—  	  	
 	 	 	 	 	
Weighted-average number of common shares outstanding for computing diluted earnings per share	  	 	31,984	 	 	 	22,658	 	  	 	31,899	 	 	 	22,624	 	
 	 	 	 	 	
Net (loss) income per share — basic	  	$	(0.60	)	 	$	0.36	 	  	$	(1.92	)	 	$	(0.43	)	
 	 	 	 	 	
Net (loss) income per share — diluted	  	$	(0.60	)	 	$	0.35	 	  	$	(1.92	)	 	$	(0.43	)	
 
*	Warrants, stock options, restricted stock units (RSUs) and stock appreciation rights (SARs) to purchase approximately 6,788,000 and 6,949,000 shares of common stock were excluded from the net loss per share calculation for the three months ended June 30, 2013 and 2012, respectively, as their effect would have been anti-dilutive. Additionally, warrants, stock options, RSUs and SARs to purchase approximately 6,788,000 and 6,992,000 shares of common stock were excluded from the net loss per share calculation for the six months ended June 30, 2013 and 2012, respectively, as their effect would have been anti-dilutive.	
 
7

Table of Contents
3. FAIR VALUE MEASUREMENTS
The Company measures at fair value certain financial assets and liabilities in accordance with a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. There are three levels of inputs that may be used to measure fair-value:
 
 	•	 	Level 1 — quoted prices for identical instruments in active markets;	
 
 	•	 	Level 2 — quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and	
 
 	•	 	Level 3 — valuations derived from valuation techniques in which one or more significant value drivers are unobservable.	
The Company’s assets and liabilities measured at fair value on a recurring basis consisted of the following as of the date indicated:

 	  	Fair Value Measurement as of June 30, 2013	 	
 	  	Total	 	  	Level 1	 	  	Level 2	 	  	Level 3	 	
 	  	(in thousands)	 	
Restricted investments, current	  	$	7,250	  	  	$	7,250	  	  	$	—  	  	  	$	—  	  	
Restricted investments, noncurrent	  	 	557	  	  	 	557	  	  	 	 	 	  	 	 	 	

Total assets	  	$	7,807	  	  	$	7,807	  	  	$	—  	  	  	$	—  	  	

 	 	 	                  	 	 	 	                  	 	 	 	                  	 	 	 	                  	 	
 	  	Fair Value Measurement as of December 31, 2012	 	
 	  	Total	 	  	Level 1	 	  	Level 2	 	  	Level 3	 	
 	  	(in thousands)	 	
Restricted investments	  	$	—  	  	  	$	—  	  	  	$	—  	  	  	$	—  	  	

Total assets	  	$	—  	  	  	$	—  	  	  	$	—  	  	  	$	—  	  	

 	 	 	                  	 	 	 	                  	 	 	 	                  	 	 	 	                  	 	
 	  	Fair Value Measurement as of June 30, 2013	 	
 	  	Total	 	  	Level 1	 	  	Level 2	 	  	Level 3	 	
 	  	(in thousands)	 	
Warrants*	  	$	79,116	  	  	$	—  	  	  	$	—  	  	  	$	79,116	 	

Total liabilities	  	$	79,116	  	  	$	—  	  	  	$	—  	  	  	$	79,116	 	

 	 	 	                  	 	 	 	                  	 	 	 	                  	 	 	 	                  	 	
 	  	Fair Value Measurement as of December 31, 2012	 	
 	  	Total	 	  	Level 1	 	  	Level 2	 	  	Level 3	 	
 	  	(in thousands)	 	
Warrants*	  	$	65,193	  	  	$	—  	  	  	$	—  	  	  	$	65,193	 	

Total liabilities	  	$	65,193	  	  	$	—  	  	  	$	—  	  	  	$	65,193	 	

*	See Note 5 for additional information related to the determination of fair value of warrants and a reconciliation of changes in fair value.	
 
8

Table of Contents
The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments and carrying amounts reported for long-term debt approximate fair value based on market activity for other debt instruments with similar characteristics and comparable risk.
4. ACCOUNTS RECEIVABLE
Accounts receivable are generally stated at invoiced amount and do not bear interest. Because the accounts receivable are primarily from the DoD and historically no amounts have been written off, an allowance for doubtful accounts receivable is not considered necessary. The accounts receivable balance included $3.1 million and $3.2 million of DoD receivables that were unbilled at June 30, 2013 and December 31, 2012, respectively.
5. WARRANTS
The Company has periodically issued warrants in connection with certain common stock offerings. The warrants issued in January and August 2009 are classified as liabilities as opposed to equity because their settlement terms require settlement in registered shares, which is outside of the Company’s control. These warrants are non-cash liabilities and the Company is not required to expend any cash to settle these liabilities. All other warrants issued by the Company were recorded as additional paid-in-capital and no further adjustments are made.
The outstanding warrants classified as liabilities are recorded at fair value on the condensed consolidated balance sheet and are adjusted to fair value at each financial reporting period, with changes in the fair value being recorded as “(Loss) income on change in warrant valuation” in the condensed consolidated statement of operations and comprehensive income (loss). The fair value is determined using the Black-Scholes-Merton option-pricing model, which requires the use of significant judgment and estimates for the inputs used in the model. The following reflects the weighted-average assumptions for each of the periods indicated:

 	  	June 30, 2013	 	 	December 31, 2012	 	
Risk-free interest rate	  	 	0.2	%	 	 	0.2%-0.3	% 	
Expected dividend yield	  	 	0	%	 	 	0	%	
Expected lives	  	 	0.6-1.2 years	  	 	 	1.1-1.6 years	  	
Expected volatility (1)	  	 	74.0%-91.6	% 	 	 	139.2%-164.1	% 	
Shares underlying warrants classified as liabilities	  	 	2,628,923	 	 	 	3,127,678	 	
Market value of stock at beginning of year	  	$	25.80	 	 	$	4.50	 	
Market value of stock at end of period	  	$	38.04	 	 	$	25.80	 	
 
(1)	For the three and six months ended June 30, 2013, expected volatility has been estimated using a blend of calculated volatility of the Company’s common stock over a historical period and implied volatility in exchange-traded options associated with the Company’s common stock. Prior to January 1, 2013, expected volatility has been estimated using calculated volatility of the Company’s common stock over a historical period commensurate with the expected term of the option.	
A reconciliation of the change in value of the Company’s warrants recorded as liabilities for the three and six months ended June 30, 2013 is as follows:

 	  	Three Months
Ended
June 30, 2013	 	 	Six Months
Ended
June 30, 2013	 	
 	  	(in thousands)	 	 	(in thousands)	 	
Balance at beginning of period	  	$	91,077	  	 	$	65,193	  	
Increase in value of warrants	  	 	1,945	  	 	 	28,851	  	
 	 	 	
Reclassification to stockholders’ equity upon exercise of warrants	  	 	(13,906	) 	 	 	(14,928	) 	

Balance at end of period	  	$	79,116	  	 	$	79,116	  	

9

Table of Contents
For the six months ended June 30, 2013, 498,695 warrants were exercised at a weighted average exercise price of $8.89, generating proceeds of $4.4 million of which $2.6 million were received in July 2013 and are included in other current assets in the condensed consolidated balance sheet at June 30, 2013. For the six months ended June 30, 2012, no warrants were exercised.
The following table summarizes the outstanding warrants at June 30, 2013.

Issue Date	  	Exercise Price	 	  	Outstanding Warrants
at June 30, 2013	 	  	Expiration Date	  	Weighted Average
Remaining
Contractual Life
(Years)	 	  	Exercisable
Warrants	 	
1/30/2009	  	$	6.96	 	  	 	1,604,049	 	  	7/30/2014	  	 	1.1	 	  	 	1,604,049	 	
1/30/2009	  	$	8.70	 	  	 	356	 	  	1/30/2014	  	 	0.6	 	  	 	356	 	
8/25/2009	  	$	10.68	 	  	 	1,024,518	 	  	8/31/2014	  	 	1.2	 	  	 	1,024,518	 	
 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
 	  	 	 	 	  	 	2,628,923	 	  	 	  	 	 	 	  	 	2,628,923	 	
6. EQUITY FINANCING
In January 2013, the Company sold approximately 87,000 shares of common stock through its At-The-Market (ATM) offering that originally commenced in September 2012 (the 2012 ATM). The sales in January 2013 generated $2.1 million in net proceeds and fully exhausted the sales of stock available under the 2012 ATM sales agreement.
Subsequent to the period ended June 30, 2013, on July 3, 2013, the Company entered into a second ATM offering (the 2013 ATM) allowing the Company to sell, at its option, up to an aggregate of $125 million of shares of common stock at market prices. Through August 7, 2013, the Company has sold approximately 1,000,000 shares generating $37.9 million in proceeds under the 2013 ATM.
7. CONTRACT REVENUE
The Company recognizes revenue from U.S. and E.U. government research contracts during the period in which the related expenditures are incurred and presents revenue and related expenses gross in the condensed consolidated financial statements. In the periods presented, substantially all of the revenue generated by the Company was derived from government research contracts.
The following table sets forth the revenue for each of the Company’s contracts with the U.S. and E.U. governments and other revenue for the three and six months ended June 30, 2013 and 2012.

 	  	Three Months Ended June 30,	 	  	Six Months Ended June 30,	 	
 	  	2013	 	  	2012	 	  	2013	 	  	2012	 	
 	  	(in thousands)	 	  	(in thousands)	 	
July 2010 Contract (Ebola and Marburg IV)	  	$	2,076	 	  	$	11,171	  	  	$	4,690	  	  	$	22,334	  	
August 2012 Contract (Intramuscular)	  	 	439	 	  	 	—  	  	  	 	2,245	  	  	 	—  	  	
November 2012 SKIP-NMD Agreement (DMD)	  	 	9	 	  	 	—  	  	  	 	63	  	  	 	—  	  	
Other Agreements	  	 	427	 	  	 	36	  	  	 	427	  	  	 	85	  	

Total	  	$	2,951	 	  	$	11,207	  	  	$	7,425	  	  	$	22,419	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
U.S. Government Contracts
As of June 30, 2013, the Company had completed all of its contracts with the DoD except for the Marburg portion of the July 2010 contract for the development of therapeutics against Ebola and Marburg viruses and the August 2012 contract for intramuscular (IM) administration of AVI-7288, the Company’s candidate against the Marburg virus.
July 2010 Contract (Ebola and Marburg Intravenous administration)
On July 14, 2010, the Company was awarded a DoD contract managed by the Joint Project Manager Transformational Medical Technologies (JPM-TMT) Project Management Office, a component of the Joint Program Executive Office for Chemical and Biological Defense, for the advanced development of the Company’s hemorrhagic fever virus therapeutic candidates, AVI-6002 and AVI-6003,
 
10

Table of Contents
against the Ebola and Marburg viruses, respectively. In February 2012, we announced that we received permission from the U.S. Food and Drug Administration (FDA) to proceed with a single oligomer from AVI-6003, AVI-7288, as the lead product candidate against Marburg virus infection.
 
11

Table of Contents
On August 2, 2012, the Company received a stop-work order related to the Ebola virus portion of the contract and, on October 2, 2012, the DoD terminated the Ebola portion of the contract for the convenience of the government due to government funding constraints.
The remaining Marburg portion of the contract is structured into four segments and has an aggregate remaining period of performance spanning approximately four years if the DoD exercises its options for all segments. Activities under the first segment began in July 2010 and include Phase I studies in healthy volunteers as well as preclinical studies.
After completion of the first segment, and each successive segment, the DoD has the option to proceed to the next segment. If the DoD exercises its options for segments II, III and IV, our contract activities would include all clinical and licensure activities necessary to obtain FDA regulatory approval for the therapeutic candidate against the Marburg virus. The funding for segments II, III and IV of the Marburg virus portion of the contract is estimated to be approximately $84.4 million.
August 2012 Contract (Intramuscular administration)
On August 29, 2012, the Company was awarded a contract from the DoD, which is also managed by the JPM-TMT. The contract was awarded for approximately $3.9 million to evaluate the feasibility of an IM route of administration using AVI-7288, the Company’s candidate for treatment of Marburg virus. The current period of performance of this contract is scheduled to conclude in the second half of 2013 subject to additional extensions that may be agreed upon by the Company and DoD.
Other Agreements
For the three month period ended June 30, 2013, Other Agreements includes $0.4 million in additional revenue from a former US government contract the Company related to H1N1 influenza.
European Union Agreement
In November 2012, the Company entered into an agreement for a collaborative research project partially funded by the EC Health Innovation. The agreement provides for reimbursement of costs of approximately $2.5 million for research in certain development and study related activities for a DMD therapeutic and is expected to last approximately three years.
During the six months ended June 30, 2013, the Company received $1.3 million in advance payments and recognized $64,000 of these payments as revenue. Deferred revenue related to the agreement as of June 30, 2013 was $1.2 million. The remaining balance of deferred revenue relates to the Company’s sponsored research agreement with Charley’s Fund.
8. STOCK COMPENSATION
The Company’s equity incentive plans allow for the granting of a variety of stock awards. To date, the Company has granted stock options, restricted stock awards, RSUs and SARs.
Stock-based compensation costs are based on the fair value calculated utilizing the Black-Scholes-Merton option pricing model on the date of grant. The fair value of stock awards, with consideration given to estimated forfeitures, is amortized as compensation expense on a straight-line basis over the vesting period of the grants.
In June 2013, the Company’s stockholders approved an additional 3.6 million shares available for grants under the Amended and Restated 2011 Equity Incentive Plan (the 2011 Plan) and stockholders approved the 2013 Employee Stock Purchase Plan (ESPP) with 250,000 shares available to be issued. As of June 30, 2013, 3,199,747 shares of common stock remain available for future grant under the 2011 Plan and 250,000 shares are available to be issued under the ESPP.
Stock Options
In general, stock options granted prior to December 31, 2010 vest over a three year period, with one-third of the underlying shares vesting on each anniversary of grant, and have a ten year term. Beginning in January 2011, stock options granted generally vest over a four year period, with one-fourth of the underlying shares vesting on the first anniversary of the grant and the remaining underlying shares vesting pro-ratably on a monthly basis thereafter, such that the underlying shares will be fully vested on the fourth anniversary of the grant.
In June 2013, the Company granted 969,500 of time-based stock options that vest in the manner described above and 459,500 stock options with performance-based vesting criteria. The performance criteria is based upon the achievement of certain clinical and regulatory milestones. As of June 30, 2013, the achievement of these performance criteria is not probable and accordingly the Company has not recognized any expense related to these options.
 
12

Table of Contents
A summary of the Company’s stock option activity with respect to the six months ended June 30, 2013 follows:

Stock Options	  	Underlying
Shares	 	 	Weighted
Average
Exercise
Price	 	  	Weighted
Average
Remaining
Contractual
Term	 	  	Aggregate
Intrinsic
Value	 	
Outstanding at December 31, 2012	  	 	2,522,522	  	 	$	11.76	  	  	 	 	 	  	 	 	 	
Granted	  	 	1,754,170	  	 	 	34.10	  	  	 	 	 	  	 	 	 	
Exercised	  	 	(119,547	) 	 	 	8.35	  	  	 	 	 	  	 	 	 	
Canceled	  	 	(180,956	) 	 	 	9.60	  	  	 	 	 	  	 	 	 	

Outstanding at June 30, 2013	  	 	3,976,189	  	 	$	21.82	  	  	 	8.91	  	  	$	64,737,000	  	

Vested at June 30, 2013 and expected to vest	  	 	3,639,329	  	 	$	21.27	  	  	 	8.84	  	  	$	61,269,000	  	
 	 	 	 	 	
Exercisable at June 30, 2013	  	 	714,247	  	 	$	11.81	  	  	 	6.82	  	  	$	18,963,000	  	
The weighted-average fair value per share of stock-based awards granted to employees during the three months ended June 30, 2013 and 2012 was $23.20 and $3.53, respectively, and during the six months ended June 30, 2013 and 2012 was $22.50 and $4.56, respectively. During the six months ended June 30, 2013, the total intrinsic value of stock options exercised was $3.0 million. During the six months ended June 30, 2013 and 2012, the total grant date fair value of stock options that vested was $0.6 million and $2.7 million, respectively.
The fair values of stock options granted during the period presented were measured on the date of grant using the Black-Scholes-Merton option-pricing model, with the following assumptions:

 	  	Three and Six Months Ended June 30,	 	
 	  	2013	 	 	2012	 	
Risk-free interest rate	  	 	0.7% - 1.4	% 	 	 	0.8% - 1.1	% 	
Expected dividend yield	  	 	0	%	 	 	0	% 	
Expected lives	  	 	5.0 years	  	 	 	5.3 years	  	
Expected volatility	  	 	80.0% - 84.1.	% 	 	 	79.7% - 82.5	% 	
 
(1)	For the three and six months ended June 30, 2013, expected volatility has been estimated using a blend of calculated volatility of the Company’s common stock over a historical period and implied volatility in exchange-traded options associated with the Company’s common stock. Prior to January 1, 2013, expected volatility has been estimated using calculated volatility of the Company’s common stock over a historical period commensurate with the expected term of the option.	
Restricted Stock Awards
In June 2013, the Company granted 6,000 shares of restricted stock awards to members of its board of directors. These shares vest on the first anniversary of the grant and have a grant date fair value of $34.92 per share. The weighted-average grant-date fair value of restricted stock awards is based on the market price of the Company’s common stock on the date of grant. The following table sets forth restricted stock activity for the period shown:

 	  	Six Months Ended June 30, 2013	 	
 	  	Shares	 	  	Weighted Average
Grant Date Fair
Value per Share	 	
Restricted Stock Awards, beginning of period	  	 	4,998	  	  	$	10.08	  	
Granted	  	 	6,000	  	  	 	34.92	  	
Vested	  	 	—  	  	  	 	—  	  	
Canceled	  	 	—  	  	  	 	—  	  	

Restricted Stock Awards, end of period	  	 	10,998	  	  	 	23.63	  	

13

Table of Contents
Restricted Stock Units
For the six months ended June 30, 2013, restricted stock unit activity is summarized in the following table:

 	  	Six Months Ended June 30,	 	
 	  	2013	 	
 	  	Shares	 	  	Weighted Average
Grant Date Fair
Value per Share	 	
Restricted Stock Units, beginning of period	  	 	38,260	  	  	$	6.32	  	
Granted	  	 	—  	  	  	 	—  	  	
Vested	  	 	24,594	  	  	 	6.83	  	
Canceled	  	 	341	  	  	 	5.40	  	

Restricted Stock Units, end of period	  	 	13,325	  	  	$	5.40	  	

14

Table of Contents
Stock-based Compensation Expense
A summary of the stock-based compensation expense, including stock options, restricted stock, RSUs, and SARs recognized in the condensed consolidated statements of operations and comprehensive loss is as follows:

 	  	Three Months Ended	 	  	Six Months Ended	 	
 	  	June 30, 2013	 	  	June 30, 2012	 	  	June 30, 2013	 	  	June 30, 2012	 	
 	  	(in thousands)	 	  	(in thousands)	 	
Research and development	  	$	724	  	  	$	259	 	  	$	1,254	  	  	$	512	  	
General and administrative	  	 	1,594	  	  	 	181	 	  	 	2,735	  	  	 	636	  	

Total	  	$	2,318	  	  	$	440	 	  	$	3,989	  	  	$	1,148	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
As of June 30, 2013, there was $45.3 million of unrecognized compensation cost related to non-vested share-based compensation arrangements outstanding including stock options, restricted stock, RSUs, and SARs. These costs are expected to be recognized over a weighted-average period of 3.3 years.
9. INCOME TAXES
At December 31, 2012, the Company had net deferred tax assets of approximately $114.1 million. The net deferred tax assets are primarily composed of U.S. federal and state tax net operating loss carryforwards, U.S. federal and state research and development credit carryforwards and share-based compensation expense. Due to uncertainties surrounding the Company’s ability to generate future taxable income to realize these assets, a full valuation allowance has been established to offset its net deferred tax asset. Additionally, the Internal Revenue Code rules could limit the future use of its net operating loss and research and development credit carryforwards to offset future taxable income based on ownership changes and the value of the Company’s stock.
10. RESTRUCTURING
In November 2012, the Company notified 21 Bothell, Washington based employees that they would be terminated as part of the corporate headquarters relocation to Cambridge, Massachusetts. The employees were given various incentives to remain through a transition period which is expected to be completed in 2013. For the six months ended June 30, 2013, the Company recorded restructuring charges of $0.3 million to research and development expense and $0.3 million to general and administrative expense. All transition costs are expected to be paid in 2013.
Changes in the liability and the balance related to the restructuring plan are as follows:

 	  	Six Months Ending
June 30, 2013	 	
 	  	(in thousands)	 	
Balance at December 31, 2012	  	$	185	 	
Restructuring charges	  	 	671	 	
Payments	  	 	(703	) 	

Balance at June 30, 2013	  	$	153	 	
 	  	 	 	 	
11. RECENT ACCOUNTING PRONOUNCEMENTS
In February 2013, the Financial Accounting Standards Board (FASB) issued new guidance which requires disclosure of significant amounts reclassified out of accumulated other comprehensive income by component and their corresponding effect on the respective line items of net income. This guidance was adopted by the Company in fiscal year 2013. The adoption of this guidance did not have an impact on the Company’s unaudited condensed consolidated financial statements.
In July 2013, FASB issued new guidance which amends the guidance related to the presentation of unrecognized tax benefits and allows for the reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. The new guidance is effective for annual and interim periods for fiscal years beginning after December 15, 2013, and early adoption is permitted. Since the guidance relates only to the presentation of unrecognized tax benefits, we do not expect our adoption in January 2014 will have a material effect on our financial position, results of operations or cash flows.
12. SUBSEQUENT EVENTS
The Company evaluated events and transactions after the date of the balance sheet data but prior to the issuance of the financial statements for potential recognition or disclosures in its financial statements. Other than discussed in note 6, Equity Financing, the Company did not identify any material subsequent events requiring adjustment or disclosure.
 
15

Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This section should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the section contained in our Annual Report on Form 10-K for the year ended December 31, 2012 under the caption “Part II-Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations”. This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “seek” and other similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements include, but are not limited to:
 
 	•	 	our expectations regarding the development and clinical benefits of our product candidates;	
 
 	•	 	the results of our research and development efforts and the efficacy of our PMO-based chemistries and other RNA-based technology;	
 
 	•	 	our expectations regarding our ability to become a leading developer and marketer of RNA-based therapeutics;	
 
 	•	 	the efficacy, potency and utility of our product candidates in the treatment of rare and infectious diseases, and their potential to treat a broad number of human diseases;	
 
 	•	 	our expectations regarding the results of preclinical and clinical testing of our product candidates;	
 
 	•	 	our expectations regarding initiating enrollment of a pivotal Phase III trial in late 2013;	
 
 	•	 	our expectations regarding the timing, completion and receipt of results from our ongoing development programs;	
 
 	•	 	the receipt of any required approval from the U.S. Food and Drug Administration, or FDA, or other regulatory approval for our products;	
 
 	•	 	the effect of regulation by FDA and other agencies;	
 
 	•	 	our expectations regarding the markets for our products;	
 
 	•	 	acceptance of our products, if introduced, in the marketplace;	
 
 	•	 	the impact of competitive products, product development, commercialization and technological difficulties;	
 
 	•	 	our expectations regarding partnering opportunities and other strategic transactions;	
 
 	•	 	the extent of protection that our patents provide and our pending patent applications may provide, if patents issue from such applications, to our technologies and programs;	
 
 	•	 	our plans to file additional patent applications to enhance and protect our existing intellectual property portfolio;	
 
 	•	 	our ability to invalidate some or all of the claims covered by patents issued to competitors	
 
 	•	 	our estimates regarding our future revenues, research and development expenses, other expenses, payments to third parties and changes in staffing levels;	
 
 	•	 	our estimates regarding how long our currently available cash and cash equivalents will be sufficient to finance our operations and statements about our future capital needs;	
 
16

Table of Contents
 	•	 	our ability to increase the scale of our manufacturing to provide our product to patients in larger scale clinical trials or in potential commercial quantities;	
 
 	•	 	our ability to operate our business without infringing the intellectual property rights of others;	
 
 	•	 	the extent of protection that our patents provide and our pending patent applications may provide, if patents issue from such applications, to our technologies and programs;	
 
 	•	 	our plans to file additional patent applications to enhance and protect our existing intellectual property portfolio;	
 
 	•	 	our estimates regarding our future revenues, research and development expenses, other expenses, payments to third parties and changes in staffing levels;	
 
 	•	 	our estimates regarding how long our currently available cash and cash equivalents will be sufficient to finance our operations and statements about our future capital needs;	
 
 	•	 	our expectations about funding from the government and other sources; and	
 
 	•	 	other factors set forth below under the heading “Risk Factors”.	
These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this Quarterly Report in Part II, Item 1A — “Risk Factors,” and elsewhere in this Quarterly Report. These statements, like all statements in this Quarterly Report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. In this report, “we,” “our,” “us,” “Sarepta,” and “Company” refers to Sarepta Therapeutics, Inc. and its subsidiaries.
Overview
We are a biopharmaceutical company focused on the discovery and development of unique RNA-based therapeutics for the treatment of rare and infectious diseases. Applying our proprietary, highly-differentiated and innovative platform technologies, we are able to target a broad range of diseases and disorders through distinct RNA-based mechanisms of action. We are primarily focused on rapidly advancing the development of our potentially disease-modifying Duchenne muscular dystrophy drug candidates, including our lead product candidate, eteplirsen. We are also focused on developing therapeutics for the treatment of infectious diseases, including our lead infectious disease program aimed at the development of a drug candidate for the Marburg hemorrhagic fever virus. By building our infectious disease programs which are primarily funded and supported by the DoD, and leveraging our highly-differentiated, proprietary technology platforms, we are seeking to further develop our research and development competencies and identify additional product candidates.
Our highly-differentiated RNA-based technologies work at the most fundamental level of biology and potentially could have a meaningful impact across a broad range of human diseases and disorders. Our lead program focuses on the development of disease-modifying therapeutic candidates for DMD, a rare genetic muscle-wasting disease caused by the absence of dystrophin, a protein necessary for muscle function. Currently, there are no approved disease-modifying therapies for DMD. Eteplirsen is our lead therapeutic candidate for DMD. If we are successful in our development efforts, eteplirsen will address a severe unmet medical need. Last year, we completed a U.S.-based Phase IIb clinical trial for eteplirsen that was initiated in August 2011. Following completion of this study in early 2012, we initiated an open label extension study with the same participants from the original Phase IIb placebo controlled trial. We anticipate initiating a pivotal clinical trial for eteplirsen by the end of 2013 and commencing dosing in this trial in early 2014.
We are also leveraging the capabilities of our RNA-based technology platforms to develop therapeutics for the treatment of infectious diseases. The DoD has provided significant financial support in the past for the development of therapeutics against Ebola, Marburg, Dengue and influenza viruses. We have attracted DoD’s support based in part on our ability to rapidly respond to pathogenic threats by quickly identifying, manufacturing and evaluating novel therapeutic candidates.
The basis for our novel RNA-based therapeutics is our phosphorodiamidate-linked morpholino oligomer, or PMO, chemistries. Unlike other RNA-based therapeutics, which are often used to down-regulate gene expression, our technologies can be used to selectively up-regulate or down-regulate the production of a target protein, or direct the expression of novel proteins involved in human diseases and disorders. Further, we believe the charge-neutral nature of our PMO-based molecules may have the potential to reduce off-target effects, such as immune stimulatory effects often seen in alternative RNA-based technologies. We believe that our highly-differentiated, novel proprietary and innovative RNA-based technology platforms, based on charge neutral morpholino oligomers, may represent a significant improvement over traditional RNA-based technologies.
 
17

Table of Contents
On July 12, 2012, our common stock began trading on The NASDAQ Global Market on a split-adjusted basis following a one-for-six reverse stock split that was effective on July 11, 2012. Unless otherwise noted, all share amounts, share prices and exercise prices included throughout this report give effect to the July 2012 one-for-six reverse stock split.
Since our inception in 1980, we have incurred losses of $492.4 million, substantially all of which resulted from expenditures related to research and development, general and administrative charges and losses on changes in warrant valuation partially offset by revenue generated from research contracts with and grants primarily from the DoD. As of June 30, 2013, we have completed all of our contracts with the DoD except for the July 2010 contract and the August 2012 contract for the development of therapeutics against the Marburg virus. The current period of performance for the August 2012 contract is scheduled to conclude in the second half of 2013 subject to additional extensions that may be agreed upon by the Company and the DoD. In November 2012 we also entered into an agreement with the EC Health Innovation for development and study related activities for a DMD therapeutic for which minimal revenues have been earned to date. We have not generated any material revenue from product sales to date, and there can be no assurance that revenues from product sales will be achieved. Moreover, even if we do achieve revenue from product sales, we are likely to continue to incur operating losses in the near term.
As of June 30, 2013, we had $164.0 million of cash equivalents and invested cash, comprised of $156.2 million of cash and cash equivalents and $7.8 million of restricted investments, which we believe, taking into consideration our current stock price and outstanding warrants, is sufficient to fund our current operational plan for the next twelve months. Should our funding from the DoD cease or be delayed, we would likely curtail certain infectious disease research and development efforts unless additional funding was obtained. We are also likely to pursue additional cash resources through public or private financings, seeking additional government contracts, and by establishing collaborations or licensing our technology to other companies.
We were originally incorporated in the State of Oregon on July 22, 1980 and on June 6, 2013, we reincorporated in Delaware. Our executive office is located at 215 First Street, Suite 7, Cambridge, MA 02142 and our telephone number is (857) 242-3700. Our common stock trades on The NASDAQ Global Market under the symbol “SRPT.”
 
18

Table of Contents
Government Contracts
We recognize revenue from government research contracts during the period in which the related expenditures are incurred and present these revenues and related expenses gross in the condensed consolidated financial statements. In the periods presented, substantially all of the revenues generated by us was derived from research contracts with the DoD. As of June 30, 2013, we had completed all of our contracts with the DoD except for the Marburg portion of the July 2010 agreement for the development of therapeutics against Ebola and Marburg viruses and the August 2012 contract for IM administration of AVI-7288, our candidate against the Marburg virus.
The following table sets forth the revenue from each of our contracts with the U.S. and E.U. governments and other revenue for the three and six months ended June 30, 2013 and 2012.

 	  	Three Months Ended June 30,	 	  	Six Months Ended June 30,	 	
 	  	2013	 	  	2012	 	  	2013	 	  	2012	 	
 	  	(in thousands)	 	  	(in thousands)	 	
July 2010 Contract (Ebola and Marburg IV)	  	$	2,076	 	  	$	11,171	  	  	$	4,690	  	  	$	22,334	  	
August 2012 Contract (Intramuscular)	  	 	439	 	  	 	—  	  	  	 	2,245	  	  	 	—  	  	
November 2012 SKIP-NMD Agreement (DMD)	  	 	9	 	  	 	—  	  	  	 	63	  	  	 	—  	  	
Other Agreements	  	 	427	 	  	 	36	  	  	 	427	  	  	 	85	  	

Total	  	$	2,951	 	  	$	11,207	  	  	$	7,425	  	  	$	22,419	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
July 2010 Contract (Ebola and Marburg Intravenous administration)
On July 14, 2010, we were awarded the DoD contract managed by the JPM-TMT Project Management Office for the advanced development of our hemorrhagic fever virus therapeutic candidates, AVI-6002 and AVI-6003, against the Ebola and Marburg viruses, respectively. In February 2012, we announced that we received permission from the FDA to proceed with a single oligomer from AVI-6003, AVI-7288, as the lead product candidate against Marburg virus infection.
On August 2, 2012, we received a stop-work order related to the Ebola virus portion of the contract and, on October 2, 2012, the DoD terminated the Ebola portion of the contract for the convenience of the government due to government funding constraints.
The remaining Marburg portion of the contract is structured into four segments and has an aggregate remaining period of performance spanning approximately four years if DoD exercises its options for all segments. Activities under the first segment began in July 2010 and include Phase I studies in healthy volunteers as well as preclinical studies.
After completion of the first segment, and each successive segment, DoD has the option to proceed to the next segment. If DoD exercises its options for segments II, III and IV, our contract activities would include all clinical and licensure activities necessary to obtain FDA regulatory approval for the therapeutic candidate against the Marburg virus. The funding for segments II, III and IV of the Marburg virus portion of the contract is estimated to be approximately $84.4 million.
August 2012 Contract (Intramuscular administration)
On August 29, 2012, we were awarded a contract from the DoD, which is also being managed by the JPM-TMT. The contract was awarded for approximately $3.9 million to evaluate the feasibility of an IM route of administration using AVI-7288, our candidate for treatment of Marburg virus. The current period of performance for this contract is scheduled to conclude in the second half of 2013 subject to additional extensions that may be agreed upon by the Company and the DoD.
Other Agreements
For the three month period ended June 30, 2013, Other Agreements includes $0.4 million in additional revenue from a former US government contract the Company related to H1N1 influenza.
November 2012 SKIP-NMD Agreement (DMD)
In November 2012, we entered into an agreement for a collaborative research project partially funded by the EC Health Innovation. The agreement provides for approximately $2.5 million for research in certain development and study related activities for a DMD therapeutic and is expected to last approximately three years.
During the six months ended June 30, 2013, the Company received $1.3 million in advance payments and recognized $63,000 of these payments as revenue. Deferred revenue related to the agreement as of June 30, 2013 was $1.2 million. The remaining balance of deferred revenue relates to the Company’s sponsored research agreement with Charley’s Fund.
 
19

Table of Contents
Key Financial Metrics
Revenue
Government Research Contract and Grant Revenue. Substantially all of our revenue is generated from U.S. government research contracts and grants. See Note 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. We recognize revenue from government research contracts and grants during the period in which the related expenses are incurred and present such revenue and related expenses gross in the condensed consolidated financial statements. Government contract revenue is highly dependent on the timing of various activities performed by us and our third party vendors. Changes in the timing of activities performed in support of this contract have, and may in the future, result in unexpected fluctuations in our revenue from period to period. We expect that future revenue generated under our government contracts will continue to be variable as a result of these factors.
License Arrangements. Our license arrangements may consist of non-refundable upfront license fees, data transfer fees, research reimbursement payments, exclusive licensed rights to patented or patent pending compounds, technology access fees, various performance or sales milestones and future product royalty payments. Some of these arrangements are multiple element arrangements.
We defer recognition of non-refundable upfront fees if we have continuing performance obligations when the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee that is separate and independent of our performance under the other elements of the arrangement. In addition, if we have continuing involvement through research and development services that are required because of our know-how or because the services can only be performed by us, then such up-front fees are deferred and recognized over the period of continuing involvement. As of June 30, 2013, we had deferred revenue of $4.5 million, which represents up-front fees which we will recognize as revenue as we satisfy the outstanding performance obligations.
Expenses
Research and Development. Research and development expense consists of costs associated with research activities as well as costs associated with our product development efforts, conducting preclinical studies, and clinical trial and manufacturing costs.
Direct research and development expenses associated with our programs include clinical trial site costs, clinical manufacturing costs, costs incurred for consultants and other outside services, such as data management and statistical analysis support, and materials and supplies used in support of the clinical programs. Indirect costs of our clinical program include salaries, stock-based compensation, and an allocation of our facility costs.
The amount and timing of future research and development expense will depend in part on our ability to obtain U.S. government awards to fund the advanced development of our infectious disease therapeutic candidates. Without such funding, we would likely significantly reduce our spending in these areas. Future research and development expenses may also increase as our internal projects, such as eteplirsen for DMD, enter later stage clinical development. Our research and development programs are in ongoing open label extension studies of Phase IIb clinical trials or in earlier stages and may not result in any approved products. Product candidates that appear promising at early stages of development may not reach the market for a variety of reasons. Similarly, any of our product candidates may be found to be ineffective during clinical trials, may take longer to complete clinical trials than we have anticipated, may fail to receive necessary regulatory approvals, or may prove impracticable to manufacture in commercial quantities at reasonable cost and with acceptable quality.
As a result of these uncertainties and the other risks inherent in the drug development process, we cannot determine the duration and completion costs of current or future clinical stages of any of our product candidates. Similarly, we cannot determine when, if, or to what extent we may generate revenue from the commercialization and sale of any product candidate. The timeframe for development of any product candidate, associated development costs, and the probability of regulatory and commercial success vary widely.
General and Administrative. General and administrative expense consists principally of salaries, benefits, stock-based compensation expense, and related costs for personnel in our executive, finance, legal, information technology, business development and human resource functions. Other general and administrative expenses include an allocation of our facility costs and professional fees for legal, consulting and accounting services.
Interest Income and Other, Net. Interest income and other, net, primarily consists of interest on our cash and cash equivalents, interest expense, and rental income. Our cash equivalents consist of money market investments. Interest expense includes interest paid on our mortgage loan related to the Corvallis property, the substantial portion of which we leased in November 2011. Rental income is from subleasing excess space in some of our facilities.
Income (Loss) on Change in Warrant Liability. Warrants issued in connection with our January and August 2009 financings are classified as liabilities as opposed to equity due to their settlement terms. These warrants are non-cash liabilities; we are not required to expend any cash to settle these liabilities. The fair market value of these warrants was recorded on the balance sheet at issuance and the warrants are marked to market each financial reporting period, with changes in the fair value recorded as a gain or loss in our statement of operations. The fair value of the warrants is determined using the Black-Scholes-Merton option-pricing model, which requires the use of significant
 
20

Table of Contents
judgment and estimates related to the inputs used in the model and can result in significant swings in the fair market valuation primarily due to changes in our stock price. For more information, see Note 5 of the Notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements included elsewhere in this report. The preparation of our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities for the periods presented. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. For any given individual estimate or assumption we make, there may also be other estimates or assumptions that are reasonable. We believe that the estimates and judgments upon which we rely are reasonable based upon historical experience and information available to us at the time that we make these estimates and judgments. To the extent there are material differences between these estimates and actual results, our financial statements will be affected. Although we believe that our judgments and estimates are appropriate, actual results may differ from these estimates.
The policies that we believe are the most critical to aid the understanding of our financial results include:
 
 	•	 	revenue recognition;	
 
 	•	 	stock-based compensation; and	
 
 	•	 	accounting for and valuation of warrants classified as liabilities.	
There have been no material changes to our critical accounting policies and significant estimates as detailed in our annual report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission, or SEC, on March 15, 2013.
Results of Operations for the Three and Six Months Ended June 30, 2013 and 2012
The following table sets forth selected consolidated statements of operations data for each of the periods indicated:

 	  	Three Months Ended
June 30,	 	 	%
Change	 	 	Six Months Ended
June 30,	 	 	%
Change	 	
 	  	2013	 	 	2012	 	 	 	 	 	2013	 	 	2012	 	 	 	 	
 	  	(in thousands, except per
share amounts)	 	 	 	 	 	(in thousands, except per
share amounts)	 	 	 	 	
Revenue	  	$	2,951	  	 	$	11,207	  	 	 	(74	)%	 	$	7,425	  	 	$	22,419	  	 	 	(67	)% 	
Operating expenses:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Research and development	  	 	12,984	  	 	 	13,849	  	 	 	(6	)%	 	 	26,746	  	 	 	28,654	  	 	 	(7	)% 	
General and administrative	  	 	7,054	  	 	 	2,915	  	 	 	142	%	 	 	13,181	  	 	 	6,196	  	 	 	113	% 	

Operating loss	  	 	(17,087	) 	 	 	(5,557	) 	 	 	207	%	 	 	(32,502	) 	 	 	(12,431	) 	 	 	161	% 	
Other income (loss):	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income and other, net	  	 	(19	) 	 	 	107	  	 	 	(118	)%	 	 	218	  	 	 	203	  	 	 	7	% 	
Income (loss) on change in warrant liability	  	 	(1,945	) 	 	 	13,488	  	 	 	(114	)%	 	 	(28,851	) 	 	 	2,562	  	 	 	(1,226	)% 	

Net income (loss)	  	$	(19,051	) 	 	$	8,038	  	 	 	(337	)%	 	$	(61,135	) 	 	$	(9,666	) 	 	 	532	% 	

Basic income (loss) per share	  	$	(0.60	) 	 	$	0.36	  	 	 	 	 	 	$	(1.92	) 	 	$	(0.43	) 	 	 	 	 	
 	 	 	 	 	 	 	
Diluted income (loss) per share	  	$	(0.60	) 	 	$	0.35	  	 	 	 	 	 	$	(1.92	) 	 	$	(0.43	) 	 	 	 	 	
Revenue
Revenue for the three months ended June 30, 2013 decreased by $8.3 million, or 74%, compared to the three months ended June 30, 2012. The decrease was primarily caused by a $4.3 million decrease in revenue from the Ebola portion of the DoD contract due to the August 2012 stop-work order and the subsequent termination for convenience in October 2012. Additionally, there was a decrease of $4.8 million in revenue associated with the Marburg portion of the DoD contract. The decrease was partially offset by a $0.4 million increase in revenue on the Marburg Intramuscular (IM) government research contract and $0.4 million in other revenue related to a prior and completed government contract.
Revenue for the six months ended June 30, 2013 decreased by $15.0 million, or 67%, compared to the six months ended June 30, 2012. The decrease was primarily due to a $9.6 million decrease in revenue from the Ebola portion of the DoD contract as a result of the August 2012 stop-work order and the subsequent termination for convenience in October 2012. Additionally, there was a decrease of $8.0 million in revenue associated with the Marburg portion of the DoD contract. The decrease was partially offset by a $2.2 million increase in revenue on the IM government research contract and $0.4 million in other revenue related to a prior and completed government contract.
 
21

Table of Contents
Research and Development Expenses
Research and development expenses for the three months ended June 30, 2013 decreased by $0.9 million, or 6%, compared to the three months ended June 30, 2012. The decrease was primarily due to $2.8 million from the Ebola portion of the DoD contract due to the August 2012 stop-work order and the subsequent termination for convenience in October 2012, a decrease of $3.6 million in costs on the Marburg portion of the DoD contract. The decrease was partially offset by a $1.1 million increase in our DMD program costs due to the timing of manufacturing and clinical activities and $4.4 million in additional personnel related costs and costs of proprietary research, which includes $1.0 million in license fees for exclusive rights on certain intellectual property.
Research and development expenses for the six months ended June 30, 2013 decreased by $1.9 million, or 7%, compared to the six months ended June 30, 2012. The decrease was primarily due to $6.5 million from the Ebola portion of the DoD contract as a result of the August 2012 stop-work order and the subsequent termination for convenience in October 2012 and a decrease of $6.2 million in costs on the Marburg portion of the DoD contract. The decrease was partially offset by an $8.7 million increase in personnel related costs and costs of proprietary research, which includes $1.0 million in license fees related to the agreement with the University of Western Australia for exclusive rights on certain intellectual property, $1.6 million of costs incurred on the IM government research contract, and a $0.6 million decrease in our DMD program costs due to the timing of manufacturing and clinical activities.
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2013 increased by $4.1 million, or 142%, compared to the three months ended June 30, 2012. The increase in general and administrative expenses is primarily due to a $3.2 million increase in personnel costs including $1.4 million in stock-based compensation, $0.2 million of additional professional service costs and $0.2 million of additional cost associated with facilities.
General and administrative expenses for the six months ended June 30, 2013 increased by $7.0 million, or 113%, compared to the six months ended June 30, 2012. The increase in general and administrative expenses is primarily due to a $5.0 million increase in personnel costs including $2.1 million in stock-based compensation, $1.0 million of additional professional service costs and $0.2 million of additional cost associated with facilities.
Interest Income and Other, Net
Interest income and other, net, for the three and six months ended June 30, 2013 decreased primarily due to lower net interest income on our cash and cash equivalents balances compared to the three and six months ended June 30, 2012.
Income (Loss) on Change in Warrant Liability
The change in fair value of our warrant liability for the three and six months ended June 30, 2013 compared to the three and six months ended June 30, 2012 was primarily attributable to the change in our stock price. See Note 5 to the Unaudited Condensed Consolidated Financial Statements included elsewhere in this report.
Net Loss
Net loss for the three months ended June 30, 2013 was $19.1 million, compared to net income of $8.0 million for the three months ended June 30, 2012, a decrease of $27.1 million. The decrease in net income was primarily due to increased operating loss and the change in our warrant liability.
Net loss for the six months ended June 30, 2013 was $61.1 million, compared to net loss of $9.7 million for the six months ended June 30, 2012. The increased net loss was primarily due to an increase in operating loss of $20.1 million and a $31.4 million increase in non-operating expense due to the increase in the fair market value of our outstanding warrants. The fair market value of our outstanding warrants is a non-cash expense which is highly impacted by the change in the value of our stock.
Liquidity and Capital Resources
As of June 30, 2013, we had $164.0 million of cash equivalents and invested cash, comprised of $156.2 million of cash and cash equivalents and $7.8 million of restricted investments, compared to $187.7 million of cash equivalents and invested cash at December 31, 2012. The decrease during the six month period ended June 30, 2013 is due primarily to cash used to operate our business and the purchase of $7.8 million of restricted investments to secure three letters of credit issued in connection with certain ongoing manufacturing and lease agreements. These uses of cash were partially offset by $4.9 million in net proceeds from the sale of common stock under our 2012 ATM sales agreement and warrant and option exercises. Based on the factors described below, which we believe, taking into consideration our current stock price and outstanding warrants, our available cash and cash equivalents is sufficient to fund our current operational plan for the next twelve months.
Our principal sources of liquidity are revenue from government research contracts and grants, and equity transactions. In July 2013, we entered into an ATM Equity Offering Sales Agreement under which the Company may issue common stock at the then current market price up to a total of $125.0 million. For more information, see note 6 of the Notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
 
22

Table of Contents
Our primary source of revenue is from development of product candidates pursuant to our contracts with the U.S. and E.U. governments. Government funding is subject to the U.S. government’s appropriations process and the U.S. government has the right under our contracts with them to terminate such contracts for convenience as was done regarding the Ebola portion of the 2010 Ebola and Marburg contract. If DoD funding is not received or is delayed, we would likely curtail certain of our infectious disease research and development efforts unless additional funding was obtained. Currently, we do not generate any revenue from the commercial sale of our pharmaceutical product candidates.
Our future expenditures and capital requirements depend on numerous factors, most of which are difficult to project beyond the short term. These requirements include the progress of our research and development programs and our pre-clinical and clinical trials, our ability to meet the requirements of our DoD research projects, the time and costs involved in obtaining regulatory approvals, the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, competing technological and market developments, our ability to establish collaborative arrangements and the terms of any such arrangements, and the costs associated with manufacturing and commercialization of our products.
Our cash requirements are expected to continue to increase as we advance our research, development and commercialization programs and we expect to seek additional financing primarily from, but not limited to, the sale and issuance of equity, debt securities or the licensing or sale of our technology. We cannot assure you that financing will be available when and as needed or that, if available, the financings will be on favorable or acceptable terms. If we are unable to obtain additional financing when and if we require, it would have a material adverse effect on our business and results of operations. To the extent we issue additional equity securities, our existing stockholders could experience substantial dilution.
Historical Trends

 	  	Six Months Ended June 30,	 	
 	  	2013	 	 	2012	 	
 	  	(in thousands)	 	
Cash provided by (used in):	  	 	 	 	 	 	 	 	
Operating activities	  	$	(26,995	)	 	$	(14,731	) 	
Investing activities	  	 	(9,173	)	 	 	(641	) 	
Financing activities	  	 	4,692	 	 	 	(41	) 	

Decrease in cash and equivalents	  	$	(31,476	)	 	$	(15,413	) 	
 	  	 	 	 	 	 	 	 	
Operating Activities. The increase in the amount of cash used in operating activities of $12.3 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 was primarily due to an increase in operating loss of $20.1 million driven by lower government contract revenue and higher general and administrative costs partially offset by a reduction in research and development costs. In addition to the increase in operating loss, there was a favorable change in operating assets and liabilities of $4.7 million, as well as a $2.8 million increase in stock-based compensation costs, which is a non-cash adjustment to net loss.
Investing Activities. The increase in the amount of cash used in investing activities of $8.5 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 was due to the purchase of $7.3 million of investments in February 2013 to secure two letters of credit issued in connection with certain manufacturing contracts, and due to the purchase of a $0.6 million investment to secure a letter of credit for a security deposit relating to our Cambridge lease. Also there was an increase in cash used to fund patent costs and acquire equipment in the six months ended June 30, 2013 as compared to the six months ended June 30, 2012.
Financing Activities. The increase in the amount of cash from financing activities of $4.7 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 was primarily due to the sale of approximately 87,000 shares of common stock under the 2012 ATM sales agreement in January 2013 which generated $2.1 million in net proceeds and fully exhausted the sales of our stock available under the 2012 ATM sales agreement. We also received $2.8 million in net proceeds from warrant and stock option exercises during the six months ended June 30, 2013 for which we issued approximately 642,000 shares of additional common stock.
Contractual Obligations
In our continuing operations, we have entered into long-term contractual arrangements for our facilities, the provision of goods and services, and acquisition of technology access rights, among others. The following table presents non-cancelable contractual obligations arising from these arrangements as of June 30, 2013:

 	  	Payments Due by Period	 	
 	  	Total	 	  	Less Than
1 Year	 	  	1-3 Years	 	  	3-5 Years	 	  	More Than
5 Years	 	
 	  	(in thousands)	 	
Long-term debt	  	$	1,712	 	  	$	90	  	  	$	196	  	  	$	216	  	  	$	1,210	  	
Operating leases	  	 	29,981	  	  	 	3,309	  	  	 	8,003	  	  	 	7,981	  	  	 	10,688	  	
Purchase obligations (1)	  	 	22,523	 	  	 	19,247	 	  	 	3,276	 	  	 	—  	  	  	 	—  	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	54,216	  	  	$	22,646	  	  	$	11,475	  	  	$	8,197	  	  	$	11,898	  	
 
(1)	Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding to us and that specify all significant terms. Purchase obligations relate primarily to our DMD development program.	
 
23

Table of Contents
Off Balance Sheet Arrangements
During the periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for another contractually narrow or limited purpose.
Recent Accounting Pronouncements
See Note 11 to the Notes to the Unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
At June 30, 2013, we had $164.0 million of cash equivalents and invested cash, comprised of $156.2 million of cash and cash equivalents and $7.8 million of restricted investments, compared to $187.7 million of cash and cash equivalents at December 31, 2012. We do not enter into investments for trading or speculative purposes; our cash equivalents are invested in money market accounts. We believe that we do not have any material exposure to changes in the fair value of these assets in the near term due to the short term nature of our cash and cash equivalents. A 0.1% decline in interest rates, occurring January 1, 2013 and sustained throughout the period ended June 30, 2013, would have been inconsequential.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation as of the end of the period covered by this report, under the supervision and with the participation of our management, including (1) our chief executive officer and (2) our chief financial officer, of our 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. The purpose of this evaluation was to determine whether as of the evaluation date our disclosure controls and procedures were effective to provide reasonable assurance that the information we are required to disclose in our filings with the Securities and Exchange Commission, or SEC, under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our chief executive officer and our chief financial officer , as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, management has concluded that as of June 30, 2013, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
24

Table of Contents
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
As of the date of this report, we are not a party to any material legal proceedings with respect to us, our subsidiaries, or any of our material properties. In the normal course of business, we may from time to time be named as a party to various legal claims, actions and complaints, including matters involving employment, intellectual property, effects from the use of drugs utilizing our technology, or others. It is impossible to predict whether any resulting liability would have a material adverse effect on our financial position, results of operations or cash flows.
Item 1A. Risk Factors.
Set forth below and elsewhere in this report and in other documents we file with the SEC are descriptions of risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. Because of the following factors, as well as other variables affecting our operating results, past financial performance should not be considered a reliable indicator of future performance and investors should not use historical trends to anticipate results or trends in future periods. The risks and uncertainties described below are not the only ones facing us. Other events that we do not currently anticipate or that we currently deem immaterial also affect our results of operations and financial condition.
Risks Relating to Our Business
Our product candidates are at an early stage of development, and it is possible that none of our product candidates will ever become commercial products.
Our product candidates are in relatively early stages of development. These product candidates will require significant further development, financial resources and personnel to obtain regulatory approval and develop into commercially viable products, if at all. Currently, eteplirsen in DMD, AVI-7288 in Marburg and AVI-7100 in influenza are in active clinical development. AVI-7537 in Ebola was in active clinical development until August 2012, when we received a stop-work order from the DoD instructing us to cease all work and ordering of supplies in support of the development of this product candidate. On October 2, 2012, we received notice from the DoD that the program for the development of AVI-7537 was terminated for the convenience of the government due to funding constraints. The rest of our product candidates are in preclinical development. We expect that much of our effort and many of our expenditures over the next several years will be devoted to development activities associated with eteplirsen and other exon-skipping candidates as part of our larger pan-exon strategy in DMD, our infectious disease candidates, our proprietary chemistry, and other potential therapeutic areas that provide long-term market opportunities. With current resources, we may be restricted or delayed in our ability to develop these and other clinical and preclinical product candidates.
Our ability to commercialize any of our product candidates, including eteplirsen, depends on first receiving required regulatory approvals, and it is possible that we may never receive regulatory approval, including any accelerated approval by the FDA under Subpart H — Accelerated Approval of New Drugs for Serious or Life-Threatening Illnesses, or any other designations that will expedite the review or approval process for any of our product candidates based on an inability to adequately demonstrate the safety and effectiveness of our product candidates, failure to meet other regulatory requirements, lack of funding, changes in the regulatory landscape, manufacturing or other reasons. If we are unable to obtain regulatory approval for any of our product candidates, it could delay or eliminate any potential product revenue by delaying or terminating the potential commercialization of our product candidates.
Even if a product candidate receives regulatory approval, the resulting product may not gain market acceptance among physicians, patients, healthcare payers and the medical community. Assuming that any of our product candidates receives the required regulatory approvals, commercial success will depend on a number of factors, including:
 
 	•	 	establishment and demonstration of clinical efficacy and safety and acceptance of the same by the medical community;	
 
 	•	 	cost-effectiveness of the product;	
 
 	•	 	the availability of adequate reimbursement by third parties, including governmental payers such as the Medicare and Medicaid programs, managed care organizations, and private health insurers;	
 
 	•	 	the product’s potential advantage over alternative treatment methods;	
 
 	•	 	whether the product can be produced in commercial quantities at acceptable costs;	
 
 	•	 	marketing and distribution support for the product; and	
 
 	•	 	any exclusivities applicable to the product.	
 
25

Table of Contents
If we are unable to develop and commercialize any of our product candidates, if development is delayed or if sales revenue from any product candidate that receives marketing approval is insufficient, we may never reach sustained profitability.
We have been granted orphan disease status for certain of our product candidates, but there can be no assurance that we will be able to prevent third parties from developing and commercializing products that are competitive to these product candidates.
To date we have been granted orphan status for two of our product candidates in DMD and for AVI-6002 and AVI-7537 for the treatment of Ebola virus and AVI-6003 and AVI-7288 for the treatment of Marburg virus. We are not guaranteed to receive orphan status for other product candidates in development or product candidates we may develop in the future and if our product candidates were to lose orphan drug status or the marketing exclusivity that it provides, our business and results of operations could be materially adversely affected. Orphan drug exclusivity grants seven years of marketing exclusivity under the Federal Food, Drug, and Cosmetic Act, and up to 10 years of marketing exclusivity in Europe. While orphan drug exclusivity would provide market exclusivity in the U.S., Europe and other countries, we would not be able to exclude other companies from manufacturing and/or selling products using the same active ingredient for the same indication beyond that timeframe on the basis of orphan drug designation. Furthermore, the marketing exclusivity in Europe can be reduced from 10 years to six years if the initial designation criteria have significantly changed since the market authorization of the orphan product. Moreover, we cannot guarantee that another company will not receive approval of products with the same active ingredient for the same indication before we receive market approval. If that were to happen, our applications for that indication may not be approved until the competing company’s period of exclusivity has expired. Even if we are the first to obtain marketing authorization for an orphan drug designation, there are circumstances under which a competing product may be approved for the same indication during the seven-year period of marketing exclusivity, such as if the later product is shown to be clinically superior to our product. Further, application of the orphan drug regulations in the United States and Europe is uncertain and we cannot predict how the respective regulatory bodies will interpret and apply the regulations to our or our competitors’ product candidates. If a competitor’s product receives orphan drug status for an indication that we are targeting, and such product is approved for commercial sales before our product, regulators may interpret our product to be the same drug as the competing product and could prevent us from selling our product in the applicable territories for the competitor’s orphan exclusivity period. Furthermore, pediatric exclusivity only applies if the product has another form of exclusivity.
If we are unable to obtain or maintain required regulatory approvals, we will not be able to commercialize our product candidates, our ability to generate revenue will be materially impaired and our business will not be successful.
The research, testing, manufacturing, labeling, approval, selling, marketing and distribution of drug products are subject to extensive regulation by the FDA in the United States, and other regulatory authorities in other countries, with regulations differing from country to country. Marketing of our product candidates in the United States or foreign countries is not permitted until we obtain marketing approval from the FDA or other foreign regulatory authorities, and we may never receive regulatory approval for the commercial sale of any of our product candidates. Obtaining marketing approval is a lengthy, expensive and uncertain process and approval is never assured. We currently plan to submit a New Drug Application (NDA) to the FDA in the first half of 2014 for the approval of eteplirsen for the treatment of Duchenne muscular dystrophy. We have not progressed to the point of preparing or filing the applications necessary to gain regulatory approvals of any of our other product candidates.
Further, the FDA and other foreign regulatory agencies have substantial discretion in the approval process, and the determination of when or whether regulatory approval, of any type, will be granted for any product candidate we develop. In this regard, even if we believe data collected from clinical trials of our product candidates are promising and our chemistry, manufacturing and controls (CMC) and related manufacturing processes are satisfactory, the FDA or foreign authorities may disagree with our interpretations and determine such data is not sufficient to accept our application or support approval. Furthermore, regulatory agencies may approve a product candidate for fewer indications than requested or may grant approval subject to the performance of post-approval studies for a product candidate. Similarly, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates.
In addition, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols or other approval strategies to reflect these changes. Amendments may require us to resubmit our clinical trial protocols to institutional review boards (IRBs) or the FDA for review, which may impact the costs, timing or successful completion of a clinical trial. Changes in the approval process may occur that require additional studies that were not originally planned. Other factors may also impact our ability to obtain approval of our product candidates, including, for example, the fact that dystrophin has never been utilized as a surrogate endpoint and a therapeutic commercial product utilizing our RNA-based technologies and the manufacturing techniques necessary to produce them at commercial scale have never been approved or validated by any regulatory authority. Our exon-skipping therapy uses antisense oligonucleotides and, to date, only one antisense oligonucleotide has been approved by the FDA for systemic use and no product using antisense oligonucleotides for systemic use has been approved for sale in the European Union. We cannot be certain that our technology will meet the applicable safety and efficacy standards for regulatory authorities and any regulatory setbacks faced by third parties developing similar compounds could affect the receptiveness of regulators to our compounds. Due to these factors, among others, our current product candidates or any of our other future product candidates could take a significantly longer time to gain regulatory approval than we expect or may never gain regulatory approval, which could delay or eliminate any potential product revenue by delaying or terminating the potential commercialization of our product candidates.
 
26

Table of Contents
For example, we are pursuing FDA approval of eteplirsen, our lead product candidate, and have reported results from a U.S.-based Phase IIb 12-patient clinical trial for eteplirsen at 30 mg/kg and 50 mg/kg which we have followed with and are currently conducting an ongoing open label extension. On July 24, 2013 we announced our plans to submit an NDA to the FDA in the first half of 2014 for the approval of eteplirsen for the treatment of Duchenne muscular dystrophy based on feedback we received from the FDA that it is “open to considering an NDA based on these data for filing.” The FDA also requested additional information related to the methodology and verification of dystrophin quantification which we plan to address in the NDA submission. The FDA would not commit to declaring dystrophin an acceptable surrogate endpoint under Subpart H — Accelerated Approval pathway prior to an NDA filing and commented that a decision by the FDA to file “the NDA would not indicate that we have accepted dystrophin expression as a biomarker reasonably likely to predict clinical benefit. A filing would only indicate that the question merits review, and that we deem the data to be reviewable.” We will continue to evaluate the most appropriate timing and path for pursuing regulatory review and approval of eteplirsen. Any decision will be further informed by a subsequent CMC meeting. There can be no assurance that, after our evaluation we will decide to pursue or submit an NDA for eteplirsen to the FDA nor can we have any assurance that the FDA will decide to review any NDA submission we make under Subpart H accelerated approval or any other form of expedited development review or approval. Furthermore, there can be no assurance that any submission or application will be accepted ( e.g. , refusal to file) or that any expedited development, review or approval will be granted on a timely basis, or at all. The FDA or other foreign authorities could also request additional information or meetings with us or require us to conduct further studies or CMC-related work ( e.g. , a complete response letter) prior to considering our application or granting approval of any type. A failure to obtain accelerated approval or any other form of expedited development, review or approval for eteplirsen or any of our other product candidates would result in a longer time period for commercialization of such product candidate, could potentially increase the cost of development of such product candidate and could harm our competitive position in the marketplace.
Additionally, even if we receive regulatory approval for our product candidates, we will be subject to ongoing FDA obligations and oversight, including adverse event reporting requirements, marketing restrictions and, potentially, other post-marketing obligations such as confirmatory studies, all of which may result in significant expense and limit our ability to commercialize any such products. The FDA’s policies may also change and additional government regulations may be enacted that could further restrict or regulate post-approval activities. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States, or abroad. If we are not able to maintain regulatory compliance, we may be subject to civil and criminal penalties, we may not be permitted to market our products and our business could suffer.
Any delay in, or failure to, receive or maintain regulatory approval for any of our product candidates could harm our business and prevent us from ever generating meaningful revenues or achieving profitability. We will also need to obtain regulatory approval from regulatory authorities in foreign countries to market our product candidates in those countries. We have not submitted an application for regulatory approval to market our product candidates in any foreign jurisdiction. Approval by one regulatory authority does not ensure approval by regulatory authorities in other jurisdictions. If we fail to obtain approvals from foreign jurisdictions, the geographic market for our product candidates would be limited.
Our preclinical and clinical trials may fail to demonstrate acceptable levels of safety and efficacy of our product candidates, which could prevent or significantly delay their regulatory approval.
To obtain the requisite regulatory approvals to market and sell any of our product candidates, we must demonstrate, through extensive preclinical and clinical studies that the product candidate is safe and effective in humans. Ongoing and future preclinical and clinical trials of our product candidates may not show sufficient safety or efficacy to obtain regulatory approvals.
For example, in 2012, we completed Study 201, a U.S.-based Phase IIb 12 person clinical trial for eteplirsen at 30 mg/kg and 50 mg/kg. Following completion of this study, we initiated Study 202, an ongoing open label extension study with the same participants from Study 201. These trials were initiated, in part, to further demonstrate efficacy and safety, including the production of dystrophin, and explore and identify a more consistently effective dose that may be more appropriate for future clinical trials. While Studies 201 and 202 met their primary endpoints at weeks 24 and 48 respectively, and results reported for weeks 62, 74 and 84 were positive, we cannot assure you that data from the ongoing open label extension study will be sufficient for regulatory approval or will continue to be positive through the remaining study period. If these data are not sufficient to demonstrate safety and efficacy to regulators, do not continue to demonstrate safety and efficacy through the remainder of Study 202, or are insufficient to identify a consistently effective dose, we expect we will need to engage in discussions with regulatory authorities about the design and subsequent execution of any further studies which may be required. Regulatory authorities might require more extensive information or preclinical or clinical trials than anticipated. Such clinical trials might include additional open label “extension studies” for all participants, who have previously received eteplirsen, as well as other participants ( e.g. , non-ambulatory participants), additional placebo-controlled “pivotal” study or studies, or additional trials before conducting a pivotal trial or trials of the product candidate. Any additional studies required by regulatory authorities would increase our costs and delay commercialization of eteplirsen. Even if we conform to any guidance regulatory authorities provide, it does not guarantee receipt of marketing approval, even if we believe our preclinical and clinical trials are successful.
Furthermore, success in preclinical and early clinical trials does not ensure that the ongoing Study 202 and later larger-scale trials will be successful nor does it predict final results. Acceptable results in early trials may not be reproduced in the remainder of the Study 202 extension study or later trials. For example, pivotal trials for eteplirsen will likely involve a larger number of patients to achieve statistical significance, will be expensive and will take a substantial amount of time to complete. As a result, we may conduct lengthy and expensive clinical trials of our product candidates, only to learn that the product candidate is not an effective treatment or is not superior to existing approved therapies, or has an unacceptable safety profile, which could prevent or significantly delay regulatory approval for such product candidate.
 
27

Table of Contents
We currently rely on certain third-party manufacturers and other third parties for production of our product candidates and our dependence on these manufacturers may impair the advancement of our research and development programs and the development of our product candidates.
We do not currently have the internal ability to manufacture our product candidates in the quantities that we need to conduct our clinical trials and we rely upon a limited number of manufacturers to supply our product candidates and the components of our drug substance. We also need to rely on manufacturers for the production of our product candidates to support our research and development programs. In addition, we rely on other third parties to perform additional steps in the manufacturing process, including filling and labeling of vials and storage of our product candidates. For the foreseeable future, we expect to continue to rely on contract manufacturers and other third parties to produce product candidates and their components, fill vials, and store sufficient quantities of our product candidates for research and development programs, clinical trials and potential commercial supply. For each of our eteplirsen, Marburg and other development programs, based on limited capacity for our specialized manufacturing needs we have had to enter into limited or, at times, non-exclusive sole-source agreements with multinational manufacturing firms for the production of the active pharmaceutical ingredients (APIs) for eteplirsen, Marburg and other therapeutics. There are a limited number of companies that can produce APIs in the quantities and with the quality and purity that we require. Establishing a relationship with alternative suppliers can be a lengthy process and might cause delays in our development efforts. If we are required to seek alternative supply arrangements, the resulting delays and potential inability to find a suitable replacement could materially and adversely impact our business.
Our product candidates require precise, high-quality manufacturing. The failure to achieve and maintain high quality standards, including failure to detect or control anticipated or unanticipated manufacturing errors, could result in patient injury or death or product recalls. Contract drug manufacturers often encounter difficulties involving production yields, quality control and quality assurance and shortages of qualified personnel. If our contract manufacturers or other third parties fail to deliver our product candidates for our research and development programs, clinical use or potential commercial supply on a timely basis, with sufficient quality, and at commercially reasonable prices, and we fail to find replacement manufacturers or to develop our own manufacturing capabilities, we may be required to delay or suspend clinical trials, research and development programs, commercial supply or otherwise discontinue development and production of our product candidates. In addition, we currently depend on certain third-party vendors, which in some cases may be sole sources, for the supply of raw materials used to produce our product candidates. If the third-party suppliers were to cease production or otherwise fail to supply us with sufficient quantities of quality raw materials and we are unable to contract on acceptable terms for these raw materials with alternative suppliers, if any, our ability to have our product candidates manufactured in sufficient quantities for preclinical testing, clinical trials, and potential commercial use would be adversely affected.
We do not yet have all of the agreements necessary for the supply of APIs and raw materials for the production of any of our product candidates in quantities sufficient for commercial sale and we may not be able to establish or maintain sufficient commercial manufacturing arrangements on commercially reasonable terms. Securing commercial quantities of our product candidates and their components from contract manufacturers will require us to commit significant capital and resources. We may also be required to enter into long-term manufacturing agreements that contain exclusivity provisions and/or substantial termination penalties. In addition, contract manufacturers have a limited number of facilities in which our product candidates can be produced and any interruption of the development or operation of those facilities due to events such as order delays for equipment or materials, equipment malfunction or failure or damage to the facility by natural disasters could result in the cancellation of shipments, loss of product in the manufacturing process or a shortfall in available product candidates or materials.
Our contract manufacturers are required to produce our clinical product candidates under current good manufacturing practice (cGMP) conditions in order to meet acceptable standards for our clinical trials. If such standards change, the ability of contract manufacturers to produce our product candidates on the schedule we require for our clinical trials may be affected. In addition, contract manufacturers may not perform their agreements with us or may discontinue their business before the time required by us to successfully produce and market our product candidates. We and our contract manufacturers are subject to periodic unannounced inspection by the FDA and corresponding state and foreign authorities to ensure strict compliance with cGMP and other applicable government regulations and corresponding foreign standards. We do not have control over a third-party manufacturer’s compliance with these regulations and standards. Any difficulties or delays in our contractors’ manufacturing and supply of product candidates or any failure of our contractors to maintain compliance with the applicable regulations and standards could increase our costs, make us postpone or cancel clinical trials, prevent or delay regulatory approval by the FDA and corresponding state and foreign authorities, prevent the import and/or export of our products, cause us to lose revenue, or cause our products to be recalled or withdrawn.
We may not be able to successfully scale-up manufacturing of our product candidates in sufficient quality and quantity, which would delay or prevent us from developing our product candidates and commercializing resulting approved drug products, if any.
To date, our product candidates have been manufactured in small quantities for preclinical studies and early stage clinical trials. As we prepare for later stage clinical trials in eteplirsen and potential commercialization, we are working to increase the scale of production of our drug product and planning for mid-scale production by the end of 2013. During 2013, we will also evaluate whether to increase API production capacity to a commercial scale which will depend in significant part on feedback from the FDA and our expectations regarding if and when we would commence a pivotal trial for eteplirsen and any subsequent commercialization. In order to conduct larger or late-stage scale clinical trials for a product candidate and supply sufficient commercial quantities of the resulting drug product and its components, if that product candidate is approved for sale, we will need to manufacture it in larger quantities. We may not be able to successfully increase the manufacturing capacity for any of our product candidates, whether in collaboration with third-party manufacturers or on our own, in a timely or cost-effective manner or at all. If a contract manufacturer makes improvements in the manufacturing process for our product candidates, we may not own, or may have to share, the intellectual property rights to those
 
28

Table of Contents
improvements. Significant scale-up of manufacturing may require additional processes, technologies and validation studies, which are costly, may not be successful and which the FDA must review and approve. In addition, quality issues may arise during those scale-up activities because of the inherent properties of a product candidate itself or of a product candidate in combination with other components added during the manufacturing and packaging process, or during shipping and storage of the finished product or active pharmaceutical ingredients. If we are unable to successfully scale-up manufacture of any of our product candidates in sufficient quality and quantity, the development of that product candidate and regulatory approval or commercial launch for any resulting drug products may be delayed or there may be a shortage in supply, which could significantly harm our business.
In addition, in order to release product and demonstrate stability of product candidates for use in late stage clinical trials (and any resulting drug products for commercial use), our analytical methods must be validated in accordance with regulatory guidelines. We may not be able to successfully validate our analytical methods or demonstrate adequate stability of the product candidates in a timely or cost-effective manner or at all. If we are unable to successfully validate our analytical methods or to demonstrate adequate stability, the development of our product candidates and regulatory approval or commercial launch for any resulting drug products may be delayed, which could significantly harm our business.
We rely on U.S. government contracts to support certain research and development programs and for substantially all of our revenue. If the U.S. government fails to fund such programs on a timely basis or at all, or such contracts are terminated, the results of our operations would be materially and adversely affected.
We rely on U.S. government contracts and awards to fund and support certain development programs, including the Marburg program which accounts for substantially all of our current revenue. The funding of U.S. government programs is subject to Congressional appropriations. Congress generally appropriates funds on a fiscal year basis even though a program may extend over several fiscal years, as is the case with our DoD contract for the development of our Marburg product candidate. Consequently, programs are often only partially funded initially and additional funds are committed only as Congress makes further appropriations. If appropriations for one of our programs become unavailable, or are reduced or delayed, our contracts may be terminated or adjusted by the government, which could have a negative impact on our future revenue under such contract or subcontract. From time to time, when a formal appropriation bill has not been signed into law before the end of the U.S. government’s fiscal year, Congress may pass a continuing resolution that authorizes agencies of the U.S. government to continue to operate, generally at the same funding levels from the prior year, but does not authorize new spending initiatives, during a certain period. During such a period, or until the regular appropriation bills are passed, delays can occur in government procurement due to lack of funding and such delays can affect our operations during the period of delay. Currently the DOD is operating under such a continuing resolution for U.S. government fiscal year 2013. Additionally, on March 1, 2013, a sequestration went into effect which implements across-the-board cuts to government agencies, totaling $1.2 trillion over 10 years. These cuts are to be split 50-50 between domestic and defense discretionary spending. The DoD must make $47 billion in cuts before September 30, 2013. These cuts could have widespread ramifications including on the DoD’s procurement and research and development programs. Sequestration may result in a reduction of funds available for new procurements, but also existing contracts may also be reduced in scope, terminated, or partially terminated. The 2004 Project BioShield Act which created the Special Reserve Fund for use by the Department of Health and Human Services (DHHS) to purchase countermeasures over 10 years mitigates the uncertainty of the annual appropriations process and sequestration, but the $5.6 billion advanced appropriation is rapidly depleting and will expire at the end of U.S. government fiscal year 2013. Thus, the viability of the DHHS and its agencies as a continuing partner and potential customer hinges in part on Congress taking action to replenish the Special Reserve Fund.
In addition, U.S. government contracts generally also permit the government to terminate or renegotiate the contract, in whole or in part, without prior notice, at the government’s convenience or for default based on performance. From time to time, we receive communications from the U.S. government regarding our performance, including requests for us to provide additional information and/or take certain steps to remedy noted deficiencies. While we work closely with our contacts at the U.S. government and believe we can adequately address issues raised through such communications, there is no guarantee that we will be able to adequately respond to all requests or remedy all deficiencies cited. If one of our contracts is terminated for convenience, we would generally be entitled to payments for our allowable costs and would receive some allowance for profit on the work performed. If one of our contracts is terminated for default, we would generally be entitled to payments for our work that has been completed to that point. A termination arising out of our default could expose us to liability and have a negative impact on our ability to obtain future contracts. Furthermore, if we fail to satisfy certain performance or deliverable requirements or to adhere to development timelines, revenues associated with the satisfaction of such requirements or timelines may be delayed or may not be realized.
The termination of one or more of these government contracts, whether due to lack of funding, for convenience, for our failure to perform, or otherwise, or the occurrence of delays or product failures in connection with one or more of these contracts, could negatively impact our financial condition. For example, on October 2, 2012, we received notice from the DoD that the program for the development of our Ebola product candidate was terminated for the convenience of the government due to funding constraints. We had previously received a stop-work order for the Ebola program which was in effect from August 2, 2012 through the termination on October 2, 2012. If the government terminates or reduces the Marburg development program or contract, our business could be materially and adversely affected. Furthermore, we can give no assurance that we would be able to procure new U.S. government contracts to offset the revenue lost as a result of termination of any of our existing contracts. Even if our Marburg contract is not terminated and is completed, there is no assurance that we will receive future government contracts.
Even if we successfully complete development of our Marburg and influenza product candidates, the major, if not only, potential purchaser is the U.S. government. The lack of a commercial market makes us reliant upon the
 
29

Table of Contents
U.S. government to determine and communicate the market for biodefense countermeasures and government purchasing is subject to evolving threat assessments and shifting political priorities, which exacerbate market uncertainties. Within the DoD, the war fighter has evolving requirements specifically related to route of administration and time to treat. Until future studies are completed, it is unclear whether our product candidates will successfully meet these requirements. If it does not, the DoD may choose to terminate the contract. With respect to the civilian sector, Marburg and influenza viruses are among the top chemical, biological, radiological and nuclear threats to national security, yet the DHHS has not defined the civilian requirements, making the broader demand for our product candidates uncertain.
This expected dependence on government purchases presents additional challenges, since the government is incentivized to negotiate prices for countermeasures to just above their marginal cost of production, which would severely limit our profit potential. If companies resist low prices, governments can, in extreme cases, threaten compulsory licensing or purchase patent-breaching generics.
Our U.S. government contracts may be terminated and we may be liable for penalties under a variety of procurement rules and regulations and changes in government regulations or practices could adversely affect our profitability, cash balances or growth prospects.
We must comply with laws and regulations relating to the formation, administration and performance of U.S. government contracts, which affect how we do business with our customers. Such laws and regulations may potentially impose added costs on our business and our failure to comply with them may lead to penalties and the termination of our U.S. government contracts. Some significant regulations that affect us include:
 
 	•	 	the Federal Acquisition Regulation and supplements, which regulate the formation, administration and performance of U.S. government contracts;	
 
 	•	 	the Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with contract negotiations; and	
 
 	•	 	the Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under certain cost-based government contracts.	
Our contracts with the DoD are subject to periodic review and investigation. If such a review or investigation identifies improper or illegal activities, we may be subject to civil or criminal penalties or administrative sanctions, including the termination of contracts, forfeiture of profits, the triggering of price reduction clauses, suspension of payments, fines and suspension or debarment from doing business with U.S. government agencies. We could also suffer harm to our reputation if allegations of impropriety were made against us, which would impair our ability to win awards of contracts in the future or receive renewals of existing contracts.
In addition, U.S. government agencies routinely audit and review their contractors’ performance on contracts, cost structure, pricing practices and compliance with applicable laws, regulations and standards. They also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. Such audits may result in adjustments to our contract costs, and any costs found to be improperly allocated will not be reimbursed. We have recorded contract revenues for the periods presented in this report based upon costs we expect to realize upon final audit; however, we do not know the outcome of any future audits and adjustments and, if future audit adjustments exceed our estimates, our results of operations could be adversely affected. Additionally, we may be required to enter into agreements and subcontracts with third parties, including suppliers, consultants and other third party contractors in order to satisfy our contractual obligations pursuant to our agreements with the DoD. Any such agreement also has to be compliant with the terms of our government grants. Negotiating and entering into such arrangements can be time-consuming and we may not be able to reach agreement with such third parties. Any delay or inability to enter into such arrangements or entering into such arrangements in a manner that is non-compliant with the terms of our grants, may result in violations of our contracts with the DoD.
Clinical trials for our product candidates are expensive and time consuming, may take longer than we expect or may not be completed at all, and their outcomes are uncertain.
We have completed a Phase Ib/II clinical trial for eteplirsen in the UK and announced results in October 2010, which were published in The Lancet in July 2011. We have also completed a U.S.-based Phase IIb placebo controlled trial in eteplirsen and announced results in April 2012. Following completion of this study, we initiated an open label extension study with the same participants from the original Phase IIb placebo controlled trial and announced 48-week results on October 3, 2012, 62-week results on December 7, 2012, 74-week results on April 5, 2013 and 84-week results on June 19, 2013. We expect to commence additional trials of eteplirsen and other product candidates in the future. Each of our clinical trials requires the investment of substantial planning, expense and time, and the timing of the commencement, continuation and completion of these clinical trials may be subject to significant delays relating to various causes. Participant enrollment is a function of many factors, including the size of the relevant population, the proximity of participants to clinical sites, the eligibility criteria for the trial, the existence of competing clinical trials and the availability of alternative or new treatments.
We depend on medical institutions and clinical research organizations (CROs), to conduct our clinical trials in compliance with Good Clinical Practice (GCP) and to the extent they fail to enroll participants for our clinical trials, fail to conduct the study to GCP standards or are delayed for a significant time in the execution of our trials, including achieving full enrollment, we may be affected by increased costs, program delays or both, which may harm our business. In addition, we have in the past conducted clinical trials in foreign countries and may do so again in the future, which may subject us to further delays and expenses as a result of increased drug shipment costs, additional regulatory requirements and the engagement of foreign CROs, as well as expose us to risks associated with less
 
30

Table of Contents
experienced clinical investigators who are unknown to the FDA, and different standards of medical care. Foreign currency transactions insofar as changes in the relative value of the U.S. dollar to the foreign currency where the trial is being conducted may impact our actual costs. In addition, for some programs (e.g., DMD and Marburg infection) there are currently no approved drugs to compare against and an agreement about how to measure efficacy has yet to be reached with the FDA and then demonstrated.
Clinical trials must be conducted in accordance with FDA or other applicable foreign government guidelines and are subject to oversight by the FDA, other foreign governmental agencies and IRBs at the medical institutions where the clinical trials are conducted. The FDA or other foreign governmental agencies or we ourselves could delay, suspend or halt our clinical trials of a product candidate for numerous reasons, including:
 
 	•	 	deficiencies in the trial design;	
 
 	•	 	deficiencies in the conduct of the clinical trial including failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols;	
 
 	•	 	deficiencies in the clinical trial operations or trial sites resulting in the imposition of a clinical hold;	
 
 	•	 	the product candidate may have unforeseen adverse side effects, including fatalities, or a determination may be made that a clinical trial presents unacceptable health risks;	
 
 	•	 	the time required to determine whether the product candidate is effective may be longer than expected;	
 
 	•	 	fatalities or other adverse events arising during a clinical trial that may not be related to clinical trial treatments;	
 
 	•	 	the product candidate may appear to be no more effective than current therapies;	
 
 	•	 	the quality or stability of the product candidate may fail to conform to acceptable standards;	
 
 	•	 	our inability to produce or obtain sufficient quantities of the product candidate to complete the trials;	
 
 	•	 	our inability to reach agreement on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;	
 
 	•	 	our inability to obtain IRB approval to conduct a clinical trial at a prospective site;	
 
 	•	 	our inability to obtain regulatory approval to conduct a clinical trial;	
 
 	•	 	lack of adequate funding to continue the clinical trial, including the occurrence of unforeseen costs due to enrollment delays, requirements to conduct additional trials and studies and increased expenses associated with the services of our CROs and other third parties;	
 
 	•	 	our inability to recruit and enroll individuals to participate in clinical trials for reasons including competition from other clinical trial programs for the same or similar indications; or	
 
 	•	 	our inability to retain participants who have initiated a clinical trial but may be prone to withdraw due to side effects from the therapy, lack of efficacy or personal issues, or who are lost to further follow-up.	
In addition, we may experience significant setbacks in advanced clinical trials, even after promising results in earlier trials, such as unexpected adverse events that occur when our product candidates are combined with other therapies and drugs or given to larger populations, which often occur in later-stage clinical trials. In addition, clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. Also, patient advocacy groups and parents of trial participants may demand additional clinical trials or continued access to therapies even if our interpretation of clinical results received thus far leads us to determine that additional clinical trials or continued access are unwarranted. Any disagreement with patient advocacy groups or parents of trial participants may require management’s time and attention and may result in legal proceedings being instituted against us, which could be expensive, time-consuming and distracting, and may result in a delay of the program. Negative or inconclusive results or adverse medical events, including participant fatalities that may be attributable to our product candidates, during a clinical trial may necessitate that it be redesigned, repeated or terminated. Further, some of our clinical trials may be overseen by an independent data and safety monitoring board (DSMB) and the DSMB may determine to delay or suspend one or more of these trials due to safety or futility findings based on events occurring during a clinical trial. Any such delay, suspension, termination or request to repeat or redesign a trial could increase our costs and prevent or significantly delay our ability to commercialize our product candidates.
The Animal Rule is a seldom-used approach to seeking approval of a new drug and our infectious disease program may not meet the requirements for this path to regulatory approval.
Clinical trials cannot be used to assess the efficacy of most biodefense countermeasures against rare and lethal pathogens due to ethical considerations and the relative infrequency of naturally occurring cases. In the United States, we plan to develop the therapeutic product
 
31

Table of Contents
candidate to treat Marburg virus using the Animal Rule regulatory mechanism. Pursuant to the Animal Rule, the sponsor of a drug product must demonstrate efficacy in animal models and safety in humans. There is no guarantee that the FDA will agree to this approach to the development of our infectious disease product candidate, considering that no validated animal model has been established as predicting human outcomes in the prevention or treatment of any filovirus disease. Animal models represent, at best, a rough approximation of efficacy in humans, and, as such, countermeasures developed using animal models will be untested until their use in humans during an emergency. We have yet to demonstrate the predictive value of our animal studies to the FDA’s satisfaction. If we fail to do so, we will have to demonstrate efficacy of AVI-7288 through adequate well-controlled trials in humans in order to obtain regulatory approval of this product in the United States, which, if possible, will greatly add to the time and expense required to commercialize this product. Furthermore, the Animal Rule mechanism has been used only rarely and questions remain regarding the FDA’s interpretation and implementation. Only one novel product has been approved using the Animal Rule. It has thus far been used to extend the indicated use of three previously approved products which had considerable prior human experience. We do not have any experience successfully navigating this approach to drug approval. Even if the Animal Rule represents a viable approach to seeking approval of AVI-7288, it may present challenges for gaining final regulatory approval for this product candidate, including an extended timeline to approval and less predictable study requirements. In addition, the FDA would require post-marketing human efficacy studies if the countermeasure is used in humans, which would most likely be in the aftermath of a bioterrorist attack. The ability to reliably perform efficacy clinical trials in the midst of a national crisis is uncertain.
The timing and conduct of animal studies may be further constrained given that filoviruses are classified for use only in BSL-4 laboratories. There are limited laboratories and staff world-wide that can work with these live viruses and companies will be competing for the limited availability of this critical infrastructure to test their countermeasures. Furthermore, we anticipate limits in conforming to good laboratory practice (GLP) requirements given the requirement for BSL-4 containment.
We have incurred operating losses since our inception and we may not achieve or sustain profitability.
We had an operating loss of $32.5 million for the six months ended June 30, 2013 and incurred an operating loss of $29.7 million for the year ended December 31, 2012. As of June 30, 2013, our accumulated deficit was $492.4 million and substantially all of our revenues to date have been derived from research and development contracts with the DoD. We have not yet generated any material revenue from product sales and have incurred expenses related to research and development of our technology and product candidates, from general and administrative expenses that we have incurred while building our business infrastructure and acquired in-process research and development resulting from two acquisitions. We anticipate that our expenses will increase substantially if and as we:
 
 	•	 	continue our research, preclinical and clinical development of our product candidates;	
 
 	•	 	acquire or in-license other product candidates;	
 
 	•	 	initiate additional clinical trials for our product candidates;	
 
 	•	 	seek marketing approvals for our product candidates that successfully complete clinical trials;	
 
 	•	 	ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;	
 
 	•	 	maintain, expand and protect our intellectual property portfolio;	
 
 	•	 	increase manufacturing capabilities;	
 
 	•	 	hire additional clinical, quality control and scientific personnel; and	
 
 	•	 	add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.	
Our ability to achieve and maintain profitability depends on our ability to raise additional capital, partner one or more programs, complete development of our product candidates, obtain regulatory approvals and market our approved products, if any. It is uncertain when, if ever, we will become profitable and if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of the company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.
We will likely need additional funds to conduct our planned research and development efforts. If we fail to attract significant capital or fail to enter into strategic relationships, we may be unable to continue to develop our product candidates.
We will likely require additional capital from time to time in the future in order to continue the development of product candidates in our pipeline and to expand our product portfolio. The actual amount of funds that we may need will be determined by many factors, some of which are beyond our control. These factors include the success of our research and development efforts, the status of our preclinical and clinical testing, costs and timing relating to securing regulatory approvals and obtaining new patent rights, regulatory changes, competitive and technological developments in the market and future commercialization expenses related to any product sales, marketing, manufacturing and distribution. An unforeseen change in these factors, or others, might increase our need for additional capital.
 
32

Table of Contents
We would expect to seek additional financing from the sale and issuance of equity or equity-linked or debt securities, and we cannot predict that financing will be available when and as we need financing or that, if available, the financing terms will be commercially reasonable. If we are unable to obtain additional financing when and if we require it or on commercially reasonable terms, it would have a material adverse effect on our business and results of operations.
If we are able to consummate such financings, the trading price of our common stock could be adversely affected and/or the terms of such financings may adversely affect the interests of our existing stockholders. To the extent we issue additional equity securities or convertible securities, our existing stockholders could experience substantial dilution in their economic and voting rights. For example, through August 7, 2013, we sold an aggregate of approximately 1,000,000 million shares of our common stock in connection with our July 2013 ATM equity offering program. 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.
Further, we may also enter into relationships with pharmaceutical or biotechnology companies to perform research and development with respect to our RNA-based technologies, research programs or to conduct clinical trials and to market our product candidates. Other than pre-clinical collaborations with academic/research institutions and government entities for the development of additional exon-skipping product candidates for the treatment of DMD and a product candidate for the treatment of influenza, we currently do not have a strategic relationship with a third party to perform research or development using our RNA-based technologies or assist us in funding the continued development and commercialization of any of our programs or product candidates other than that with the U.S. government. Such relationships may require us 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.
We rely on third parties to provide services in connection with our preclinical and clinical development programs. The inadequate performance by or loss of any of these service providers could affect our product candidate development.
Several third parties provide services in connection with our preclinical and clinical development programs, including in vitro and in vivo studies, assay and reagent development, immunohistochemistry, toxicology, pharmacokinetics, clinical assessments, data monitoring and management and statistical analysis and other outsourced activities. If these service providers do not adequately perform the services for which we have contracted or cease to continue operations and we are not able to quickly find a replacement provider or we lose information or items associated with our product candidates, our development programs may be delayed.
Our RNA-based, or antisense, technology has not been incorporated into a therapeutic commercial product and is still at a relatively early stage of development.
Our RNA-based platforms, utilizing proprietary PMO-based technology, have not been incorporated into a therapeutic commercial product and are still at a relatively early stage of development. This technology is used in all of our product candidates, including eteplirsen. We are conducting toxicology, pharmacology, pharmacokinetics and other preclinical studies and, although we have conducted Phase I clinical trials for AVI-6003 (we are now pursuing development of AVI-7288, one of the two component oligomers in AVI-6003) and AVI-7100 and conducted a Phase IIb clinical trial in eteplirsen, additional preclinical studies may be required for these product candidates and before other product candidates enter human clinical trials. In addition, preclinical models to study participant toxicity and activity of compounds are not necessarily predictive of toxicity or efficacy of these compounds in the treatment of human disease and there may be substantially different results in clinical trials from the results obtained in preclinical studies. Any failures or setbacks in utilizing our PMO-based technology, including adverse effects resulting from the use of this technology in humans, could have a detrimental impact on our product candidate pipeline and our ability to maintain and/or enter into new corporate collaborations regarding these technologies, which would negatively affect our business and financial position.
The relocation of our selected research and development activities may create unintended negative consequences, including increased costs and loss of personnel.
We moved selected research and development activities from Bothell to our existing site in Corvallis, Oregon and will develop additional research and development activities at a future site in Cambridge Massachusetts. We expect the transition will continue through 2013. While we believe the relocation will improve our business operations and enhance our ability to attract and retain industry talent, this relocation may result in the following negative consequences:
 
 	•	 	increased costs associated with the closing of our existing facility in Bothell, Washington including the moving of lab equipment to Cambridge and Corvallis;	
 
 	•	 	increased costs associated with the relocation of personnel, including reimbursement of relocation expenses and cost of living adjustments to base salaries;	
 
 	•	 	employee turnover due to relocation;	
 
 	•	 	increased costs associated with retention and/or severance packages for Bothell based personnel;	
 
33

Table of Contents
 	•	 	business disruptions resulting from the relocation; and	
 
 	•	 	increased long-term lease costs.	
If any of these consequences occur, the negative impact may outweigh any benefits related to the relocation, which could have an adverse effect on our business.
If we fail to retain our key personnel or are unable to attract and retain additional qualified personnel, our future growth, ability to perform our U.S. government contracts and our ability to compete would suffer.
We are highly dependent on the efforts and abilities of the principal members of our senior management. Additionally, we have scientific personnel with significant and unique expertise in RNA-based therapeutics and related technologies and personnel with experience overseeing compliance with and execution of the terms of our U.S. government contracts. The loss of the services of any one of the principal members of our managerial, scientific or government contract compliance staff may prevent us from achieving our business objectives.
The competition for qualified personnel in the biotechnology field and for qualified personnel with government contracting experience is intense, and our future success depends upon our ability to attract, retain and motivate such personnel. In order to develop and commercialize our products successfully, we will be required to retain key managerial, scientific and government contract compliance staff. In certain instances, we may also need to expand our workforce and our management ranks. We face intense competition for qualified individuals from numerous pharmaceutical and biotechnology companies, as well as academic and other research institutions. If we are unable to attract, assimilate or retain such key personnel, our ability to advance our proprietary programs and perform our U.S. government contracts would be adversely affected. Any failure to perform under our U.S. government contracts could result in a termination of the agreement, which would harm our business.
We may engage in future acquisitions that increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks.
We actively evaluate various strategic transactions on an ongoing basis, including licensing or acquiring complementary products, technologies or businesses. Any potential acquisitions may entail numerous risks, including increased operating expenses and cash requirements, assimilation of operations and products, retention of key employees, diversion of our management’s attention and uncertainties in our ability to maintain key business relationships of the acquired entities. In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense.
Our success, competitive position, and future revenues, if any, depend in part on our ability and the abilities of our licensors to obtain and maintain patent protection for our product candidates, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights, and to operate without infringing on the proprietary rights of third parties.
We currently hold various issued patents and exclusive rights to issued patents and own and have licenses to various patent applications, in each case in the United States as well as rights under European patents and patent applications. We anticipate filing additional patent applications both in the United States and in other countries. The patent process, however, is subject to numerous risks and uncertainties, and we can provide no assurance that we will be successful in obtaining and defending patents or in avoiding infringement of the rights of others. The risks we face on the intellectual property front include the following:
 
 	•	 	our patent rights might be challenged, invalidated, or circumvented, or otherwise might not provide any competitive advantage;	
 
 	•	 	as a matter of public policy, there might be significant pressure on governmental bodies to limit the scope of patent protection for disease treatments that prove successful; and	
 
 	•	 	jurisdictions other than the U.S. might have less restrictive patent laws than the U.S., giving foreign competitors the ability to exploit these laws to create, develop, and market competing products.	
In addition, the USPTO and patent offices in other jurisdictions have often required that patent applications concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only the specific innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges. Accordingly, even if we or our licensors are able to obtain patents, the patents might be substantially narrower than anticipated.
On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law, including provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The USPTO has issued regulations and procedures to govern administration of the Leahy-Smith Act, but many of the substantive changes to patent law associated with the Leahy-Smith Act have only recently become effective. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.
 
34

Table of Contents
Additionally, the U.S. Supreme Court has issued decisions, the full impact of which is not yet known. For example, on March 20, 2012 in Mayo Collaborative Services, DBA Mayo Medical Laboratories, et al. v. Prometheus Laboratories, Inc. , the Court held that several claims drawn to measuring drug metabolite levels from patient samples and correlating them to drug doses were not patentable subject matter. The decision appears to impact diagnostics patents that merely apply a law of nature via a series of routine steps and it has created uncertainty around the ability to patent certain biomarker-related method claims. Additionally, on June 13, 2013 in  Association for Molecular Pathology v. Myriad Genetics, Inc. , the Court held that claims to isolated genomic DNA are not patentable, but claims to complementary DNA (cDNA) molecules were held to be valid. The effect of the decision on patents for other isolated natural products is uncertain and as with the Leahy-Smith Act, these decisions could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.
Our business prospects will be impaired if third parties successfully assert that our product candidates or technologies infringe proprietary rights of such third parties.
Our competitors may make significant investments in competing technologies, might have or obtain patents that limit, interfere with, or eliminate our ability to make, use, and sell our product candidates in important commercial markets.
If our product candidates or technologies infringe enforceable, proprietary rights of others, we could incur substantial costs and may have to:
 
 	•	 	obtain rights or licenses from others, which might not be available on commercially reasonable terms or at all;	
 
 	•	 	abandon development of an infringing product candidate;	
 
 	•	 	redesign product candidates or processes to avoid infringement;	
 
 	•	 	pay damages; and/or	
 
 	•	 	defend litigation or administrative proceedings which might be costly whether we win or lose, and which could result in a substantial diversion of financial and management resources.	
Any of these events could substantially harm our potential earnings, financial condition, and operations. Prosensa, which is developing competitive pipeline products, has rights to patent claims that, absent a license, may preclude us from commercializing eteplirsen in several jurisdictions. Prosensa has rights to European Patent No. EP 1619249, for example. We opposed this patent in the Opposition Division of the European Patent Office, and the Opposition Division maintained certain claims of this patent relating to the treatment of DMD by skipping dystrophin exons 51 and 46, which may provide a basis to maintain that commercialization of our drug eteplirsen in the European Union would infringe on such patent. Both we and Prosensa are appealing the Opposition Division decision given that the decision could have a substantial effect on our businesses and leaves open the possibility that Prosensa or other parties that have rights to such patent could assert that our drug eteplirsen infringes on such patent. The timing and outcome of appeal cannot be predicted or determined as of the date of this report. We are also aware of certain patent claims that Prosensa has rights to, and others that it is pursuing, in other jurisdictions, including Japan and the United States, that may provide the basis for Prosensa or other parties that have rights to these claims to assert that commercialization of our drug eteplirsen in such other jurisdictions would infringe on such claims.
The DMD patent landscape is continually evolving and multiple parties, both commercial entities and academic institutions, may have rights to claims or may be pursuing additional claims that could provide these parties a basis to assert that our product candidates infringe on the intellectual property rights of those parties. Similarly, we may be able to assert that certain activities engaged in by these parties infringe on our current or future patent rights. There has been, and we believe that there will continue to be, significant litigation in the biopharmaceutical and pharmaceutical industries regarding patent and other intellectual property rights. We also cannot be certain that other third parties will not assert patent infringement in the future with respect to any of our development program.
We face intense competition and rapid technological change, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.
The biotechnology and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. We are aware of many pharmaceutical and biotechnology companies that are actively engaged in research and development in areas related to antisense technology and other RNA technologies or that are developing alternative approaches to or therapeutics for the disease indications on which we are focused. Some of these competitors are developing or testing product candidates that now, or may in the future, competes directly with our product candidates. For example, we believe that companies including Alnylam Pharmaceuticals, Isis Pharmaceuticals and Santaris share a focus on RNA-based drug discovery and development. Competitors with respect to our exon-skipping DMD program, or eteplirsen, include Prosensa and GSK and other companies such as PTC Therapeutics and Summit plc have also been working on DMD programs.
Clinical trials evaluating the systemic administration of the Prosensa/GSK lead DMD drug candidate are currently ongoing, including a placebo-controlled global Phase III clinical trial. Two placebo-controlled Phase II clinical trials, one based in the United States and one based outside the United States have now concluded. The Prosensa/GSK drug candidate may, or may not, prove to be safer or more efficacious than our product candidate and it could gain marketing approval before our product candidate. This might affect our ability to successfully complete a clinical development program or market eteplirsen once approved. This competition may also extend to other exon-skipping drugs for DMD limiting our ability to gain market share.
 
35

Table of Contents
Other potential competitors include large, fully integrated pharmaceutical companies and more established biotechnology companies that have significantly greater resources and expertise in research and development, manufacturing, testing, obtaining regulatory approvals and marketing. Also, academic institutions, government agencies and other public and private research organizations conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and marketing. It is possible that these competitors will succeed in developing technologies that are more effective than our product candidates or that would render our technology obsolete or noncompetitive. Our competitors may, among other things:
 
 	•	 	develop safer or more effective products;	
 
 	•	 	implement more effective approaches to sales and marketing;	
 
 	•	 	develop less costly products;	
 
 	•	 	obtain regulatory approval more quickly;	
 
 	•	 	have access to more manufacturing capacity;	
 
 	•	 	develop products that are more convenient and easier to administer;	
 
 	•	 	form more advantageous strategic alliances; or	
 
 	•	 	establish superior intellectual property positions.	
We may be subject to clinical trial claims and our insurance may not be adequate to cover damages.
We currently have no products that have been approved for commercial sale; however, the current and future use of our product candidates by us and our collaborators in clinical trials, and the sale of any approved products in the future, may expose us to liability claims. These claims might be made directly by consumers or healthcare providers or indirectly by pharmaceutical companies, our collaborators or others selling such products. Regardless of merit or eventual outcome, we may experience financial losses in the future due to such product liability claims. We have obtained limited general commercial liability insurance coverage for our clinical trials. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for any of our product candidates. However, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against all losses. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.
Our operations involve the use of hazardous materials, and we must comply with environmental laws, which can be expensive, and may affect our business and operating results.
Our research and development activities involve the use of hazardous materials, including organic and inorganic solvents and reagents. Accordingly, we are subject to federal, state, and local laws and regulations governing the use, storage, handling, manufacturing, exposure to, and disposal of these hazardous materials. In addition, we are subject to environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens, and the handling of biohazardous materials. Although we believe that our activities conform in all material respects with such environmental laws, there can be no assurance that violations of these laws will not occur in the future as a result of human error, accident, equipment failure, or other causes. Liability under environmental, health and safety laws can be joint and several and without regard to fault or negligence. The failure to comply with past, present or future laws could result in the imposition of substantial fines and penalties, remediation costs, property damage and personal injury claims, loss of permits or a cessation of operations, and any of these events could harm our business and financial conditions. We expect that our operations will be affected by other new environmental and health and workplace safety laws on an ongoing basis, and although we cannot predict the ultimate impact of any such new laws, they may impose greater compliance costs or result in increased risks or penalties, which could harm our business.
We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.
Despite the implementation of security measures, our internal computer systems and those of third parties with which we contract are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. System failures, accidents or security breaches could cause interruptions in our operations, and could result in a material disruption of our clinical activities and business operations, in addition to possibly requiring substantial expenditures of resources to remedy. The loss of clinical trial data could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and our research and development programs and the development of our product candidates could be delayed.
 
36

Table of Contents
Risks Related to Our Common Stock
Our stock price is volatile and may fluctuate due to factors beyond our control.
The market prices for, and trading volumes of, securities of biotechnology companies, including our securities, have been historically volatile. For example, during 2012, our stock has traded from a low of $3.30 per share to a high of $45.00 per share. As an additional example, we note that on July 24, 2013 our stock price decreased 19% on the same day that we made an announcement regarding eteplirsen and recent communications we had with the FDA. The market has from time to time experienced significant price and volume fluctuations unrelated to the operating performance of particular companies. The market price of our common stock may fluctuate significantly due to a variety of factors, including:
 
 	•	 	our ability to obtain any decision to pursue Subpart — H accelerated approval for eteplirsen;	
 
 	•	 	positive or negative results of testing and clinical trials by ourselves, strategic partners, or competitors;	
 
 	•	 	delays in entering or failing to enter into strategic relationships with respect to development and/or commercialization of our product candidates or entry into strategic relationships on terms that are not deemed to be favorable to our company;	
 
 	•	 	technological innovations or commercial product introductions by ourselves or competitors;	
 
 	•	 	changes in government regulations;	
 
 	•	 	developments concerning proprietary rights, including patents and litigation matters;	
 
 	•	 	public concern relating to the commercial value or safety of any of our products;	
 
 	•	 	financing, through the issuance of equity or equity linked securities or incurrence of debt, or other corporate transactions;	
 
 	•	 	comments by securities analysts;	
 
 	•	 	litigation; or	
 
 	•	 	general market conditions in our industry or in the economy as a whole.	
Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
Provisions of our certificate of incorporation, bylaws and Delaware law might deter acquisition bids for us that might be considered favorable and prevent or frustrate any attempt to replace or remove the then current management and board of directors.
Certain provisions of our certificate of incorporation and bylaws may make it more difficult for a third party to acquire control of us or effect a change in our board of directors and management. These provisions include:
 
 	•	 	when the board is comprised of six or more directors, classification of our board of directors into two classes, with one class elected each year;	
 
 	•	 	directors may only be removed for cause by the affirmative vote of majority of the voting power of all the then-outstanding shares of voting stock;	
 
 	•	 	prohibition of cumulative voting of shares in the election of directors;	
 
 	•	 	right of the board of directors to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death, disqualification or removal of a director;	
 
 	•	 	express authorization of the board of directors to make, alter or repeal our bylaws;	
 
 	•	 	prohibition on stockholder action by written consent;	
 
 	•	 	advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings;	
 
 	•	 	the ability of our board of directors to authorize the issuance of undesignated preferred stock, the terms and rights of which may be established and shares of which may be issued without stockholder approval, including rights superior to the rights of the holders of common stock; and	
 
 	•	 	a super-majority (66 2/3%) of the voting power of all of the then-outstanding shares of capital stock are required to amend, rescind, alter or repeal our bylaws and certain provisions of our certificate of incorporation.	
 
37

Table of Contents
In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our certificate of incorporation and our bylaws and in the Delaware General Corporation Law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors.
We expect our quarterly operating results to fluctuate in future periods, which may adversely affect our stock price.
Our quarterly operating results have fluctuated in the past, and we believe they will continue to do so in the future. Some of these fluctuations may be very pronounced such as in the case of our warrant offerings in January and August 2009 of which 2.6 million remain outstanding and exercisable as of June 30, 2013. Each of these warrants is classified as a derivative liability and accordingly, the fair value of the warrants is recorded on our condensed consolidated balance sheet as a liability, and such fair value is adjusted at each financial reporting date with the adjustment to fair value reflected in our condensed consolidated statement of operations. For example, for the six months ended June 30, 2013, the impact of the change in fair value of these warrants resulted in a $28.9 million charge to our Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss. The fair value of the warrants is determined using the Black-Scholes-Merton option valuation model. Fluctuations in the assumptions and factors used in the Black-Scholes-Merton model can result in adjustments to the fair value of the warrants reflected on our balance sheet and, therefore, our statement of operations. Due to the classification of such warrants and other factors, quarterly results of operations are difficult to forecast, and period-to-period comparisons of our operating results may not be predictive of future performance. Additionally, our quarterly operating results may fluctuate due to the variable nature of our revenue and research and development expenses. Specifically, a change in the timing of activities performed in support of our U.S. government research contracts could either accelerate or defer anticipated revenue from period to period. Likewise, our research and development expenses may experience fluctuations as a result of the timing of activities performed in support of our U.S. government research contracts and the timing and magnitude of expenditures incurred in support of our DMD and other proprietary drug development programs. In one or more future quarters, our results of operations may fall below the expectations of securities analysts and investors. In that event, the market price of our common stock could decline.
A significant number of shares of our common stock are issuable pursuant to outstanding stock awards and warrants, and we expect to issue additional stock awards and shares of common stock in the future. Exercise of these awards, and sales of shares will dilute the interests of existing security holders and may depress the price of our common stock.
As of June 30, 2013, there were 32.4 million shares of common stock outstanding, outstanding awards to purchase 4.2 million shares of common stock under various incentive stock plans and outstanding warrants to purchase up to 2.6 million shares of common stock. Additionally, as of June 30, 2013, there were 3.2 million shares of common stock available for future issuance under our Amended and Restated 2011 Equity Incentive Plan and 250,000 shares of common stock remain available for issuance under the Company’s 2013 Employee Stock Purchase Plan. In addition, we may issue additional common stock and warrants from time to time to finance our operations. We may also issue additional shares to fund potential acquisitions or in connection with additional stock options or other equity awards granted to our employees, officers, directors and consultants under our Amended and Restated 2011 Equity Incentive Plan. The issuance of additional shares of common stock or warrants to purchase common stock, perception that such issuances may occur, or exercise of outstanding warrants or options may have a dilutive impact on other stockholders and could have a material negative effect on the market price of our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
None.
 
38

Table of Contents
Item 6. Exhibits.

 	  	 	  	Incorporated by Reference to Filings Indicated	
Exhibit
Number	  	Description	  	Form	  	File No.	  	Exhibit	  	Filing
Date	  	Provided
Herewith	
 	 	 	 	 	 	 	
    2.1	  	Agreement and Plan of Merger dated June 6, 2013 between Sarepta Therapeutics, Inc., a Delaware corporation, and Sarepta Therapeutics, Inc., an Oregon corporation.	  	8-K12B	  	001-14895	  	2.1	  	6/6/13	  	 	
 	 	 	 	 	 	 	
    3.1	  	Amended and Restated Certificate of Incorporation.	  	8-K12B	  	001-14895	  	3.1	  	6/6/13	  	 	
 	 	 	 	 	 	 	
    3.2	  	Bylaws.	  	8-K12B	  	001-14895	  	3.2	  	6/6/13	  	 	
 	 	 	 	 	 	 	
    4.1	  	Form of Common Stock Certificate.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  10.1†	  	Executive Employment Agreement with Jayant Aphale, Ph.D.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  10.2†	  	Amended and Restated 2011 Equity Incentive Plan.	  	8-K12B	  	001-14895	  	10.1	  	6/6/13	  	 	
 	 	 	 	 	 	 	
  10.3†	  	2013 Employee Stock Purchase Plan.	  	8-K12B	  	001-14895	  	10.2	  	6/6/13	  	 	
 	 	 	 	 	 	 	
  10.4†	  	Form of Notice of Grant of Restricted Stock under the Amended & Restated 2011 Equity Incentive Plan.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  10.5	  	Form of Stock Option Award Agreement under the Amended & Restated 2011 Equity Incentive Plan.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  10.6	  	Lease Agreement dated June 25, 2013 by and between Sarepta Therapeutics, Inc. and ARE-MA Region No. 38, LLC.	  	8-K	  	001-14895	  	10.1	  	7/1/13	  	 	
 	 	 	 	 	 	 	
  31.1	  	Certification of the Company’s President and Chief Executive Officer, Christopher Garabedian, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  31.2	  	Certification of the Company’s Senior Vice President, Chief Financial Officer, Sandesh Mahatme, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  32.1	  	Certification of the Company’s President and Chief Executive Officer, Christopher Garabedian, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  32.2	  	Certification of the Company’s Senior Vice President, Chief Financial Officer, Sandesh Mahatme, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
101.INS*	  	XBRL Instance Document.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
101.SCH*	  	XBRL Taxonomy Extension Schema Document.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
101.CAL*	  	XBRL Taxonomy Extension Calculation Linkbase Document.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
101.DEF*	  	XBRL Taxonomy Extension Definition Linkbase Document.	  	 	  	 	  	 	  	 	  	X	
 
39

Table of Contents
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	 	  	Incorporated by Reference to Filings Indicated	
Exhibit
Number	  	Description	  	Form	  	File No.	  	Exhibit	  	Filing
Date	  	Provided
Herewith	
 	 	 	 	 	 	 	
101.LAB*	  	XBRL Taxonomy Extension Label Linkbase Document.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
101.PRE*	  	XBRL Taxonomy Extension Presentation Linkbase Document.	  	 	  	 	  	 	  	 	  	X	
 
†	Indicates management contract or compensatory plan, contract or arrangement.	
*	In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.	
**	Confidential treatment has been requested for portions of this exhibit.	
 
40

Table of Contents
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.

 	 	 	 	SAREPTA THERAPEUTICS, INC.	
 	 	 	 	
Date: August 8, 2013	 	 	 	By:	 	/s/ CHRISTOPHER GARABEDIAN	
 	 	 	 	 	 	Christopher Garabedian	
 	 	 	 	 	 	President and Chief Executive Officer	
 	 	 	 	
Date: August 8, 2013	 	 	 	By:	 	/s/ SANDESH MAHATME	
 	 	 	 	 	 	Sandesh Mahatme	
 	 	 	 	 	 	Senior Vice President, Chief Financial Officer (Principal Financial Officer)	
 
41

Table of Contents
EXHIBIT INDEX

 	  	 	  	Incorporated by Reference to Filings Indicated	
Exhibit
Number	  	Description	  	Form	  	File No.	  	Exhibit	  	Filing
Date	  	Provided
Herewith	
 	 	 	 	 	 	 	
    2.1	  	Agreement and Plan of Merger dated June 6, 2013 between Sarepta Therapeutics, Inc., a Delaware corporation, and Sarepta Therapeutics, Inc., an Oregon corporation.	  	8-K12B	  	001-14895	  	2.1	  	6/6/13	  	 	
 	 	 	 	 	 	 	
    3.1	  	Amended and Restated Certificate of Incorporation.	  	8-K12B	  	001-14895	  	3.1	  	6/6/13	  	 	
 	 	 	 	 	 	 	
    3.2	  	Bylaws.	  	8-K12B	  	001-14895	  	3.2	  	6/6/13	  	 	
 	 	 	 	 	 	 	
    4.1	  	Form of Common Stock Certificate.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  10.1†	  	Executive Employment Agreement with Jayant Aphale, Ph.D.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  10.2†	  	Amended and Restated 2011 Equity Incentive Plan.	  	8-K12B	  	001-14895	  	10.1	  	6/6/13	  	 	
 	 	 	 	 	 	 	
  10.3†	  	2013 Employee Stock Purchase Plan.	  	8-K12B	  	001-14895	  	10.2	  	6/6/13	  	 	
 	 	 	 	 	 	 	
  10.4†	  	Form of Notice of Grant of Restricted Stock under the Amended & Restated 2011 Equity Incentive Plan.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  10.5	  	Form of Stock Option Award Agreement under the Amended & Restated 2011 Equity Incentive Plan.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  10.6	  	Lease Agreement dated June 25, 2013 by and between Sarepta Therapeutics, Inc. and ARE-MA Region No. 38, LLC.	  	8-K	  	001-14895	  	10.1	  	7/1/13	  	 	
 	 	 	 	 	 	 	
  31.1	  	Certification of the Company’s President and Chief Executive Officer, Christopher Garabedian, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  31.2	  	Certification of the Company’s Senior Vice President, Chief Financial Officer, Sandesh Mahatme, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  32.1	  	Certification of the Company’s President and Chief Executive Officer, Christopher Garabedian, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
  32.2	  	Certification of the Company’s Senior Vice President, Chief Financial Officer, Sandesh Mahatme, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
101.INS*	  	XBRL Instance Document.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
101.SCH*	  	XBRL Taxonomy Extension Schema Document.	  	 	  	 	  	 	  	 	  	X	
 
42

Table of Contents
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	 	  	Incorporated by Reference to Filings Indicated	
Exhibit
Number	  	Description	  	Form	  	File No.	  	Exhibit	  	Filing
Date	  	Provided
Herewith	
 	 	 	 	 	 	 	
101.CAL*	  	XBRL Taxonomy Extension Calculation Linkbase Document.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
101.DEF*	  	XBRL Taxonomy Extension Definition Linkbase Document.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
101.LAB*	  	XBRL Taxonomy Extension Label Linkbase Document.	  	 	  	 	  	 	  	 	  	X	
 	 	 	 	 	 	 	
101.PRE*	  	XBRL Taxonomy Extension Presentation Linkbase Document.	  	 	  	 	  	 	  	 	  	X	
 
†	Indicates management contract or compensatory plan, contract or arrangement.	
*	In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.	
**	Confidential treatment has been requested for portions of this exhibit.	
 
43

Exhibit 4.1

ZQ|CERT#|COY|CLS|RGSTRY|ACCT#|TRANSTYPE|RUN#|TRANS#
COMMON STOCK
PAR VALUE $0.0001
COMMON STOCK
THIS CERTIFICATE IS TRANSFERABLE IN CANTON, MA, JERSEY CITY, NJ AND COLLEGE STATION, TX
SAREPTA THERAPEUTICS
Certificate Number ZQ00000000
Shares
** 000000 ******************
*** 000000 *****************
**** 000000 ****************
***** 000000 ***************
****** 000000 **************
SAREPTA THERAPEUTICS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
MR. SAMPLE & MRS. SAMPLE & MR. SAMPLE & MRS. SAMPLE
** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Sample **** Mr. Sample
is the record holder of
***ZERO HUNDRED THOUSAND ZERO HUNDRED AND ZERO***
**000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**
Shares****000000**Shares****000000**Shares***
*000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**
Shares****000000**Shares****000000**Shares****
000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**
Shares****000000**Shares****000000**Shares****0 00000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**
Shares****000000**Shares****000000**Shares****00 0000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**
Shares****000000**Shares****000000**Shares****000 000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**
Shares****000000**Shares****000000**Shares****0000 00**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**
Shares****000000**Shares****000000**Shares****00000 0**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**
Shares****000000**Shares****000000**Shares****000000 **Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**
Shares****000000**Shares****000000**Shares****000000* *Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**
Shares****000000**Shares****000000**Shares****000000** Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**
Shares****000000**Shares****000000**Shares****000000**S
CUSIP 803607 10 0
SEE REVERSE FOR CERTAIN DEFINITIONS
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $0.0001 PAR VALUE, OF
SAREPTA THERAPEUTICS, INC.
transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
President and Chief Executive Officer
Corporate Secretary
SAREPTA THERAPEUTICS, INC.
SEAL 2013 DELAWARE
DATED DD-MMM-YYYY
COUNTERSIGNED AND REGISTERED:
COMPUTERSHARE INC.
TRANSFER AGENT AND REGISTRAR,
By
AUTHORIZED SIGNATURE
SECURITY INSTRUCTIONS ON REVERSE
1234567

 
SAREPTA THERAPEUTICS, INC.
UPON WRITTEN REQUEST, THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATION, PREFERENCE, LIMITATIONS, AND RELATIVE RIGHTS APPLICABLE TO THE SHARES OF EACH CLASS OF STOCK AUTHORIZED TO BE ISSUED AND, WITH RESPECT TO ANY PREFERRED OR SPECIAL CLASS WHICH THE CORPORATION IS AUTHORIZED TO ISSUE IN SERIES, THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS FOR SHARES OF EACH SUCH SERIES, SO FAR AS THE SAME HAVE BEEN FIXED AND DETERMINED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO FIX AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:	
 	 	 	 	 	
TEN COM	 	- as tenants in common	 	 	 	UNIF GIFT MIN ACT -	 	                                                     Custodian                                      	
 	 	 	 	 	 	 	 	                     (Cust)                                                 (Minor)	
TEN ENT	 	- as tenants by the entireties	 	under Uniform Gifts to Minors Act                                                  	
 	 	 	 	 	 	 	 	                                                                              (State)	
JT TEN	 	- as joint tenants with right of survivorship and not as tenants in common	 	 	 	UNIF TRF MIN ACT -	 	                                 Custodian (until age                                         )
            (Cust)
                        under Uniform Transfers to  Minors Act                  
      (Minor)                                                                           (State)	
 	 	Additional abbreviations may also be used though not in the above list.	

 	 	PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE	
 	 	
For value received,                          hereby sell(s), assign(s) and transfer(s) unto	 	 	

 	
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE)	

 	

 	 	shares	
 	 	 	
of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint	 	 	
 	 	
 	 	attorney-in-fact	
to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.	

Dated:	 	                                                         20                                     	 	 	 	Signature(s) Guaranteed: Medallion Guarantee Stamp
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15.	
 
Signature:	 	 	 	 	 	 	
 
Signature:	 	 	 	 	 	 	
 	 	Notice:     The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever.	 	 	 	 	

Exhibit 10.1
AVI BIOPHARMA, INC.
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”) is entered into as of December 9, 2011 (the “Effective Date”) by and between AVI BioPharma, Inc. (the “ Company ”), and Jayant Aphale (“ Executive ”).
1. Duties and Scope of Employment.
(a) Positions and Duties. As of December 12, 2011 (the “Start Date”), Executive will serve as the Company’s Senior Vice President, Technical Operations. Executive will render such business and professional services in the performance of his duties as will reasonably be assigned to him by the Company’s Chief Executive Officer.
(b) Obligations. During the Employment Term, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and time to the Company. For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Company’s Board of Directors (the “ Board ”).
2. At-Will Employment. The parties agree that Executive’s employment with the Company will be “at-will” employment and may be terminated at any time with or without Cause or notice. Executive understands and agrees that neither his job performance nor promotions, commendations, bonuses or the like from the Company give rise to or in any way serve as the basis for modification, amendment, or extension, by implication or otherwise, of his employment with the Company. However, as described in this Agreement, Executive may be entitled to severance benefits depending on the circumstances of Executive’s termination of employment with the Company.
3. Term of Agreement. Subject to Section 2 above, this Agreement will have a term of two (2) years, commencing on the Start Date (the “ Employment Term ”). At the end of the Employment Term, the Agreement may be renewed upon mutual agreement in writing by Executive and the Company, otherwise it will expire in accordance with its terms. Non-renewal at the end of the Employment Term shall not constitute termination without Cause or give Executive an opportunity to terminate his employment for Good Reason, even if a Good Reason event has occurred before the expiration of the Employment Term under this Agreement. Notwithstanding anything herein to the contrary, if, during the Employment Term, the Company experiences a Change of Control, the Employment Term shall be extended to the end of the Change of Control Period (as defined in Section 9(b) below).
4. Compensation.
(a) Base Salary. During the Employment Term, the Company will pay Executive an annual salary of $310,000 as compensation for his services (the “ Base Salary ”). The Base Salary will be paid periodically in accordance with the Company’s normal payroll practices and be subject to the usual, required withholdings. Executive’s salary will be subject to review and adjustments will be made based upon the Company’s normal performance review practices.

(b) Target Bonus. Executive will be eligible to receive a target annual bonus of thirty percent (30%) of Executive’s Base Salary, less applicable withholdings, upon achievement of performance objectives to be determined by the Board in its sole discretion (the “ Target Bonus ”). The maximum bonus Executive will be eligible to receive is forty-five percent (45%) of his Base Salary. The Target Bonus, or any portion thereof, will be paid as soon as practicable after the Board determines that the Target Bonus has been earned, but in no event shall the Target Bonus be paid after the later of (i) the fifteenth (15 th ) day of the third (3 rd ) month following the close of the Company’s fiscal year in which the Target Bonus is earned or (ii) March 15 following the calendar year in which the Target Bonus is earned.
(c) Stock Option. Following the Effective Date, it will be recommended that Executive be granted a stock option to purchase 600,000 shares at an exercise price equal to the fair market value on the date of grant (the “ Option ”). Subject to the accelerated vesting provisions set forth herein, the Option will vest as to twenty-five percent (25%) of the shares subject to the Option on the first anniversary of the Start Date, and as to 1/48th of the shares subject to the Option on each monthly anniversary thereafter on the same day of the month as the Start Date (and if there is no corresponding day, the last day of the month), so that the Option will be fully vested and exercisable four (4) years from the Start Date, subject to Executive continuing to provide services to the Company through the relevant vesting dates. The Option will be subject to the terms, definitions and provisions of the Company’s 2011 Equity Incentive Plan (the “ Equity Plan ”) and the stock option agreement by and between Executive and the Company (the “ Option Agreement ”), both of which documents are incorporated herein by reference.
5. Employee Benefits. During the Employment Term, Executive will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other executive officers of the Company. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.
6. Vacation. Executive will be entitled to paid vacation in accordance with the Company’s vacation policy, with the timing and duration of specific days off mutually and reasonably agreed to by the parties hereto.
7. Relocation/Corporate Housing.
(a) The Company agrees to reimburse Executive up to a total of $50,000 (excluding any tax “gross ups”) for his (i) actual corporate housing expenses for housing for Executive and his family in the Corvallis, OR metropolitan area, which expenses may not exceed $9,000 with such amounts counted towards the $50,000 cap, and (ii) actual, documented reasonable expenses incurred in moving and relocating his family and household to the Corvallis, OR metropolitan area, which may include any costs or expenses associated with Executive’s (x) sale of his current residence, (y) shipment of personal effects to the Corvallis, OR metropolitan area, or (z) the customary closing costs associated with the purchase of a residence in the Corvallis, OR metropolitan area incurred by Executive during the relocation period; provided that any expenses incurred pursuant to Sections 7(a)(i) and (ii) must be incurred within 12 months of Executive’s Start
 
-2-

Date to be eligible for reimbursement pursuant to this Section 7(a). Executive agrees that he will submit all such reimbursable expenses to the Company with appropriate documentation no later than sixty (60) days after such expenses are incurred and the Company shall reimburse Executive promptly thereafter in accordance with the Company’s expense reimbursement policy, but no later than thirty (30) days after receipts are submitted and approved. In addition, the Company will remit directly to the Internal Revenue Service and/or any applicable state taxing authorities any applicable income taxes on taxable relocation reimbursements paid to Executive during the course of Executive’s relocation.
(b) If, on or prior to the one (1) year anniversary of the Start Date, Executive terminates his employment with the Company for any reason, Executive must repay 100% of the expense reimbursement, including any tax gross ups, paid by the Company under Section 7(a) above to the Company within sixty (60) days of Executive’s termination of employment.
8. Business Expenses. The Company will reimburse Executive for reasonable travel, entertainment or other business expenses incurred by Executive in the furtherance of, or in connection with, the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time.
9. Severance.
(a) Termination for other than Cause, Death or Disability Apart from a Change of Control. If prior to a Change of Control or after twelve (12) months following a Change of Control, the Company (or any parent or subsidiary or successor of the Company) terminates Executive’s employment with the Company other than for Cause, death or disability after providing at least thirty (30) days advance notice to Executive, then, subject to Section 10, Executive will be entitled to
(i) receive continuing payments of severance pay at a rate equal to Executive’s Base Salary, as then in effect, for twelve (12) months from the date of such termination, which will be paid in accordance with the Company’s regular payroll procedures;
(ii) accelerated vesting as to 50% of Executive’s outstanding and unvested equity awards; and
(iii) an extension of the post-termination exercise period applicable to Executive’s outstanding options to one hundred and eighty (180) days following the date of Executive’s termination of employment.
(b) Termination for other than Cause, Death or Disability or Resignation by Executive for Good Reason upon or within Twelve Months Following a Change of Control . If upon or within twelve (12) months following a Change of Control (the “ Change of Control Period ”), the Company (or any parent or subsidiary or successor of the Company) terminates Executive’s employment with the Company other than for Cause, death or disability after providing at least thirty (30) days advance notice to Executive, or the Executive resigns from such employment for Good Reason, then, subject to Section 10, Executive will be entitled to
(i) receive continuing payments of severance pay at a rate equal to Executive’s Base Salary, as then in effect, for twenty-four (24) months from the date of such termination, which will be paid in accordance with the Company’s regular payroll procedures;
 
-3-

(ii) accelerated vesting as to 100% of Executive’s outstanding and unvested equity awards; and
(iii) an extension of the post-termination exercise period applicable to Executive’s outstanding options to one hundred and eighty (180) days following the date of Executive’s termination of employment.
(c) Termination for Cause, Death or Disability; Resignation without Good Reason. If Executive’s employment with the Company (or any parent or subsidiary or successor of the Company) terminates voluntarily by Executive (except upon resignation for Good Reason during the Change of Control Period), for Cause by the Company or due to Executive’s death or disability, then
(i) all vesting will terminate immediately with respect to Executive’s outstanding equity awards;
(ii) all payments of compensation by the Company to Executive hereunder will terminate immediately (except as to amounts already earned); and
(iii) Executive will only be eligible for severance benefits in accordance with the Company’s established policies, if any, as then in effect.
(d) Exclusive Remedy. In the event of a termination of Executive’s employment with the Company (or any parent or subsidiary or successor of the Company), the provisions of this Section 9 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive will be entitled to no severance or other benefits upon termination of employment with respect to acceleration of award vesting, extension of the option exercise period, or severance pay other than those benefits expressly set forth in this Section 9.
10. Conditions to Receipt of Severance; No Duty to Mitigate.
(a) Separation Agreement and Release of Claims. The receipt of any severance pursuant to Section 9(a) or 9(b) will be subject to Executive signing and not revoking a separation agreement and release of claims in a form reasonably satisfactory to the Company (the “ Release ”) and provided that such Release becomes effective and irrevocable no later than sixty (60) days following the termination date (such deadline, the “ Release Deadline ”). No severance will be paid or provided until the Release becomes effective. If the Release does not become effective by the Release Deadline, Executive forfeits his right to any severance or similar payment under the Agreement. In the event Executive’s termination of employment occurs at a time during the calendar year where it would be possible for the Release to become effective in the calendar year following the calendar year in which his termination of employment occurs, then any severance that would be deferred in accordance with the paragraph below will be paid on the first payroll date to occur during the calendar year following the calendar year in which such termination of employment occurs, or such later time as required by (i) the payment schedule applicable to each payment or benefit, (ii) the date the Release becomes effective, or (iii) Section 10(c) below.
 
-4-

(b) Non-Competition; Non-Solicitation. The receipt of any severance benefits pursuant to Section 9(a) or 9(b) will be subject to Executive not violating the provisions of Sections 14 and 15. In the event Executive breaches the provisions of Sections 14 and/or 15, or otherwise materially breaches this Agreement, all continuing payments and benefits to which Executive may otherwise be entitled pursuant to Section 9(a) or 9(b), as applicable, will immediately cease.
(c) Section 409A.
(i) Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Code Section 409A, and the final regulations and any guidance promulgated thereunder (“ Section 409A ”) (together, the “ Deferred Payments ”) will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a “separation from service” within the meaning of Section 409A.
(ii) Any severance payments or benefits under this Agreement that would be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the sixtieth (60 th ) day following Executive’s separation from service, or, if later, such time as required by Section 10(c)(iii). Except as required by Section 10(c)(iii), any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s separation from service but for the preceding sentence will be paid to Executive on the sixtieth (60 th ) day following Executive’s separation from service and the remaining payments shall be made as provided in this Agreement.
(iii) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination (other than due to death), then the Deferred Payments that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service, but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.
 
-5-

(iv) Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of clause (i) above.
(v) Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments for purposes of clause (i) above.
(vi) The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.
(d) Confidential Information Agreement. Executive’s receipt of any payments or benefits under Section 9 will be subject to Executive continuing to comply with the terms of the Confidential Information Agreement (as defined in Section 13).
(e) No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment.
11. Definitions.
(a) Cause. For purposes of this Agreement, “Cause” is defined as (i) an act of dishonesty made by Executive in connection with Executive’s responsibilities as an employee; (ii) Executive’s conviction of, or plea of  nolo contendere  to, a felony or any crime involving fraud, embezzlement or any other act of moral turpitude; (iii) Executive’s gross misconduct; (iv) Executive’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom Executive owes an obligation of nondisclosure as a result of Executive’s relationship with the Company; (v) Executive’s willful breach of any obligations under any written agreement or covenant with the Company; or (vi) Executive’s continued failure to perform his employment duties after Executive has received a written demand of performance from the Company which specifically sets forth the factual basis for the Company’s belief that Executive has not substantially performed his duties and has failed to cure such non-performance to the Company’s satisfaction within ten (10) business days after receiving such notice.
(b) Change of Control. For purposes of this Agreement, “Change of Control” of the Company is defined as:
(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company’s then outstanding voting securities; or
 
-6-

(ii) the date of the consummation of a merger or consolidation of the Company with any other corporation that has been approved by the shareholders of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or
(iii) the date of the consummation of the sale or disposition by the Company of all or substantially all the Company’s assets.
Notwithstanding the foregoing provisions of this definition, a transaction will not be deemed a Change of Control unless the transaction qualifies as a “change in control event” within the meaning of Section 409A.
(c) Code. For purposes of this Agreement, “Code” means the Internal Revenue Code of 1986, as amended.
(d) Good Reason. For the purposes of this Agreement, “Good Reason” means the termination by Executive upon the occurrence of any of the below described events. Executive must provide notice to the Company of the existence of such event within ninety (90) days of the first occurrence of such event, and the Company will have thirty (30) days to remedy the condition, in which case no Good Reason shall exist. If the Company fails to remedy the condition within such thirty (30) day period, Executive must terminate employment within two (2) years of the first occurrence of such event. The events which constitute a Good Reason termination are: (i) the assignment of a different title or change that results in a material reduction in Executive’s duties or responsibilities; (ii) a material reduction by the Company in Executive’s base compensation, other than a reduction in his Base Salary that is part of a general salary reduction affecting employees generally and provided the reduction is not greater, percentage-wise, than the reduction affecting other employees generally or failure to provide an annual increase in base compensation commensurate with other executives; provided, however, in determining whether to provide an annual increase in base compensation commensurate with an annual increase provided to other executives, the Company may take into account factors such as market levels of compensation, Executive’s overall performance, and other factors reasonably considered by the Company’s compensation committee and/or Board, so long as such determination is not made in bad faith with the intent to discriminate against Executive; or (iii) relocation of Executive’s principal place of business of greater than seventy-five (75) miles from its then location.
(e) Section 409A Limit. For purposes of this Agreement, “Section 409A Limit” will mean two (2) times the lesser of: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Executive’s taxable year preceding the Executive’s taxable year of his or her separation from service as determined under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; and (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Internal Revenue Code for the year in which Executive’s separation from service occurred.
 
-7-

12. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section 12, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s severance benefits will be either:
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to the excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. If a reduction in the severance and other benefits constituting “parachute payments” is necessary so that no portion of such severance benefits is subject to the excise tax under Section 4999 of the Code, the reduction shall occur in the following order: (1) reduction of the cash severance payments; (2) cancellation of accelerated vesting of equity awards; and (3) reduction of continued employee benefits. In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of Executive’s equity awards. If two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis. In no event shall the Executive have any discretion with respect to the ordering of payment reductions.
Unless the Company and Executive otherwise agree in writing, any determination required under this Section 12 will be made in writing by the independent public accountants who are primarily used by the Company immediately prior to the Change of Control, the Company’s legal counsel or such other person or entity to which the parties mutually agree (the “ Firm ”), whose determination will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 12, the Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Firm such information and documents as the Firm may reasonably request in order to make a determination under this Section 12. The Company will bear all costs the Firm may reasonably incur in connection with any calculations contemplated by this Section 12.
13. Confidential Information. Executive agrees to enter into the confidential information agreement attached hereto (the “Confidential Information Agreement ”) upon commencing employment hereunder.
14. Non-Competition. During the term of his employment with the Company and until the later of: the date Executive terminates his employment with the Company and the date Executive no longer receives the severance benefits provided in Section 9(a)(i) or 9(b)(i), as applicable, Executive will not, either directly or indirectly, (a) serve as an advisor, agent, consultant, director, employee, officer, partner, proprietor or otherwise of, (b) have any ownership interest in (except for passive ownership of one percent (1%) or less of any entity whose securities have been registered under the Securities Act of 1933, as amended, or Section 12 of the Securities Exchange Act of 1934,
 
-8-

as amended) or (c) participate in the organization, financing, operation, management or control of, any business (i) that is in competition with the Company’s business as conducted by the Company at any time during the course of Executive’s employment with the Company and (ii) on which Executive worked or about which Executive learned, during his employment, information or knowledge not generally known or available outside the Company, or information or physical material entrusted to the Company by third parties, including, but not limited to inventions, during Executive’s employment or consultancy with the Company, confidential knowledge, copyrights, product ideas, techniques, processes, formulas, object codes, biological materials, mask works and/or any other information of any type relating to documentation, laboratory notebooks, data, schematics, algorithms, flow charts, mechanisms, research, manufacture, improvements, assembly, installation, marketing, forecasts, sales, pricing, customers, the salaries, duties, qualifications, performance levels and terms of compensation of other employees, and/or cost or other financial data concerning any of the foregoing or the Company and its operations.
15. Non-Solicitation. During the term of his employment with the Company and until the date two (2) years after the termination of Executive’s employment with the Company for any reason, Executive agrees not, either directly or indirectly, to solicit, induce, attempt to solicit, recruit, or encourage any employee of the Company (or any parent or subsidiary of the Company) to leave his employment either for Executive or for any other entity or person. Executive represents that he (a) is familiar with the foregoing covenant not to solicit, and (b) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants.
16. Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executive’s death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “ successor ” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance or other disposition of Executive’s right to compensation or other benefits will be null and void.
17. Notices. All notices, requests, demands and other communications called for hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered personally, (b) one (1) day after being sent by a well established commercial overnight service, or (c) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:
If to the Company:
AVI BioPharma, Inc.
Attn: Chief Executive Officer
3450 Monte Villa Parkway, Suite 101
Bothell, WA 98021
If to Executive:
at the last residential address known by the Company.
 
-9-

18. Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.
19. Arbitration.
(a) General. In consideration of Executive’s service to the Company, his promise to arbitrate all employment related disputes and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s service to the Company under this Agreement or otherwise or the termination of Executive’s service with the Company, including any breach of this Agreement, shall be subject to binding arbitration under the Arbitration Rules set forth in the Revised Code of Washington Chapter 7.04 (the “ Rules ”) and pursuant to Washington law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, claims of harassment, discrimination or wrongful termination. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.
(b) Procedure. Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the  National Rules for the Resolution of Employment Disputes  or the  Washington Code of Civil Procedure . Executive agrees that the arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Executive agrees that the arbitrator shall issue a written decision on the merits with findings of fact and conclusions of law. Executive also agrees that the arbitrator shall have the power to award any remedies, including attorneys’ fees and costs, available under applicable law. Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that, for any filing fees associated with any arbitration Executive initiates, Executive shall pay an amount equal to the filing fees Executive would have paid had he/she filed a complaint in a court of law. Executive agrees that the arbitrator shall administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules shall take precedence.
(c) Remedy. Except as provided by the Rules, arbitration shall be the sole, exclusive and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Rules, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not
 
-10-

have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator shall not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.
(d) Availability of Injunctive Relief. In addition to the right under the Rules to petition the court for provisional relief, Executive agrees that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidential Information Agreement or any other agreement regarding trade secrets, confidential information, non-competition, non-solicitation or non-disparagement. In the event either party seeks injunctive relief, the prevailing party shall be entitled to recover reasonable costs and attorneys’ fees.
(e) Administrative Relief. Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Washington State Human Rights Commission, Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim.
(f) Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understands it, including that  EXECUTIVE IS WAIVING EXECUTIVE’S RIGHT TO A JURY TRIAL . Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.
20. Integration. This Agreement, together with the Equity Plan, Option Agreement and the Confidential Information Agreement represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. With respect to stock options or other equity awards granted on or after the date of this Agreement, the acceleration of vesting provisions provided herein will apply to such stock options and other equity awards except to the extent otherwise explicitly provided in the applicable stock option or equity award agreement. This Agreement may be modified only by agreement of the parties by a written instrument executed by the parties that is designated as an amendment to this Agreement.
21. Waiver of Breach. The waiver of a breach of any term or provision of this Agreement, which must be in writing, will not operate as or be construed to be a waiver of any other previous or subsequent breach of this Agreement.
22. Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.
23. Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.
24. Governing Law. This Agreement will be governed by the laws of the State of Washington (with the exception of its conflict of laws provisions).
 
-11-

25. Acknowledgment. Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.
26. Counterparts. This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.
[Signature Page Follows]
 
-12-

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their duly authorized officers, as of the day and year first above written.

COMPANY:	 	 	 	 	 	 	
 	 	 	 	
AVI BIOPHARMA, INC.	 	 	 	 	 	 	
 	 	 	 	 	
By:	 	 	 	 	 	Date:	 	December 12, 2011	
 	 	 	 	 	
Title:	 	CEO & President	 	 	 	 	 	 	
 	 	 	 	
EXECUTIVE:	 	 	 	 	 	 	
 	 	 	 	
 	 	 	 	Date:	 	11 DECEMBER 2011	
JAYANT APHALE	 	 	 	 	 	 	
[SIGNATURE PAGE TO EXECUTIVE EMPLOYMENT AGREEMENT]
 
-13-

Exhibit 10.4
SAREPTA THERAPEUTICS, INC.
AMENDED AND RESTATED 2011 EQUITY INCENTIVE PLAN
NOTICE OF GRANT OF RESTRICTED STOCK
Unless otherwise defined herein, the terms defined in the Sarepta Therapeutics, Inc. Amended and Restated 2011 Equity Incentive Plan (the “Plan”) will have the same defined meanings in this Notice of Grant of Restricted Stock (the “Notice of Grant”) and Terms and Conditions of Restricted Stock Grant, attached hereto as  Exhibit A  (together, the “Agreement”).
NOTICE OF RESTRICTED STOCK GRANT

 	 	Participant Name:	 	 	
 	 	 	
 	 	Address:	 	 	

Participant has been granted the right to receive an Award of Restricted Stock, subject to the terms and conditions of the Plan and this Agreement, as follows:

 	 	Grant Number	 	 	
 	 	 	
 	 	Date of Grant	 	 	
 	 	 	
 	 	Vesting Commencement Date	 	                              	
 	 	 	
 	 	Total Number of Shares Granted	 	 	
Vesting Schedule:
Subject to any acceleration provisions contained in the Plan or set forth below, the Restricted Stock will vest and the Company’s right to reacquire the Restricted Stock will lapse in accordance with the following schedule:
[INSERT VESTING SCHEDULE]
By Participant’s signature and the signature of the representative of Sarepta Therapeutics, Inc. (the “Company”) below, Participant and the Company agree that this Award of Restricted Stock is granted under and governed by the terms and conditions of the Plan and this Agreement.
 
1

Participant has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of the Plan and Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated below.

PARTICIPANT	 	 	 	 	 	SAREPTA THERAPEUTICS, INC.	

Signature	 	 	 	 	 	 	

Print Name	 	 	 	 	 	 	
 	 	 	 	
Address:	 	 	 	 	 	 	

 	 	 	 	

2

EXHIBIT A
 
TERMS AND CONDITIONS OF RESTRICTED STOCK GRANT
1. Grant of Restricted Stock. The Company hereby grants to the Participant named in the Notice of Grant (the “Participant”) under the Plan for past services and as a separate incentive in connection with his or her services and not in lieu of any salary or other compensation for his or her services, an Award of Shares of Restricted Stock, subject to all of the terms and conditions in this Agreement and the Plan, which is incorporated herein by reference. Subject to Section 20(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan will prevail.
2. Escrow of Shares.
(a) All Shares of Restricted Stock will, upon execution of this Agreement, be delivered and deposited with an escrow holder designated by the Company (the “Escrow Holder”). The Shares of Restricted Stock will be held by the Escrow Holder until such time as the Shares of Restricted Stock vest or the date Participant ceases to be a Service Provider.
(b) The Escrow Holder will not be liable for any act it may do or omit to do with respect to holding the Shares of Restricted Stock in escrow while acting in good faith and in the exercise of its judgment.
(c) Upon Participant’s termination as a Service Provider for any reason, the Escrow Holder, upon receipt of written notice of such termination, will take all steps necessary to accomplish the transfer of the unvested Shares of Restricted Stock to the Company. Participant hereby appoints the Escrow Holder with full power of substitution, as Participant’s true and lawful attorney-in-fact with irrevocable power and authority in the name and on behalf of Participant to take any action and execute all documents and instruments, including, without limitation, stock powers which may be necessary to transfer the certificate or certificates evidencing such unvested Shares of Restricted Stock to the Company upon such termination.
(d) The Escrow Holder will take all steps necessary to accomplish the transfer of Shares of Restricted Stock to Participant after they vest following Participant’s request that the Escrow Holder do so.
(e) Subject to the terms hereof, Participant will have all the rights of a shareholder with respect to the Shares while they are held in escrow, including without limitation, the right to vote the Shares and to receive any cash dividends declared thereon. In addition, with respect to a Share of Restricted Stock with performance-based vesting, dividends which are paid prior to vesting shall only be paid out to Participant to the extent that the performance-based vesting conditions are subsequently satisfied and the Share of Restricted Stock vests.
(f) In the event of any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares, the Shares of Restricted Stock will be increased, reduced or otherwise changed, and by virtue of any such change Participant will in his or her capacity as
 
1

owner of unvested Shares of Restricted Stock be entitled to new or additional or different shares of stock, cash or securities (other than rights or warrants to purchase securities); such new or additional or different shares, cash or securities will thereupon be considered to be unvested Shares of Restricted Stock and will be subject to all of the conditions and restrictions which were applicable to the unvested Shares of Restricted Stock pursuant to this Agreement. If Participant receives rights or warrants with respect to any unvested Shares of Restricted Stock, such rights or warrants may be held or exercised by Participant, provided that until such exercise any such rights or warrants and after such exercise any shares or other securities acquired by the exercise of such rights or warrants will be considered to be unvested Shares of Restricted Stock and will be subject to all of the conditions and restrictions which were applicable to the unvested Shares of Restricted Stock pursuant to this Agreement. In addition, with respect to a Share of Restricted Stock with performance-based vesting, dividends which are paid prior to vesting shall only be paid out to Participant to the extent that the performance-based vesting conditions are subsequently satisfied and the Share of Restricted Stock vests. The Administrator in its absolute discretion at any time may accelerate the vesting of all or any portion of such new or additional shares of stock, cash or securities, rights or warrants to purchase securities or shares or other securities acquired by the exercise of such rights or warrants.
(g) The Company may instruct the transfer agent for its Common Stock to place a legend on the certificates representing the Restricted Stock or otherwise note its records as to the restrictions on transfer set forth in this Agreement.
3. Vesting Schedule. Except as provided in Section 4, and subject to Section 5, the Shares of Restricted Stock awarded by this Agreement will vest in accordance with the vesting provisions set forth in the Notice of Grant. Shares of Restricted Stock scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest in Participant in accordance with any of the provisions of this Agreement, unless Participant will have been continuously a Service Provider from the Date of Grant until the date such vesting occurs.
4. Administrator Discretion. The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Restricted Stock at any time, subject to the terms of the Plan. If so accelerated, such Restricted Stock will be considered as having vested as of the date specified by the Administrator.
5. Forfeiture upon Termination of Status as a Service Provider. Notwithstanding any contrary provision of this Agreement, the balance of the Shares of Restricted Stock that have not vested at the time of Participant’s termination as a Service Provider for any reason other than death will be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company upon the date of such termination and Participant will have no further rights thereunder. Participant will not be entitled to a refund of the price paid for the Shares of Restricted Stock, if any, returned to the Company pursuant to this Section 5. Participant hereby appoints the Escrow Agent with full power of substitution, as Participant’s true and lawful attorney-in-fact with irrevocable power and authority in the name and on behalf of Participant to take any action and execute all documents and instruments, including, without limitation, stock powers which may be necessary to transfer the certificate or certificates evidencing such unvested Shares to the Company upon such termination of service. In the event of Participant’s termination as a Service Provider as a result of death, the vesting restrictions on all of the Shares of Restricted Stock that have not lapsed shall lapse upon the Participant’s death.
 
2

6. Death of Participant. Any distribution or delivery to be made to Participant under this Agreement will, if Participant is then deceased, be made to Participant’s designated beneficiary, or if no beneficiary survives Participant, the administrator or executor of Participant’s estate. Any such transferee must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.
7. Withholding of Taxes. Notwithstanding any contrary provision of this Agreement, no certificate representing the Shares of Restricted Stock may be released from the escrow established pursuant to Section 2, unless and until satisfactory arrangements (as determined by the Administrator) will have been made by Participant with respect to the payment of income, employment and other taxes which the Company determines must be withheld with respect to such Shares. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit Participant to satisfy such tax withholding obligation, in whole or in part (without limitation) by (a) paying cash, (b) electing to have the Company withhold otherwise deliverable Shares having a Fair Market Value equal to the minimum amount required to be withheld, (c) delivering to the Company already vested and owned Shares having a Fair Market Value equal to the amount required to be withheld, or (d) selling a sufficient number of such Shares otherwise deliverable to Participant through such means as the Company may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld. To the extent determined appropriate by the Company in its discretion, it will have the right (but not the obligation) to satisfy any tax withholding obligations by reducing the number of Shares otherwise deliverable to Participant. If Participant fails to make satisfactory arrangements for the payment of any required tax withholding obligations hereunder at the time any applicable Shares otherwise are scheduled to vest pursuant to Sections 3 or 4, Participant will permanently forfeit such Shares and the Shares will be returned to the Company at no cost to the Company.
8. Rights as Shareholder. Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a shareholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant or the Escrow Agent. Except as provided in Section 2(f), after such issuance, recordation and delivery, Participant will have all the rights of a shareholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.
9. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF THE SHARES OF RESTRICTED STOCK PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS RESTRICTED STOCK OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES
 
3

THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
10. Address for Notices. Any notice to be given to the Company under the terms of this Award Agreement will be addressed to the Company at Sarepta Therapeutics, Inc., 215 First Street, Suite 7, Cambridge, MA 02142, or at such other address as the Company may hereafter designate in writing.
11. Grant is Not Transferable. Except to the limited extent provided in Section 6, the unvested Shares subject to this grant and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any unvested Shares of Restricted Stock subject to this grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this grant and the rights and privileges conferred hereby immediately will become null and void.
12. Binding Agreement. Subject to the limitation on the transferability of this grant contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
13. Additional Conditions to Release from Escrow. The Company will not be required to issue any certificate or certificates for Shares hereunder or release such Shares from the escrow established pursuant to Section 2 prior to fulfillment of all the following conditions: (a) the admission of such Shares to listing on all stock exchanges on which such class of stock is then listed; (b) the completion of any registration or other qualification of such Shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Administrator will, in its absolute discretion, deem necessary or advisable; (c) the obtaining of any approval or other clearance from any state or federal governmental agency, which the Administrator will, in its absolute discretion, determine to be necessary or advisable; and (d) the lapse of such reasonable period of time following the date of grant of the Restricted Stock as the Administrator may establish from time to time for reasons of administrative convenience.
14. Plan Governs. This Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan will govern. Capitalized terms used and not defined in this Agreement will have the meaning set forth in the Plan.
 
4

15. Administrator Authority. The Administrator will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Shares of Restricted Stock have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. No member of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement.
16. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to the Shares of Restricted Stock awarded under the Plan or future Restricted Stock that may be awarded under the Plan by electronic means or request Participant’s consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.
17. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
18. Agreement Severable. In the event that any provision in this Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement.
19. Modifications to the Agreement. This Agreement constitutes the entire understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Agreement, the Company reserves the right to revise this Agreement as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection to this Award of Restricted Stock.
20. Amendment, Suspension or Termination of the Plan. By accepting this Award, Participant expressly warrants that he or she has received an Award of Restricted Stock under the Plan, and has received, read and understood a description of the Plan. Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time.
21. Governing Law. This Agreement will be governed by the laws of the State of Delaware, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises under this Option or this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of Delaware, and agree that such litigation will be conducted in the state courts of Delaware, or the federal courts for the United States for the District of Delaware, and no other courts, where this Option is made and/or to be performed.
 
5

Exhibit 10.5
SAREPTA THERAPEUTICS, INC.
AMENDED AND RESTATED 2011 EQUITY INCENTIVE PLAN
STOCK OPTION AWARD AGREEMENT
Unless otherwise defined herein, the terms defined in the Amended and Restated 2011 Equity Incentive Plan (the “Plan”) will have the same defined meanings in this Stock Option Award Agreement (the “Award Agreement”).
 
I.	NOTICE OF STOCK OPTION GRANT	
Participant Name:
Address:
You have been granted an Option to purchase Common Stock of Sarepta Therapeutics, Inc. (the “Company”), subject to the terms and conditions of the Plan and this Award Agreement, as follows:

Grant Number	 	 	
 	 	
Date of Grant	 	 	
 	 	
Vesting Commencement Date	 	 	
 	 	
Exercise Price per Share	 	$                    	
 	 	
Total Number of Shares Granted    	 	 	
 	 	
Total Exercise Price	 	$                    	
 	 	
Type of Option:	 	         Incentive Stock Option                 	
 	 	
 	 	         Nonstatutory Stock Option	
 	 	
Term/Expiration Date:	 	 	
Vesting Schedule:
Subject to any acceleration provisions contained in the Plan or set forth below, this Option may be exercised, in whole or in part, in accordance with the following schedule:
[INSERT VESTING SCHEDULE]
Notwithstanding the foregoing, in the event of Participant’s termination as a Service Provider as a result of death, the vesting of all of the Shares subject to the Option shall be accelerated as to 100% of such Shares as of the date of Participant’s death.

Termination Period:
This Option will be exercisable for [three (3)] months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death or Disability, in which case this Option will be exercisable for  [ twelve (12)] months after Participant ceases to be Service Provider. Notwithstanding the foregoing, in no event may this Option be exercised after the Term/Expiration Date as provided above and may be subject to earlier termination as provided in Section 15 of the Plan.
By Participant’s signature and the signature of the Company’s representative below, Participant and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Award Agreement, including the Terms and Conditions of Stock Option Grant, attached hereto as  Exhibit A , all of which are made a part of this document. Participant has reviewed the Plan and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Award Agreement and fully understands all provisions of the Plan and Award Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Award Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated below.

PARTICIPANT:	 	 	 	 	 	SAREPTA THERAPEUTICS, INC.	

Signature	 	 	 	 	 	By	

Print Name	 	 	 	 	 	Title	
 	 	 	 	
Residence Address:	 	 	 	 	 	 	

 	 	 	 	

-2-

EXHIBIT A
TERMS AND CONDITIONS OF STOCK OPTION GRANT
1. Grant of Option. The Company hereby grants to the Participant named in the Notice of Grant attached as Part I of this Award Agreement (the “Participant”) an option (the “Option”) to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), subject to all of the terms and conditions in this Award Agreement and the Plan, which is incorporated herein by reference. Subject to Section 20 of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Award Agreement, the terms and conditions of the Plan will prevail.
If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an ISO under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). However, if this Option is intended to be an ISO, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it will be treated as a Nonstatutory Stock Option (“NSO”). Further, if for any reason this Option (or portion thereof) will not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a NSO granted under the Plan. In no event will the Administrator, the Company or any Parent or Subsidiary or any of their respective employees or directors have any liability to Participant (or any other person) due to the failure of the Option to qualify for any reason as an ISO.
2. Vesting Schedule. Except as provided in Section 3, the Option awarded by this Award Agreement will vest in accordance with the vesting provisions set forth in the Notice of Grant. Shares scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest in Participant in accordance with any of the provisions of this Award Agreement, unless Participant will have been continuously a Service Provider from the Date of Grant until the date such vesting occurs.
3. Administrator Discretion. The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Option at any time, subject to the terms of the Plan. If so accelerated, such Option will be considered as having vested as of the date specified by the Administrator.
4. Exercise of Option.
(a) Right to Exercise. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Award Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit B (the “Exercise Notice”) or in a manner and pursuant to such procedures as the Administrator may determine, which will state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice will be completed by Participant and delivered to the Company. The Exercise Notice will be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares together with any applicable tax withholding. This Option will be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price.

5. Method of Payment. Payment of the aggregate Exercise Price will be by any of the following, or a combination thereof, at the election of Participant.
(a) cash;
(b) check;
(c) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(d) surrender of other Shares which have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares, provided that accepting such Shares, in the sole discretion of the Administrator, will not result in any adverse accounting consequences to the Company.
6. Tax Obligations.
(a) Withholding Taxes. Notwithstanding any contrary provision of this Award Agreement, no certificate representing the Shares will be issued to Participant, unless and until satisfactory arrangements (as determined by the Administrator) will have been made by Participant with respect to the payment of income, employment and other taxes which the Company determines must be withheld with respect to such Shares. To the extent determined appropriate by the Company in its discretion, it will have the right (but not the obligation) to satisfy any tax withholding obligations by reducing the number of Shares otherwise deliverable to Participant. If Participant fails to make satisfactory arrangements for the payment of any required tax withholding obligations hereunder at the time of the Option exercise, Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.
(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Participant herein is an ISO, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Grant Date, or (ii) the date one (1) year after the date of exercise, Participant will immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.
(c) Code Section 409A. Under Code Section 409A, an option that vests after December 31, 2004 (or that vested on or prior to such date but which was materially modified after October 3, 2004) that was granted with a per Share exercise price that is determined by the Internal Revenue Service (the “IRS”) to be less than the Fair Market Value of a Share on the date of grant (a “Discount Option”) may be considered “deferred compensation.” A Discount Option may result in (i) income recognition by Participant prior to the exercise of the option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The Discount Option may also result in additional state income, penalty and interest charges to the Participant. Participant acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share exercise price of this Option equals or exceeds the Fair Market Value of a Share on the Date of Grant in a later examination. Participant agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the Fair Market Value of a Share on the date of grant, Participant will be solely responsible for Participant’s costs related to such a determination.
 
-2-

7. Rights as Shareholder. Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a shareholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant. After such issuance, recordation and delivery, Participant will have all the rights of a shareholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.
8. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AWARD AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
9. Address for Notices. Any notice to be given to the Company under the terms of this Award Agreement will be addressed to the Company at Sarepta Therapeutics, Inc., 215 First Street, Suite 7, Cambridge, MA 02142, or at such other address as the Company may hereafter designate in writing.
10. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant.
11. Binding Agreement. Subject to the limitation on the transferability of this grant contained herein, this Award Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
12. Additional Conditions to Issuance of Stock. If at any time the Company will determine, in its discretion, that the listing, registration or qualification of the Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory authority is necessary or desirable as a condition to the issuance of Shares to Participant (or his or her estate), such issuance will not occur unless and until such listing, registration, qualification, consent or approval will have been effected or obtained free of any conditions not acceptable to the Company. The Company will make all reasonable efforts to meet the requirements of any such state or federal law or securities exchange and to obtain any such consent or approval of any such governmental authority. Assuming such compliance, for income tax purposes the Exercised Shares will be considered transferred to Participant on the date the Option is exercised with respect to such Exercised Shares.
 
-3-

13. Plan Governs. This Award Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Award Agreement and one or more provisions of the Plan, the provisions of the Plan will govern. Capitalized terms used and not defined in this Award Agreement will have the meaning set forth in the Plan.
14. Administrator Authority. The Administrator will have the power to interpret the Plan and this Award Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Shares subject to the Option have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. No member of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Award Agreement.
15. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to Options awarded under the Plan or future options that may be awarded under the Plan by electronic means or request Participant’s consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.
16. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Award Agreement.
17. Agreement Severable. In the event that any provision in this Award Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Award Agreement.
18. Modifications to the Agreement. This Award Agreement constitutes the entire understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Award Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Award Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Award Agreement, the Company reserves the right to revise this Award Agreement as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Code Section 409A or to otherwise avoid imposition of any additional tax or income recognition under Code Section 409A in connection to this Option.
19. Amendment, Suspension or Termination of the Plan. By accepting this Award, Participant expressly warrants that he or she has received an Option under the Plan, and has received, read and understood a description of the Plan. Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time.
 
-4-

20. Governing Law. This Award Agreement will be governed by the laws of the State of Delaware, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises under this Option or this Award Agreement, the parties hereby submit to and consent to the jurisdiction of the State of Delaware, and agree that such litigation will be conducted in the state courts of Delaware, or the federal courts for the United States for the District of Delaware, and no other courts, where this Option is made and/or to be performed.
 
-5-

EXHIBIT B
SAREPTA THERAPEUTICS, INC.
AMENDED AND RESTATED 2011 EQUITY INCENTIVE PLAN
EXERCISE NOTICE
Sarepta Therapeutics, Inc.
215 First Street
Suite 7
Cambridge, MA 02142
1. Exercise of Option. Effective as of today,             ,             , the undersigned (“Purchaser”) hereby elects to purchase              shares (the “Shares”) of the Common Stock of Sarepta Therapeutics, Inc. (the “Company”) under and pursuant to the Amended and Restated 2011 Equity Incentive Plan (the “Plan”) and the Stock Option Award Agreement dated              (the “Award Agreement”). The purchase price for the Shares will be $            , as required by the Award Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price of the Shares and any required tax withholding to be paid in connection with the exercise of the Option.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Award Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a shareholder will exist with respect to the Shares subject to the Option, notwithstanding the exercise of the Option. The Shares so acquired will be issued to Purchaser as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance, except as provided in Section 15 of the Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.

6. Entire Agreement; Governing Law. The Plan and Award Agreement are incorporated herein by reference. This Exercise Notice, the Plan and the Award Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser’s interest except by means of a writing signed by the Company and Purchaser. This agreement is governed by the internal substantive laws, but not the choice of law rules, of the State of Delaware.

Submitted by:	  	Accepted by:	
 	 	
PURCHASER:	  	SAREPTA THERAPEUTICS, INC.	

Signature	  	By	

Print Name	  	Title	
 	 	
Residence Address:	  	 	

 	 	

 	  	 	
 	  	Date Received	
 
-2-

Exhibit 31.1
CERTIFICATION
I, Christopher Garabedian, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Sarepta Therapeutics, Inc., (the “Registrant”);
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.

August 8, 2013	 	 	 	/s/ Christopher Garabedian	
 	 	 	 	Christopher Garabedian	
 	 	 	 	President and Chief Executive Officer	
 	 	 	 	(Principal Executive Officer)	

Exhibit 31.2
CERTIFICATION
I, Sandesh Mahatme, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Sarepta Therapeutics, Inc., (the “Registrant”);
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.

August 8, 2013	 	 	 	/s/ Sandesh Mahatme	
 	 	 	 	Sandesh Mahatme	
 	 	 	 	Senior Vice President, Chief Financial Officer	
 	 	 	 	(Principal Financial Officer)	

Exhibit 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
I, Christopher Garabedian, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that this Quarterly Report of Sarepta Therapeutics, Inc. on Form 10-Q for the quarterly period ended June 30, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Sarepta Therapeutics, Inc.

August 8, 2013	 	 	 	/s/ Christopher Garabedian	
 	 	 	 	Christopher Garabedian,	
 	 	 	 	President and Chief Executive Officer	
 	 	 	 	(Principal Executive Officer)	
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Sarepta Therapeutics, Inc. and will be retained by Sarepta Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by Sarepta Therapeutics, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Sarepta Therapeutics, Inc. specifically incorporates it by reference.

Exhibit 32.2
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
I, Sandesh Mahatme, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that this Quarterly Report of Sarepta Therapeutics, Inc. on Form 10-Q for the quarterly period ended June 30, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Sarepta Therapeutics, Inc.

August 8, 2013	 	 	 	/s/ Sandesh Mahatme	
 	 	 	 	Sandesh Mahatme	
 	 	 	 	Senior Vice President, Chief Financial Officer	
 	 	 	 	(Principal Financial Officer)	
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Sarepta Therapeutics, Inc. and will be retained by Sarepta Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by Sarepta Therapeutics, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Sarepta Therapeutics, Inc. specifically incorporates it by reference.