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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(Mark One)
   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
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 001-37929
Myovant Sciences Ltd.
(Exact name of registrant as specified in its charter)
Bermuda 98-1343578
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
Suite 1, 3rd Floor 
11-12 St. James’s Square
London
SW1Y 4LB
United KingdomNot Applicable
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: +44 (207) 400 3351
Securities registered pursuant to Section 12(b) of the Act:
Title of each ClassTrading SymbolName of each exchange on which registered
Common Shares, $0.000017727 par value per shareMYOVNew York Stock Exchange
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 No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” ”accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
The number of shares outstanding of the Registrant’s common shares, $0.000017727 par value per share, on November 9, 2020, was 90,593,611.


Table of Contents
MYOVANT SCIENCES LTD.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2020
TABLE OF CONTENTS
 Page
 

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MYOVANT SCIENCES LTD.
Condensed Consolidated Balance Sheets
(unaudited; in thousands, except share and per share data)
September 30, 2020March 31, 2020
Assets  
Current assets:  
Cash and cash equivalents$94,210 $76,644 
Marketable securities17,086 2,997 
Prepaid expenses and other current assets5,612 8,269 
Total current assets116,908 87,910 
Property and equipment, net2,808 2,497 
Operating lease right-of-use asset10,423 11,146 
Other assets5,634 4,373 
Total assets$135,773 $105,926 
Liabilities and shareholders’ deficit  
Current liabilities:  
Accounts payable$7,008 $15,334 
Interest payable (related party) 15 
Accrued expenses40,141 29,060 
Deferred revenue16,667 40,000 
Operating lease liability1,657 1,516 
Amounts due to related parties1,284  
Total current liabilities66,757 85,925 
Long-term operating lease liability10,127 10,996 
Long-term debt, less current maturities (related party)253,700 113,700 
Other4,968 3,582 
Total liabilities335,552 214,203 
Commitments and contingencies (Note 11)
Shareholders’ deficit:  
Common shares, par value $0.000017727 per share, 564,111,242 shares authorized, 90,581,003 and 89,833,998 issued and outstanding at September 30, 2020 and March 31, 2020, respectively
2 2 
Additional paid-in capital702,695 684,381 
Accumulated other comprehensive loss (11,540)(1,646)
Accumulated deficit(890,936)(791,014)
Total shareholders’ deficit (199,779)(108,277)
Total liabilities and shareholders’ deficit$135,773 $105,926 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MYOVANT SCIENCES LTD.
Condensed Consolidated Statements of Operations
(unaudited; in thousands, except share and per share data)
Three Months Ended September 30,Six Months Ended September 30,
 2020201920202019
License and milestone revenue$ $ $33,333 $ 
Operating expenses: 
Research and development40,521 50,803 84,707 101,920 
General and administrative (1)
31,316 16,603 54,144 30,755 
Total operating expenses71,837 67,406 138,851 132,675 
Loss from operations(71,837)(67,406)(105,518)(132,675)
Interest expense 3,788  7,581 
Interest expense (related party)2,115  4,299  
Interest income(38)(942)(146)(1,708)
Other (income) expense, net(6,718)121 (10,287)(584)
Loss before income taxes(67,196)(70,373)(99,384)(137,964)
Income tax (benefit) expense (134)195 538 508 
Net loss$(67,062)$(70,568)$(99,922)$(138,472)
Net loss per common share — basic and diluted$(0.75)$(0.79)$(1.12)$(1.68)
Weighted average common shares outstanding — basic and diluted89,744,142 88,798,398 89,523,389 82,667,061 

(1) Includes $1,291 and $1,405 of expense (inclusive of third-party pass through costs) for the three and six months ended September 30, 2020, respectively, pursuant to the terms of the Company’s agreements with Sumitovant Biopharma Ltd. and Sunovion Pharmaceuticals Inc. (see Note 5).
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MYOVANT SCIENCES LTD.
Condensed Consolidated Statements of Comprehensive Loss
(unaudited; in thousands)
Three Months Ended September 30,Six Months Ended September 30,
2020201920202019
Net loss$(67,062)$(70,568)$(99,922)$(138,472)
Other comprehensive (loss) income:
Foreign currency translation adjustment(6,419)281 (9,894)(538)
Total other comprehensive (loss) income(6,419)281 (9,894)(538)
Comprehensive loss$(73,481)$(70,287)$(109,816)$(139,010)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

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MYOVANT SCIENCES LTD.
Condensed Consolidated Statements of Shareholders’ (Deficit) Equity
(unaudited; in thousands, except share data)

Common SharesAdditional
Paid-in Capital
Accumulated
Other Comprehensive
Loss
Accumulated DeficitTotal Shareholders’
(Deficit) Equity
SharesAmount
Balance at March 31, 202089,833,998 $2 $684,381 $(1,646)$(791,014)$(108,277)
Share-based compensation expense— — 7,812 — — 7,812 
Issuance of shares upon exercise of stock options and vesting of restricted stock units
303,014 — 2,190 — — 2,190 
Foreign currency translation adjustment— — — (3,475)— (3,475)
Net loss— — — — (32,860)(32,860)
Balance at June 30, 202090,137,012 2 694,383 (5,121)(823,874)(134,610)
Share-based compensation expense— — 6,924 — — 6,924 
Issuance of shares upon exercise of stock options and vesting of restricted stock units and performance share units
443,991 — 1,388 — — 1,388 
Foreign currency translation adjustment— — — (6,419)— (6,419)
Net loss— — — — (67,062)(67,062)
Balance at September 30, 202090,581,003 $2 $702,695 $(11,540)$(890,936)$(199,779)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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 Common SharesAdditional
Paid-in Capital
Accumulated
Other Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Shareholders’
(Deficit) Equity
 SharesAmount
Balance at March 31, 201972,057,490 $1 $505,851 $507 $(502,025)$4,334 
Issuance of shares in connection with “at-the-market” equity offering, net of commissions of $79
106,494 — 2,546 — — 2,546 
Issuance of shares in connection with public equity offering, net of commissions and offering costs of $9,229
17,424,243 1 134,537 — — 134,538 
Share-based compensation expense— — 6,410 — — 6,410 
Capital contribution from former controlling shareholder — share-based compensation
— — 42 — — 42 
Capital contribution from former controlling shareholder— — 106 — — 106 
Foreign currency translation adjustment— — — (819)— (819)
Issuance of shares upon exercise of stock options and vesting of restricted stock units
34,399 — 314 — — 314 
Net loss— — — — (67,904)(67,904)
Balance at June 30, 201989,622,626 2 649,806 (312)(569,929)79,567 
Public equity offering, additional offering costs  (80)— — (80)
Share-based compensation expense— — 7,879 — — 7,879 
Capital contribution from former controlling shareholder — share-based compensation
— — 52 — — 52 
Capital contribution from former controlling shareholder— — 123 — — 123 
Foreign currency translation adjustment— — — 281 — 281 
Issuance of shares upon vesting of restricted stock units938 —  — —  
Net loss— — — — (70,568)(70,568)
Balance at September 30, 201989,623,564 $2 $657,780 $(31)$(640,497)$17,254 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MYOVANT SCIENCES LTD.
Condensed Consolidated Statements of Cash Flows
(unaudited; in thousands)
Six Months Ended September 30,
20202019
Cash flows from operating activities: 
Net loss$(99,922)$(138,472)
Adjustments to reconcile net loss to net cash used in operating activities: 
Share-based compensation14,736 14,383 
Depreciation and amortization (1)
1,146 726 
Amortization of debt discount and issuance costs 1,095 
Foreign currency transaction gain(10,287)(584)
Other393 215 
Changes in operating assets and liabilities: 
Prepaid expenses and other current assets2,657 225 
Income tax receivable 507 
Other assets(648)(799)
Accounts payable(8,326)(5,200)
Interest payable (772)
Interest payable (related party)(15) 
Accrued expenses11,081 (9,154)
Deferred revenue(23,333) 
Operating lease liabilities(728)(368)
Deferred interest payable 3,050 
Amounts due to related parties1,284  
Other liabilities1,386  
Net cash used in operating activities(110,576)(135,148)
Cash flows from investing activities: 
Purchases of marketable securities(28,874)(27,160)
Maturities of marketable securities14,785  
Purchases of property and equipment(734)(532)
Net cash used in investing activities(14,823)(27,692)
Cash flows from financing activities: 
Proceeds from issuance of common shares in “at-the-market” equity offering, net of issuance costs paid
 2,546 
Proceeds from issuance of common shares in public equity offering, net of issuance costs paid
 134,528 
Proceeds from related party debt financing140,000  
Proceeds from stock option exercises3,578 314 
Net cash provided by financing activities143,578 137,388 
Net change in cash, cash equivalents and restricted cash18,179 (25,452)
Cash, cash equivalents and restricted cash, beginning of period78,018 157,199 
Cash, cash equivalents and restricted cash, end of period$96,197 $131,747 
Non-cash financing activities: 
Offering costs included in accounts payable and accrued expenses$ $70 
(1) Includes amortization of operating lease right-of-use assets.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MYOVANT SCIENCES LTD.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1—Description of Business
Myovant Sciences Ltd. (together with its wholly-owned subsidiaries, the “Company”) is a healthcare company that aspires to redefine care for women and for men through purpose-driven science, empowering medicines, and transformative advocacy. The Company’s lead product candidate is relugolix, a once-daily, oral gonadotropin-releasing hormone (“GnRH”) receptor antagonist. Relugolix monotherapy tablet (120 mg) is under regulatory review in the U.S. for men with advanced prostate cancer. Relugolix combination tablet (relugolix 40 mg, estradiol 1.0 mg, and norethindrone acetate 0.5 mg) is under regulatory review in the U.S. and Europe for women with uterine fibroids and is under development for women with endometriosis. The Company is also developing MVT-602, an oligopeptide kisspeptin-1 receptor agonist, for the treatment of female infertility as part of assisted reproduction.
Takeda Pharmaceuticals International AG (“Takeda”), a subsidiary of Takeda Pharmaceutical Company Limited, the originator of relugolix, granted the Company a worldwide license to develop and commercialize relugolix (excluding Japan and certain other Asian countries) and an exclusive right to develop and commercialize MVT-602 in all countries worldwide. On March 30, 2020, the Company entered into an exclusive license agreement with Gedeon Richter Plc. (“Richter”) for Richter to commercialize relugolix combination tablet for uterine fibroids and endometriosis in certain territories outside of the U.S. Under this agreement, the Company has retained all of its rights to relugolix combination tablet in the U.S. and Canada, as well as rights to relugolix in other therapeutic areas outside of women’s health.
Since its inception, the Company has devoted substantially all of its efforts to identifying and in-licensing its product candidates, organizing and staffing the Company, raising capital, preparing for and advancing the clinical development of its product candidates, and preparing for potential future regulatory approvals and commercialization of relugolix combination tablet and relugolix monotherapy tablet.
The Company’s majority shareholder is Sumitovant Biopharma Ltd. (“Sumitovant”), a wholly-owned subsidiary of Sumitomo Dainippon Pharma Co., Ltd. (“Sumitomo Dainippon Pharma”). As of September 30, 2020, Sumitovant directly, and Sumitomo Dainippon Pharma indirectly, own 48,641,181, or approximately 53.7%, of the Company’s outstanding common shares.
Note 2—Summary of Significant Accounting Policies
(A) Basis of Presentation
The Company’s fiscal year ends on March 31, and its first three fiscal quarters end on June 30, September 30 and December 31. The Company has determined that it has one operating and reporting segment as it allocates resources and assesses financial performance on a consolidated basis.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 18, 2020. The unaudited consolidated balance sheet at March 31, 2020 has been derived from the audited consolidated financial statements at that date. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented have been included. Operating results for the three and six months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021, for any other interim period or for any other future year. There have been no significant changes in the Company’s accounting policies from those disclosed in its Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the SEC on May 18, 2020.
Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP included in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”), issued by the Financial Accounting Standards Board (“FASB”). The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company has no unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
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The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the unaudited condensed consolidated financial statements are issued. During the six months ended September 30, 2020, the Company incurred net losses of $99.9 million and used $110.6 million of cash and cash equivalents in operations. The Company expects to continue to incur significant and increasing operating losses and negative operating cash flows as it continues to develop its product candidates and prepares for potential future regulatory approvals and commercialization of relugolix combination tablet and relugolix monotherapy tablet. In addition, the Company currently expects that its outstanding debt levels will increase in future periods, which will result in an increase in its quarterly interest payment obligations. The Company has not generated any product revenue to date and does not expect to generate product revenue unless and until it obtains regulatory approval for at least one of its product candidates. Based on its current operating plan, the Company expects that its existing cash, cash equivalents, marketable securities, and its ability to borrow under the terms of the Sumitomo Dainippon Pharma Loan Agreement (See Note 5) will be sufficient to fund its operating expenses and capital expenditure requirements at least through the end of the Company’s fiscal year ending March 31, 2021. This estimate is based on the Company’s current assumptions, including assumptions relating to its ability to manage its spend, that might prove to be wrong, and it could use its available capital resources sooner than it currently expects. Current cash, cash equivalents, marketable securities and amounts available under the Sumitomo Dainippon Pharma Loan Agreement will not be sufficient to enable the Company to complete all necessary development and regulatory activities and commercially launch relugolix combination tablet or relugolix monotherapy tablet. The Company anticipates that it will continue to incur net losses and negative operating cash flows for the foreseeable future.
To continue as a going concern, the Company will need, among other things, additional capital resources. The Company continually assesses multiple options to obtain additional funding to support its operations, including through financing activities in public or private capital markets. Management can provide no assurances that any sources of a sufficient amount of financing will be available to the Company on favorable terms, if at all. Although the Company expects to draw under the Sumitomo Dainippon Pharma Loan Agreement on a quarterly basis, such draws are contingent upon the consent of the Company’s board of directors. In addition, if Sumitomo Dainippon Pharma fails to own at least a majority of the Company’s outstanding common shares, it may become unlawful under Japanese law for Sumitomo Dainippon Pharma to fund loans to the Company, in which case the Company would not be able to continue to borrow under the Sumitomo Dainippon Pharma Loan Agreement. ASC 240-40, Going Concern, does not allow the Company to consider future financing activities that are uncertain in its assessment of the Company’s future cash burn for the purpose of its liquidity assessment.
Due to these uncertainties, there is substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements and footnotes have been prepared on the basis that the Company will continue as a going concern, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
(B) Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in certain circumstances that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company regularly evaluates estimates and assumptions related to assets and liabilities, and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Determinations in which management uses subjective judgments include, but are not limited to, the evaluation of the Company’s ability to continue as a going concern, revenue recognition, share-based compensation expenses, research and development (“R&D”) expenses and accruals, leases, and income taxes. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period, that are not readily apparent from other sources. Estimates and assumptions are periodically reviewed in light of changes in circumstances, facts, or experience. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Actual results could differ from those estimates.
(C) Risks and Uncertainties
The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, risks of failure or unsatisfactory results of nonclinical and clinical studies, the need to obtain additional capital to fund the future development of its product candidates and the commercialization of any product candidates that may obtain marketing approval, the need to obtain marketing approval for its product candidates, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations, ability to transition from pilot-scale
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manufacturing to large-scale production of products, and dependence on third-party service providers such as contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs).
In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. Through November 12, 2020, the date of issuance of this Quarterly Report on Form 10-Q, the Company’s results of operations and cash flows have not been significantly impacted by the COVID-19 pandemic. The Company is not aware of any specific event or circumstance that would require an update to its estimates, judgments, and assumptions or a revision of the carrying value of the Company’s assets or liabilities as of November 12, 2020.
(D) Net Loss per Common Share
Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted-average number of common shares outstanding during the period, reduced, when applicable, for outstanding yet unvested shares of restricted common stock. The computation of diluted net loss per common share is based on the weighted-average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options, restricted stock units, restricted stock awards, performance stock units, and warrants. In periods in which the Company reports a net loss, all common share equivalents are deemed anti-dilutive such that basic net loss per common share and diluted net loss per common share are equal. Potentially dilutive common shares have been excluded from the diluted net loss per common share computations in all periods presented because such securities have an anti-dilutive effect on net loss per common share due to the Company’s net loss. There are no reconciling items used to calculate the weighted-average number of total common shares outstanding for basic and diluted net loss per common share.
As of September 30, 2020, and 2019, potentially dilutive securities were as follows:
September 30,
20202019
Stock options8,484,057 7,676,460 
Restricted stock awards (unvested)564,111 775,651 
Restricted stock units (unvested)2,703,287 753,720 
Performance stock units (unvested)722,071 408,510 
Warrants73,710 73,710 
Total12,547,236 9,688,051 
(E) Cash, Cash Equivalents, and Restricted Cash
Cash as reported on the unaudited condensed consolidated statements of cash flows includes the aggregate amounts of cash, cash equivalents, and restricted cash and consists of the following (in thousands):
September 30,
20202019
Cash and cash equivalents$94,210 $130,373 
Restricted cash (1)
1,987 1,374 
Total cash, cash equivalents and restricted cash$96,197 $131,747 
(1) Restricted cash consists of funds held to satisfy the requirements of certain agreements that are restricted in their use and are included in other assets on the unaudited condensed consolidated balance sheets.
(F) Marketable Securities
Investments in marketable securities are held in a custodial account at a financial institution and managed by the Company’s investment advisor based on the Company’s investment guidelines. The Company considers all highly liquid investments in securities with a maturity of greater than three months at the time of purchase to be marketable securities.
The Company classifies its marketable securities as available-for-sale at the time of purchase and reevaluates such designation at each balance sheet date. Unrealized gains and losses on available-for-sale securities are excluded from earnings and are recorded in accumulated other comprehensive (loss) income until realized. Any unrealized losses are evaluated for other-than-temporary impairment at each balance sheet date. Realized gains and losses are determined based on the specific identification method and are recorded in other (income) expense, net.
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The Company does not intend to sell its securities that are in an unrealized loss position, and it is unlikely that the Company will be required to sell its securities before recovery of their amortized cost basis, which may be maturity. Factors considered in determining whether a loss is temporary include the length of time and extent to which the fair value has been less than the amortized cost basis and whether the Company intends to sell the security or whether it is more likely than not that the Company would be required to sell the security before recovery of the amortized cost basis. See Note 3 for additional information.
(G) Fair Value Measurements
The Company utilizes fair value measurement guidance prescribed by accounting standards to value its financial instruments. The guidance establishes a fair value hierarchy for financial instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.
Fair value is defined as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a three-tier fair value hierarchy that distinguishes among the following:
Level 1—Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2—Valuations are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.
Level 3—Valuations are based on inputs that are unobservable (supported by little or no market activity) and significant to the overall fair value measurement.
To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company’s financial instruments include cash, cash equivalents, marketable securities, accounts payable, amounts due to related parties, and debt obligations. Cash, cash equivalents, accounts payable, and amounts due to related parties are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature. Marketable securities are recorded at their estimated fair value and are included in Level 2 of the fair value hierarchy.
(H) Revenue Recognition
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), as subsequently amended, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company was required to adopt ASC 606 on April 1, 2018. As the Company did not have any effective contracts within the scope of this guidance prior to April 1, 2018, ASC 606 had no impact on the Company's consolidated financial statements and related disclosures upon adoption.
In accordance with ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as the Company satisfies a performance obligation.
When applying the revenue recognition criteria of ASC 606 to license and collaboration agreements, the Company applies significant judgment when evaluating whether contractual obligations represent distinct performance obligations, allocating transaction price to performance obligations within a contract, determining when performance obligations have been met,
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assessing the recognition and future reversal of variable consideration, and determining and applying appropriate methods of measuring progress for performance obligations satisfied over time. These judgments are discussed in more detail below.
Licenses of intellectual property: If the licenses to intellectual property are determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are not distinct from other promises, the Company applies judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the related revenue recognition accordingly.
Milestone payments: At the inception of each arrangement that includes research, development or regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative standalone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price on a cumulative catch-up basis in earnings in the period of the adjustment.
Royalties and commercial milestone payments: For arrangements that include sales-based royalties, including commercial milestone payments based on pre-specified level of sales, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Achievement of these royalties and commercial milestones may solely depend upon performance of the licensee.
(I) Other (Income) Expense, Net
Other (income) expense, net consists primarily of the impact of changes in foreign currency exchange rates on the Company’s foreign exchange denominated liabilities, relative to the U.S. dollar. The impact of foreign exchange rates on the Company’s results of operations fluctuates period over period based on its foreign currency exposures resulting from changes in applicable exchange rates associated with its foreign denominated liabilities, such as the outstanding balance under the Sumitomo Dainippon Pharma Loan Agreement. The Company’s primary foreign currency exposure is currently the exchange rate between the Swiss franc and the U.S. dollar.
(J) Recently Adopted Accounting Standards
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which simplifies the fair value measurement disclosure requirements. The Company adopted the new standard on April 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). This guidance is intended to reduce diversity in practice and clarify the interaction between Topic 808, Collaborative Arrangements, and Topic 606, Revenue from Contracts with Customers. ASU 2018-18 provided guidance on whether certain transactions between collaborative arrangement participants should be accounted for with revenue under Topic 606. The Company adopted the new standard on April 1, 2020. The adoption of ASU 2018-18 did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”), which amends ASU 2015-05, Customers Accounting for Fees in a Cloud Computing Agreement, to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The most significant change will align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. Accordingly, the amendments in ASU 2018-15 require an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation
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costs to capitalize as assets related to the service contract and which costs to expense. The Company adopted ASU 2018-15 using the prospective method as of April 1, 2020. The adoption of ASU 2018-15 did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
(K) Recently Issued Accounting Standards
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. These amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective prospectively for all entities as of March 12, 2020 through December 31, 2022. As of September 30, 2020, the Company has not modified its contract that will be impacted by reference rate reform. The Company will continue to assess the impact the adoption of this standard will have on its consolidated financial statements and related disclosures when its contract impacted by reference rate reform is modified.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses on available-for-sale debt securities to be recorded through an allowance for credit losses instead of as a reduction in the amortized cost basis of the securities. ASU 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASC 2016-13 and its amendments will be effective for annual and interim periods beginning after December 15, 2022 for smaller reporting companies. The Company is currently assessing the impact the adoption of this new standard will have on its consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“ASU 2019-12”), that eliminates certain exceptions to the general principles in ASC 740 related to intra-period tax allocation, deferred tax liability and general methodology for calculating income taxes. ASU 2019-12 also simplifies U.S. GAAP by making other changes for matters such as, franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. ASU 2019-12 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. The Company is currently assessing the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.
Other recent accounting pronouncements issued by the FASB, (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by the Company to, have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
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Note 3—Investments and Fair Value Measurements
Fair Value Measurements
The following table summarizes the Company’s assets that require fair value measurements on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):
 Quoted Market Prices for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total Fair Value
As of September 30, 2020 
Money market funds (1)
$291 $ $ $291 
Commercial paper (2)
 56,159  56,159 
Corporate bonds (1)
 3,000  3,000 
Municipal bonds (3)
 512  512 
U.S. Treasury bills (1)
10,000   10,000 
Total assets$10,291 $59,671 $ $69,962 
As of March 31, 2020
Money market funds (1)
$11,348 $ $ $11,348 
Commercial paper (4)
 7,042  7,042 
Total assets$11,348 $7,042 $ $18,390 
(1) Included in cash and cash equivalents.
(2) Includes $39.6 million in cash and cash equivalents and $16.6 million in marketable securities.
(3) Included in marketable securities.
(4) Includes $4.0 million in cash and cash equivalents and $3.0 million in marketable securities.
There were no liabilities measured at fair value on a recurring basis as of September 30, 2020 or March 31, 2020.
Note 4—Accrued Expenses
As of September 30, 2020, and March 31, 2020, accrued expenses consisted of the following (in thousands):
September 30, 2020March 31, 2020
Accrued R&D expenses$17,911 $15,500 
Accrued compensation-related expenses12,330 9,309 
Accrued commercial expenses5,898 818 
Accrued professional service fees1,068 1,126 
Accrued other expenses2,934 2,307 
Total accrued expenses$40,141 $29,060 
Note 5—Related Party Transactions
(A) Sumitomo Dainippon Pharma Co., Ltd.
On December 27, 2019, the Company’s former controlling shareholder, Roivant Sciences Ltd. (“Roivant”), completed a transaction (the “Sumitomo-Roivant Transaction”) in which all of the Company’s outstanding common shares held directly or indirectly by Roivant and not already held by Sumitovant were transferred to Sumitovant, and Roivant transferred all of the outstanding equity of Sumitovant to Sumitomo Dainippon Pharma, resulting in Sumitovant directly, and Sumitomo Dainippon Pharma indirectly, owning 45,008,604, or approximately 50.2%, of the Company’s outstanding common shares on December 27, 2019. As of September 30, 2020, Sumitovant directly, and Sumitomo Dainippon Pharma indirectly, own 48,641,181, or approximately 53.7%, of the Company’s outstanding common shares.
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Sumitomo Dainippon Pharma Loan Agreement
On December 27, 2019, the Company and its subsidiary, Myovant Sciences GmbH (“MSG”), entered into a Loan Agreement with Sumitomo Dainippon Pharma (the “Sumitomo Dainippon Pharma Loan Agreement”). Pursuant to the Sumitomo Dainippon Pharma Loan Agreement, Sumitomo Dainippon Pharma agreed to make revolving loans to the Company in an aggregate principal amount of up to $400.0 million. On December 30, 2019, the Company borrowed an initial amount of $113.7 million under the Sumitomo Dainippon Pharma Loan Agreement, the proceeds of which were used to repay all outstanding obligations of the Company to NovaQuest Capital Management and Hercules Capital, Inc. and to satisfy certain other fees and expenses. Additional funds may be drawn down by the Company once per calendar quarter, subject to certain terms and conditions, including consent of the Company’s board of directors. In addition, if Sumitomo Dainippon Pharma fails to own at least a majority of the Company’s outstanding common shares, it may become unlawful under Japanese law for Sumitomo Dainippon Pharma to fund loans to the Company, in which case the Company would not be able to continue to borrow under the Sumitomo Dainippon Pharma Loan Agreement. Interest is due and payable quarterly, and the outstanding principal amounts are due and payable in full on the five-year anniversary of the closing date of the Sumitomo Dainippon Pharma Loan Agreement. Loans under the Sumitomo Dainippon Pharma Loan Agreement are prepayable at any time without premium or penalty upon 10 business days’ prior written notice.
Loans under the Sumitomo Dainippon Pharma Loan Agreement bear interest at a rate per annum equal to 3-month LIBOR plus a margin of 3% payable on the last day of each calendar quarter. LIBOR is currently expected to be phased out by the end of 2021, and if it becomes unavailable, the Company and Sumitomo Dainippon Pharma will negotiate in good faith to select an alternative interest rate and, if applicable as a result of such alternative interest rate, margin adjustment that is consistent with industry accepted successor rates for determining a LIBOR replacement. The Company’s obligations under the Sumitomo Dainippon Pharma Loan Agreement are fully and unconditionally guaranteed by the Company and its subsidiaries. The loans and other obligations are senior unsecured obligations of the Company, MSG, and subsidiary guarantees. The Sumitomo Dainippon Pharma Loan Agreement includes customary representations and warranties and affirmative and negative covenants.
The Sumitomo Dainippon Pharma Loan Agreement also includes customary events of default, including payment defaults, breaches of representations and warranties, breaches of covenants following any applicable cure period, cross acceleration to certain other debt, failure to pay certain final judgments, certain events relating to bankruptcy or insolvency, failure of material provisions of the loan documents to remain in full force and effect or any contest thereto by the Company or any of its subsidiaries and certain breaches by the Company under the Investor Rights Agreement. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% will apply to the outstanding principal amount of the loans, Sumitomo Dainippon Pharma may terminate its obligations to make loans to the Company and declare the principal amount of loans to become immediately due and payable, and Sumitomo Dainippon Pharma may take such other actions as set forth in the Sumitomo Dainippon Pharma Loan Agreement. Upon the occurrence of certain bankruptcy and insolvency events, the obligations of Sumitomo Dainippon Pharma to make loans to the Company would automatically terminate and the principal amount of the loans would automatically become due and payable. In addition, if it becomes unlawful for Sumitomo Dainippon Pharma to maintain the loans under the Sumitomo Dainippon Pharma Loan Agreement or within 30 days of a change of control with respect to the Company, the Company would be required to repay the outstanding principal amount of the Loans.
As of September 30, 2020, the outstanding loan balance of $253.7 million is classified as a long-term liability on the Company’s unaudited condensed consolidated balance sheets under the caption long-term debt, less current maturities (related party). As of September 30, 2020, approximately $146.3 million of borrowing capacity remains available to the Company, subject to the terms of the Sumitomo Dainippon Pharma Loan Agreement. Interest expense under the Sumitomo Dainippon Pharma Loan Agreement was $2.1 million and $4.3 million for the three and six months ended September 30, 2020 and is included in interest expense (related party) in the Company’s unaudited condensed consolidated statements of operations. There was no interest expense (related party) for the three and six months ended September 30, 2019.
Sumitomo Dainippon Pharma Loan Commitment
On August 5, 2020, the Company obtained a debt commitment letter from Sumitomo Dainippon Pharma, as amended by a letter dated September 29, 2020 (the “2020 Commitment Letter”), pursuant to which, subject to the terms and conditions set forth therein, Sumitomo Dainippon Pharma has committed to provide an additional $200.0 million in unsecured revolving commitments (the “New Credit Facility”), the proceeds of which may be used for business operating expenditures of the Company and its subsidiaries. The commitments are in addition to the commitments made available to the Company and its subsidiaries by Sumitomo Dainippon Pharma under the existing Sumitomo Dainippon Pharma Loan Agreement.
The New Credit Facility described in the 2020 Commitment Letter will not be available to the Company until the Company enters into a definitive agreement with Sumitomo Dainippon Pharma and the New Credit Facility becomes effective. Pursuant to the terms of the 2020 Commitment Letter, the New Credit Facility shall mature on the fifth anniversary of the closing of the
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New Credit Facility. Sumitomo Dainippon Pharma will have the discretion, to require certain prepayments as Sumitomo Dainippon Pharma may request and/or to not allow the Company to draw down any remaining funds under the New Credit Facility, upon the occurrence of certain material business development transactions. In addition, as a condition to entering into the New Credit Facility, the Company shall be required to enter into an information sharing agreement with Sumitovant which will be on terms to be agreed between the Company and Sumitovant. The terms and conditions of the New Credit Facility shall otherwise be substantially identical to the terms of the existing Sumitomo Dainippon Pharma Loan Agreement, including with respect to the interest rate margins, except as otherwise agreed between the Company and Sumitomo Dainippon Pharma.
Investor Rights Agreement
On December 27, 2019, the Company entered into an Investor Rights Agreement with Sumitomo Dainippon Pharma and Sumitovant (the “Investor Rights Agreement”). Pursuant to the Investor Rights Agreement, among other things, the Company agreed, at the request of Sumitovant, to register for sale, under the Securities Act of 1933, common shares beneficially owned by Sumitovant, subject to specified conditions and limitations. In addition, the Company agreed to periodically provide Sumitovant (i) certain financial statements, projections, capitalization summaries and other information and (ii) access to the Company’s books, records, facilities and employees during the Company’s normal business hours as Sumitovant may reasonably request, subject to specified limitations.
The Investor Rights Agreement also contains certain protections for the Company’s minority shareholders for so long as Sumitomo Dainippon Pharma or certain of its affiliates beneficially owns more than 50% of the Company’s common shares. These protections include: (i) a requirement that Sumitovant vote its shares for the election of independent directors in accordance with the recommendation of the Company’s board of directors (the “board”) or in the same proportion as the shareholders not affiliated with Sumitovant vote their shares; (ii) a requirement that the audit committee of the Company’s board be composed solely of three independent directors; (iii) a requirement that any transaction proposed by Sumitomo Dainippon Pharma or certain of its affiliates that would increase Sumitomo Dainippon Pharma’s beneficial ownership to over 60% of the outstanding voting power of the Company must be approved by the Company’s audit committee (if occurring prior to December 27, 2022), and be conditioned on the approval of shareholders not affiliated with Sumitovant approving the transaction by a majority of the common shares held by such shareholders; and a requirement that any related person transactions between Sumitomo Dainippon Pharma or certain of its affiliates and the Company must be approved by the Company’s audit committee.
Pursuant to the Investor Rights Agreement, the Company also agreed that at all times that Sumitomo Dainippon Pharma beneficially owns more than 50% of the Company’s common shares, Sumitomo Dainippon Pharma, by purchasing common shares in the open market or from the Company in certain specified circumstances, will have the right to maintain its percentage ownership in the Company’s common shares in the event of a financing event or acquisition event conducted by the Company, or specified other events, subject to specific conditions.
(B) Sumitovant
On May 18, 2020, the Company and Sumitovant entered into a consulting agreement, as amended on November 9, 2020, pursuant to which Sumitovant provides consulting services to the Company to support the Company in commercial planning, commercial launch activities and implementation. Adele Gulfo, Sumitovant’s Chief Business and Commercial Development Officer and a member of the Company’s board of directors, provides services to the Company on behalf of Sumitovant under this agreement. For the three and six months ended September 30, 2020, the Company incurred $0.2 million and $0.3 million of expense under this consulting agreement, which is included in general and administrative (“G&A”) expenses in the accompanying unaudited condensed consolidated statements of operations.
(C) Sunovion Pharmaceuticals Inc.
Market Access Services Agreement
On August 1, 2020, the Company’s subsidiary, MSG, entered into the Market Access Services Agreement with Sunovion Pharmaceuticals Inc. (“Sunovion”), a subsidiary of Sumitomo Dainippon Pharma. Pursuant to the Market Access Services Agreement, among other things, Sunovion agreed to provide to MSG certain market access services with respect to the distribution and sale of relugolix monotherapy (relugolix 120 mg) (“Prostate Cancer Product”) and relugolix combination tablet (relugolix 40 mg, estradiol 1.0 mg and norethindrone acetate 0.5 mg) (“Women’s Health Product,” and collectively with Prostate Cancer Product, the “Products”, and each a “Product”), including, among other things: (i) adding the Products to Sunovion’s agreements with its third party logistics providers; (ii) adding the Women’s Health Product to certain of Sunovion’s contracts with wholesalers, group purchasing organizations and integrated delivery networks and negotiating rates for the Products with certain market access customers; (iii) providing order-to-cash services; (iv) providing certain employees to provide market access account director services; (v) performing activities required in connection with supporting and
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maintaining contracts between the Company and market access customers for the coverage, purchase, or dispensing of the Products; (vi) managing the validation, processing and payment of rebates, chargebacks, and certain administrative, distribution and service fees related to the Products; (vii) providing MSG with price reporting metrics and other information required to allow the Company to comply with applicable government price reporting requirements; (viii) coordinating with MSG and any applicable wholesalers and distributors to address any recalls, investigations, or product holds; (ix) configuring, or causing to be configured, the appropriate software systems to enable Sunovion to perform its obligations under the Market Access Services Agreement; and (x) providing training and certain other ancillary support services to facilitate the foregoing.
MSG, in turn, appointed Sunovion as the exclusive distributor of the Women’s Health Product and a non-exclusive distributor of the Prostate Cancer Product, each in the United States, including all of its territories and possessions.
In order to facilitate Sunovion’s provision of these services, MSG agreed, among other things, to: (i) grant Sunovion a non-exclusive license under all intellectual property owned or controlled by MSG, solely for Sunovion’s use in connection with its performance of the contemplated services; (ii) provide Sunovion periodic reports of sales projections and estimated volume requirements, as well as such other information as Sunovion reasonably requests or may need to perform the services; (iii) comply with the provisions of any agreements between Sunovion and third parties pursuant to which the Products will be distributed or sold; (iv) cooperate with certain investigations related to orders and audits of MSG’s quality systems solely related, as reasonably determined by Myovant, to Sunovion’s performance of certain regulatory services, at Sunovion’s costs; and (v) promptly notify Sunovion in the event relugolix is recalled.
As consideration for the services, MSG will pay Sunovion an agreed-upon monthly service charge for each of the first two years of the Market Access Services Agreement term and any agreed regulatory and training service charges. After the second year of the Market Access Services Agreement term, the monthly service charges will be determined by the parties. In addition, MSG also agreed to (x) reimburse Sunovion for any pass-through expenses it incurs while providing the services, and (y) establish an escrow fund for use by Sunovion when managing any rebates, chargebacks and similar fees. For the three and six months ended September 30, 2020, the Company incurred $1.1 million of expense under this agreement (inclusive of third-party pass through costs billed to the Company), which is included in G&A expense in the accompanying unaudited condensed consolidated statements of operations.
The Market Access Services Agreement also contains customary representations and warranties by the parties and customary provisions related to confidentiality, indemnification and insurance. The initial term of the Market Access Services Agreement is three years. Thereafter, the term will be automatically extended for one-year periods, unless either party provides notice of its intent not to renew the Market Access Services Agreement at least nine (9) months prior to the expiration of the applicable term. Either party may also terminate the Market Access Services Agreement prior to the end of its term in the event of an uncured material breach by the other party, if there are certain changes of law, or if such other party becomes insolvent or undergoes a change of control. MSG may also terminate the Market Access Services Agreement with respect to one or both Products if Sunovion fails to satisfy certain market access milestones or for convenience upon payment of a break-up fee.
(D) Roivant Sciences Ltd.
As a result of the closing of the Sumitomo-Roivant Transaction described above, on December 27, 2019 all of the Company’s outstanding common shares held directly or indirectly by Roivant and not already held by Sumitovant were transferred to Sumitovant, and Roivant transferred all of the outstanding equity of Sumitovant to Sumitomo Dainippon Pharma. As a result of the transfer of these common shares, Roivant no longer beneficially owns any common shares of the Company. On December 27, 2019, the then existing Information Sharing and Cooperation Agreement between the Company and Roivant, the then existing Services Agreements between the Company and certain of its subsidiaries and Roivant and certain of its subsidiaries, and the then existing Option Agreement between the Company and Roivant were terminated. For three and six months ended September 30, 2019, the Company paid or reimbursed Roivant approximately $0.2 million and $0.4 million under the terms of the then existing Services Agreements. In addition, the Company recorded share-based compensation expense allocated from Roivant of less than $0.1 million and $0.1 million for the three and six months ended September 30, 2019, respectively. No amounts were incurred during the three and six months ended September 30, 2020.
Roivant purchased 2,424,242 of the Company’s common shares in the Company’s June 4, 2019 underwritten public equity offering at the same price offered to the public of $8.25 per common share, for a total purchase price of $20.0 million (see Note 7).
Note 6—Income Taxes
The Company is not subject to taxation under the laws of Bermuda since it was organized as a Bermuda Exempted Limited Company, for which there is no current tax regime. The Company’s income tax expense is primarily based on income taxes in the U.S. for federal, state and local taxes. The Company’s effective tax rate for the three months ended September 30, 2020 and
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2019 was 0.20% and (0.28)%, respectively. The Company’s effective tax rate for the six months ended September 30, 2020 and 2019 was (0.54)% and (0.37)%, respectively. The Company’s effective tax rate is driven by the Company’s jurisdictional earnings by location and a valuation allowance that eliminates the Company’s global net deferred tax assets.
The Company assesses the realizability of the deferred tax assets at each balance sheet date based on available positive and negative evidence in order to determine the amount which is more likely than not to be realized and records a valuation allowance as necessary.
In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures include deferring the due dates of tax payments and other changes to income and non-income-based-tax laws as well as providing direct government assistance through grants and forgivable loans. On March 27, 2020, the U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic and the negative impacts that it is having on the global economy and U.S. companies. The CARES Act includes measures to assist companies, including temporary changes to income and non-income-based tax laws. The Company has implemented certain provisions of the CARES Act, such as deferring employer payroll taxes through the end of calendar year 2020. As of September 30, 2020, the Company has deferred $1.2 million of employer payroll taxes, of which 50% are required to be deposited by December 2021 and the remaining 50% by December 2022. The deferred payroll tax liability is included in other liabilities on the accompanying unaudited condensed consolidated balance sheet.
Note 7—Shareholders’ Deficit
(A) At-the-Market Equity Offering Program
In April 2018, the Company entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), to sell its common shares having an aggregate offering price of up to $100.0 million from time to time through an “at-the-market” equity offering program under which Cowen acts as the Company’s agent. During the six months ended September 30, 2019, the Company issued and sold 106,494 of its common shares under the Sales Agreement. The common shares were sold at a weighted-average price of $24.65 per common share for aggregate net proceeds to the Company of approximately $2.5 million after deducting underwriting commissions paid by the Company. No shares were sold under the Sales Agreement during the three and six months ended September 30, 2020 and the three months ended September 30, 2019. As of September 30, 2020, the Company had approximately $10.4 million of capacity available to it under its “at-the-market” equity offering program.
(B) Underwritten Public Equity Offering of Common Shares
On June 4, 2019, the Company completed an underwritten public equity offering of 17,424,243 of its common shares at a public offering price of $8.25 per common share. After deducting the underwriting discounts and commissions and offering costs paid by the Company, the net proceeds to the Company in connection with the underwritten public equity offering, including from the exercise of the underwriters’ option to purchase additional common shares, were approximately $134.5 million.
Note 8—Share-Based Compensation
(A) Myovant 2016 Equity Incentive Plan
In June 2016, the Company adopted its 2016 Equity Incentive Plan, as amended (the “2016 Plan”), under which 4.5 million common shares were originally reserved for issuance. Pursuant to the “evergreen” provision contained in the 2016 Plan, the number of common shares reserved for issuance under the 2016 Plan automatically increases on April 1 of each year, commencing on (and including) April 1, 2017 and ending on (and including) April 1, 2026, in an amount equal to 4% of the total number of shares of the Company’s capital stock outstanding on March 31 of the preceding fiscal year, or a lesser number of shares as determined by the Company’s board of directors. On April 1, 2020, the number of common shares authorized for issuance increased automatically by 3.6 million shares in accordance with the evergreen provision of the 2016 Plan. As of September 30, 2020, a total of 1.1 million common shares were available for future issuance under the 2016 Plan.
The Company’s employees, directors, officers and consultants are eligible to receive non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other share awards under the 2016 Plan.
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(B) Stock Options
A summary of stock option activity under the Company’s 2016 Plan is as follows:
Number of Options
Options outstanding at March 31, 20207,723,302 
Granted
1,679,338 
Exercised
(496,078)
Forfeited
(422,505)
Options outstanding at September 30, 20208,484,057 
Options vested and expected to vest at September 30, 20208,484,057 
Options exercisable at September 30, 20204,360,312 
(C) Restricted Stock Awards and Restricted Stock Units
A summary of restricted stock award and restricted stock unit activity under the Company’s 2016 Plan is as follows:
Number of Shares
Unvested balance at March 31, 20201,280,312 
Granted2,465,139 
Vested(212,079)
Forfeited(265,974)
Unvested balance at September 30, 20203,267,398 
(D) Performance Stock Units
A summary of performance stock unit activity under the Company's 2016 Plan is as follows:
Number of Shares
Unvested balance at March 31, 2020299,870 
Granted568,976 
Vested(109,360)
Forfeited(37,415)
Unvested balance at September 30, 2020722,071 
The vesting of performance stock units requires that certain performance conditions are achieved during the performance period and is subject to the employee’s continued service requirements.
(E) Share-Based Compensation Expense
Share-based compensation expense was as follows (in thousands):
Three Months Ended September 30,Six Months Ended September 30,
2020201920202019
Share-based compensation expense recognized as:
R&D expenses$3,725 $3,618 $7,749 $6,166 
G&A expenses3,199 4,313 6,987 8,217 
Total$6,924 $7,931 $14,736 $14,383 
Share-based compensation expense is included in R&D and G&A expenses in the accompanying unaudited condensed consolidated statements of operations consistent with the grantee’s salary. Total unrecognized share-based compensation expense was approximately $65.2 million as of September 30, 2020 and is expected to be recognized over a weighted-average period of approximately 2.8 years.
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Note 9—Leases
At September 30, 2020, the Company has lease agreements, as lessee, for office space in Brisbane, California, which are accounted for as operating leases. The lease agreements do not contain a specified implicit interest rate; therefore, the Company’s estimated incremental borrowing rate was used to determine the present value of future minimum lease payments. The lease terms for the office space includes the non-cancelable period of the lease and any periods covered by renewal options that the Company is reasonably certain to exercise.
In September 2020, the Company entered into a vehicle leasing program for certain of its field-based employees. Each vehicle lease under this program will be executed separately for twelve-month periods and expire at varying times with renewal options for which the Company is not reasonably certain to exercise. The rent expense for these short-term leases will be recognized on a straight-line basis over the lease terms.
The Company currently has no other significant operating, financing, or short-term leases.
The components of the Company’s lease expense were as follows (in thousands):
Three Months Ended September 30,Six Months Ended September 30,
2020201920202019
Operating lease cost$729 $519 $1,458 $1,038 
Variable lease cost (1)
100 46 190 55 
Total lease cost$829 $565 $1,648 $1,093 
(1) Variable lease cost includes common area maintenance and utilities costs which are not included in operating lease liabilities and which are expensed as incurred.
Certain information related to the Company’s operating lease right-of-use assets and operating lease liabilities for its Brisbane, California office space are as follows (in thousands):
Three Months Ended September 30,Six Months Ended September 30,
2020201920202019
Cash paid for operating lease liabilities$734 $501 $1,463 $997 
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities
$ $ $ $9,181 
As of September 30, 2020, the Company’s operating leases had a weighted average remaining lease term of 5.2 years and a weighted average discount rate of 12.3%.
As of September 30, 2020, maturities of operating lease liabilities were as follows (in thousands):
Years Ended March 31,
2021 (remainder of year)$1,476 
20223,028 
20233,127 
20243,053 
20252,409 
Thereafter2,898 
Total lease payments15,991 
Less imputed interest(4,207)
Present value of future minimum lease payments11,784 
Less operating lease liability, current portion(1,657)
Operating lease liability, long-term portion$10,127 
Note 10—Development and Commercialization Agreement with Richter
On March 30, 2020, the Company entered an exclusive license agreement for Richter to commercialize relugolix combination tablet for uterine fibroids and endometriosis in Europe, the Commonwealth of Independent States including Russia, Latin
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America, Australia, and New Zealand (the “Richter Development and Commercialization Agreement”). Under the agreement, the Company received an upfront payment of $40.0 million on March 31, 2020, is eligible to receive up to $40.0 million in regulatory milestone payments (of which $10.0 million was received in April 2020), $107.5 million in sales-related milestones, and tiered royalties on net sales following regulatory approval. Under the terms of the agreement, the Company will continue to lead global development of relugolix combination tablet. The Company has also agreed to assist Richter in transferring manufacturing technology from the Company’s CMOs to Richter to enable Richter to manufacture relugolix combination tablet. If requested by Richter, the Company has agreed to supply Richter with quantities of relugolix combination tablet for its territories pursuant to the Company’s agreements with its CMOs. Richter will be responsible for local clinical development, manufacturing, and all commercialization activities for its territories. The Company has also granted Richter an option to collaborate with the Company on relugolix combination tablet for future indications in women’s health other than fertility.
The Company determined that the transaction price under the Richter Development and Commercialization Agreement totaled $50.0 million, consisting of the upfront payment of $40.0 million received on March 31, 2020 and a $10.0 million regulatory milestone payment received in April 2020. No other regulatory milestones, sales-related milestones, or royalties on net sales following regulatory approval were included in the transaction price given the substantial uncertainty related to their achievement.
The Company concluded that Richter represented a customer and applied relevant guidance from ASC 606 to evaluate the accounting under the Richter Development and Commercialization Agreement. In accordance with this guidance, the Company identified one material combined performance obligation to grant a license to Richter to certain of its intellectual property and to deliver certain clinical and regulatory data packages for relugolix combination therapy, the drug used for both potential indications of uterine fibroids and endometriosis. The Company determined that its grant of a license to Richter to certain of its intellectual property was not distinct from the delivery of certain clinical and regulatory data packages pertaining to relugolix combination therapy. In evaluating the appropriate measure for the Company's performance under the combined performance obligation, the Company determined that revenues should be recognized as data packages are issued to Richter based on the relative value of the data packages delivered to date compared to the totality of the data packages it is obligated to deliver under the Richter Development and Commercialization Agreement. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Based upon the Company's assessment of its progress toward delivering relugolix combination therapy clinical and regulatory data packages to Richter, the Company concluded that as of September 30, 2020, it had satisfied approximately two-thirds of the combined performance obligation. As a result, the Company recognized $33.3 million of the transaction price as revenue during the six months ended September 30, 2020. There were no such amounts in the three months ended September 30, 2020 or the comparable prior year periods. As the Company currently expects to deliver the remaining substantive relugolix combination therapy data packages to Richter in the fourth quarter of the fiscal year ending March 31, 2021, the Company has recorded the remaining $16.7 million of the transaction price as deferred revenue, a current liability, on the unaudited condensed consolidated balance sheet as of September 30, 2020.
Contract Balances
Upfront payments and fees are recorded as deferred revenue upon receipt or when due, and may require deferral of revenue recognition to a future period until the Company performs its obligations under these agreements. Amounts payable to the Company are recorded as accounts receivable when the Company's rights to consideration is unconditional. The following table presents changes in the Company’s total contract liabilities during the six months ended September 30, 2020 (in thousands):
Balance atBalance at
March 31, 2020AdditionsDeductionsSeptember 30, 2020
Contract liabilities:
Deferred revenue, current$40,000 $10,000 $(33,333)$16,667 
Deferred revenue related to the Richter Development and Commercialization Agreement as of September 30, 2020, which was comprised of the $50.0 million transaction price, including a $40.0 million upfront payment received in March, 2020 and a $10.0 million regulatory milestone received in April, 2020, less the revenue recognized from the effective date of the contract, will be recognized as revenue as the combined performance obligation is satisfied.
The Company had no receivables or contract assets as of September 30, 2020 or March 31, 2020. During the six months ended September 30, 2020, the Company's contract liabilities, which consisted of deferred revenue, decreased by $23.3 million. This decrease included deductions of $33.3 million related to revenue recognized during the six months ended September 30, 2020, partially offset by additions of $10.0 million related to a regulatory milestone received in April, 2020.
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Note 11—Commitments and Contingencies
(A) Legal Contingencies
The Company may be, from time to time, a party to various disputes and claims arising from normal business activities. The Company accrues for loss contingencies when available information indicates that it is probable that a liability has been incurred and the amount of such liability can be reasonably estimated. For cases in which the Company believes that a reasonably possible loss exists, the Company discloses the facts and circumstances of the loss contingency, including an estimable range, if possible. The Company is currently not involved in any material legal proceedings.
(B) Contract Service Providers
In the normal course of business, the Company enters into agreements with contract service providers to assist in the performance of its R&D and clinical and commercial manufacturing activities. Subject to required notice periods and the Company’s obligations under binding purchase orders, the Company can elect to discontinue the work under these agreements at any time. The Company expects to enter into additional collaborative research, contract research, clinical and commercial manufacturing, and supplier agreements in the future, which may require upfront payments and long-term commitments of capital resources.
(C) Indemnification Agreements
The Company has agreed to indemnify its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director was serving at the Company’s request in such capacity. The maximum amount of potential future indemnification liability is unlimited; however, the Company holds directors’ and officers’ liability insurance which limits the Company’s exposure and may enable it to recover a portion of any future amounts paid. In the normal course of business, the Company also enters into contracts and agreements with service providers and other parties with which it conducts business that contain indemnification provisions pursuant to which the Company has agreed to indemnify the party against certain types of third-party claims. The Company has agreed to indemnify Sumitomo Dainippon Pharma against certain losses, claims, liabilities and related expenses incurred by Sumitomo Dainippon Pharma, subject to the terms of the Sumitomo Dainippon Pharma Loan Agreement and the Investor Rights Agreement. The Company has also agreed to indemnify Sunovion against certain losses, claims, liabilities and related expenses incurred by Sunovion, subject to the terms of the Market Access Services Agreement. The Company has not experienced any material losses related to these indemnification obligations, and no material claims with respect thereto were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related accruals have been established.
(D) Takeda Agreements
Under the Company’s license agreement (the “Takeda License Agreement”) with Takeda, the Company will pay Takeda a fixed, high single-digit royalty on net sales of relugolix and MVT-602 products in the Company’s territory, subject to certain agreed reductions. Takeda will pay the Company a royalty at the same rate on net sales of relugolix products for prostate cancer in the Takeda Territory, subject to certain agreed reductions. Royalties are required to be paid, on a product-by-product and country-by-country basis, until the latest to occur of the expiration of the last to expire valid claim of a licensed patent covering such product in such country, the expiration of regulatory exclusivity for such product in such country, or 10 years after the first commercial sale of such product in such country. Under the Takeda License Agreement, there was no upfront payment and there are no payments upon the achievement of clinical development or marketing approval milestones. As the amount and timing of any potential future payments under the Takeda License Agreement are not probable and estimable, no such potential commitments have been included in the unaudited condensed consolidated balance sheet.
If the Takeda License Agreement is terminated in its entirety or with respect to relugolix for prostate cancer, other than for safety reasons or by the Company for Takeda’s uncured material breach, prior to receipt of the first regulatory approval of relugolix for prostate cancer in Japan, then the Company must either reimburse Takeda for its out of pocket costs and expenses directly incurred in connection with Takeda’s completion of the relugolix development for prostate cancer, up to an agreed upon cap, or complete by itself the conduct of any clinical studies of relugolix for prostate cancer that are ongoing as of the effective date of such termination, at its cost and expense.
Pursuant to a Commercial Manufacturing and Supply Agreement entered into with Takeda (the “Takeda Commercial Supply Agreement”), Takeda agreed to supply the Company and the Company agreed to obtain from Takeda certain quantities of relugolix drug substance according to agreed-upon quality specifications. For relugolix drug substance manufactured or delivered on or after December 31, 2019, the Company will pay Takeda a price per kilogram of relugolix drug substance to be agreed upon between the parties at the beginning of each fiscal year.
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The initial term of the Takeda Commercial Supply Agreement began on May 30, 2018 and will continue for five years. At the end of the initial term, the Takeda Commercial Supply Agreement will automatically renew for successive one-year terms, unless either party gives notice of termination to the other at least 12 months prior to the end of the then-current term. The Takeda Commercial Supply Agreement may be terminated by either party upon 90 days’ notice of an uncured material breach of its terms by the other party, or immediately upon notice to the other party of a party’s bankruptcy. Each party will also have the right to terminate the Takeda Commercial Supply Agreement, in whole or in part, for any reason upon 180 days’ prior written notice to the other party, provided that any then-open purchase orders will remain in effect and be binding on both parties. The Takeda Commercial Supply Agreement, including any then-open purchase orders thereunder, will terminate immediately upon the termination of the Takeda License Agreement in accordance with its terms.
Note 12—Subsequent Events
(A) Sumitomo Dainippon Pharma Loan Agreement
Pursuant to the terms of the Sumitomo Dainippon Pharma Loan Agreement (see Note 5), the Company is permitted to draw down funds once per calendar quarter, subject to certain conditions. In October 2020, the Company borrowed $60.0 million under the Sumitomo Dainippon Pharma Loan Agreement. Subsequent to this draw, approximately $86.3 million of borrowing capacity remains available to the Company.
(B) 2020 Inducement Plan

On November 4, 2020, the Compensation Committee of the Board of Directors of the Company adopted the Myovant Sciences Ltd. 2020 Inducement Plan (the “2020 Inducement Plan”), which, subject to the adjustment provisions thereof, reserved 1,000,000 shares of the Company’s common shares for issuance pursuant to equity awards granted under the 2020 Inducement Plan. The 2020 Inducement Plan was adopted without shareholder approval pursuant to the Listed Company Manual Rule 303A.08 (“Rule 303A.08”) of the New York Stock Exchange (the “NYSE”). The 2020 Inducement Plan provides for the grant of restricted stock units and non-qualified stock options, and contains terms and conditions intended to comply with the inducement award exception under the NYSE rules. In accordance with Rule 303A.08, awards under the 2020 Inducement Plan may only be made to individuals not previously employees of the Company, or being rehired following a bona fide period of interruption of employment, as an inducement material to such individuals’ entering into employment with the Company. An award is a right to receive the Company’s common shares pursuant to the 2020 Inducement Plan pursuant to a restricted stock unit award or a non-qualified stock option award. Through November 12, 2020, the date of issuance of this Quarterly Report on Form 10-Q, there have been no grants made pursuant to the terms of the 2020 Inducement Plan.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with (1) the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended March 31, 2020 included in our Annual Report on Form 10-K, filed with the SEC on May 18, 2020. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Myovant,” the “Company,” “we,” “us,” and “our” refer to Myovant Sciences Ltd. and its wholly-owned subsidiaries.
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). These statements are often identified by the use of words such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “to be,” “will,” “would,” or the negative or plural of these words, or similar expressions or variations, although not all forward-looking statements contain these words. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur and actual results could differ materially from those expressed or implied by these forward-looking statements.
The forward-looking statements appearing in a number of places throughout this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things:
the impact of pandemics, epidemics or outbreaks of infectious diseases, including the effect that the COVID-19 pandemic and related “shelter-in-place” orders and other measures will have on our business operations, financial conditions and results of operations;
the success and anticipated timing of our clinical studies for relugolix combination therapy (relugolix 40 mg, plus estradiol 1.0 mg and norethindrone acetate 0.5 mg), relugolix 120 mg as a monotherapy, and MVT-602;
the anticipated start dates, durations and completion dates of our ongoing and future nonclinical and clinical studies;
the anticipated designs of our future clinical studies;
the anticipated future regulatory submissions and the timing of, and our ability to, obtain and maintain regulatory approvals for relugolix combination tablet, relugolix monotherapy tablet, MVT-602 and any future product candidates;
our ability to successfully plan for and commercialize relugolix combination tablet and relugolix monotherapy tablet, if approved;
our ability to procure sufficient quantities of commercial relugolix drug substance and drug product from approved third party CMOs;
our ability to achieve commercial sales of any approved products, whether alone or in collaboration with others;
our ability to obtain coverage for our products if commercialized;
the rate and degree of market acceptance and clinical utility of any approved products;
our ability to initiate and continue relationships with third-party clinical research organizations and manufacturers;
our ability to quickly and efficiently identify and develop new product candidates;
our ability to hire and retain our management and other key personnel;
our ability to obtain, maintain and enforce intellectual property rights for our product candidates;
our estimates regarding our results of operations, financial condition, liquidity, capital requirements, access to capital, prospects, growth and strategies;
our ability to continue to fund our operations with the cash, cash equivalents, and marketable securities currently on hand, including our expectations for how long these capital resources will enable us to fund our operations;
our expectations regarding potential future payments that we are eligible to receive from Richter under the Richter Development and Commercialization Agreement;
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our ability to borrow under the Sumitomo Dainippon Pharma Loan Agreement and our ability to effect the new debt facility transaction with Sumitomo Dainippon Pharma pursuant to the 2020 Commitment Letter with Sumitomo Dainippon Pharma;
third party collaboration partners' abilities to perform their obligations under our agreements with them;
our ability to raise additional capital if needed, on acceptable terms to us;
industry trends;
developments and projections relating to our competitors or our industry; and
the success of competing drugs that are or may become available.
Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors known and unknown that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, particularly in the section titled “Risk Factors” set forth in Part II. Item 1A. of this Quarterly Report on Form 10-Q, and in our other filings with the SEC. These risks are not exhaustive. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
All brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.
Business Overview
We are a healthcare company that aspires to redefine care for women and for men through purpose-driven science, empowering medicines, and transformative advocacy. Our lead product candidate is relugolix, a once-daily, oral GnRH receptor antagonist. Relugolix monotherapy tablet (120 mg) is under regulatory review in the U.S. for men with advanced prostate cancer. Relugolix combination tablet (relugolix 40 mg, estradiol 1.0 mg, and norethindrone acetate 0.5 mg) is under regulatory review in the U.S. and Europe for women with uterine fibroids and is under development for women with endometriosis. We are also developing MVT-602, an oligopeptide kisspeptin-1 receptor agonist, for the treatment of female infertility as a part of assisted reproduction.
Takeda granted us a worldwide license to develop and commercialize relugolix (excluding Japan and certain other Asian countries) and an exclusive right to develop and commercialize MVT-602 in all countries worldwide. On March 30, 2020, we entered into an exclusive license agreement with Richter for Richter to commercialize relugolix combination tablet for uterine fibroids and endometriosis in certain territories outside of the U.S. Under this agreement, we have retained all of our rights to relugolix combination tablet in the U.S. and Canada, as well as rights to relugolix in other therapeutic areas outside of women’s health.
Since our inception, we have devoted substantially all of our efforts to identifying and in-licensing our product candidates, organizing and staffing our company, raising capital, preparing for and advancing the clinical development of our product candidates and preparing for potential future regulatory approvals and commercialization of relugolix combination tablet and relugolix monotherapy tablet.
Our majority shareholder is Sumitovant, a wholly-owned subsidiary of Sumitomo Dainippon Pharma. As of September 30, 2020, Sumitovant directly, and Sumitomo Dainippon Pharma indirectly, own 48,641,181, or approximately 53.7%, of our outstanding common shares.
Second Fiscal Quarter Ended September 30, 2020 and Recent Corporate Updates
The following summarizes our second fiscal quarter ended September 30, 2020 and recent corporate updates, as well as anticipated upcoming milestones.
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Relugolix Clinical Programs
Prostate Cancer:
Relugolix monotherapy tablet is under Priority Review by the U.S. Food and Drug Administration (“FDA”) and is on track for a decision by its December 20, 2020 target action date. The NDA is supported by the positive Phase 3 HERO study results, including a 97% responder rate and six positive key secondary endpoints. Relugolix also demonstrated a lower incidence of major adverse cardiovascular events compared to leuprolide acetate, the current standard of care. The Phase 3 HERO study results were published in the New England Journal of Medicine on June 4, 2020.
On September 29, 2020, we announced results of an additional secondary endpoint of castration resistance-free survival assessed in the subgroup of men with metastatic prostate cancer from the Phase 3 HERO study of relugolix monotherapy in advanced prostate cancer. Relugolix monotherapy had a similar rate of castration resistance-free survival compared to leuprolide acetate (74% vs. 75%, respectively), and did not achieve statistical superiority (p = 0.84).
On October 19, 2020, we presented an economic analysis of the Phase 3 HERO data at the Academy of Managed Care Pharmacy (“AMCP”) Nexus 2020 Virtual Meeting, demonstrating that treatment with relugolix may prevent one major adverse cardiovascular event for every 31 patients treated versus patients receiving leuprolide injections.
We currently expect to submit a Marketing Authorisation Application (“MAA”) to the European Medicines Agency (“EMA”) for relugolix monotherapy tablet for advanced prostate cancer in the first half of calendar year 2021.
Uterine Fibroids:
In August 2020, the FDA accepted our New Drug Application (“NDA”) for relugolix combination tablet for the treatment of women with heavy menstrual bleeding associated with uterine fibroids, setting a target action date of June 1, 2021.
On September 14, 2020, we announced one-year data on bone mineral density (“BMD”) from the Phase 3 LIBERTY program. The BMD results from the LIBERTY program demonstrated maintenance of BMD through one year and were consistent with those observed in a separate prospective observational study of untreated, age-matched women with uterine fibroids. These findings were presented at the American Society for Bone and Mineral Research (“ASBMR”) 2020 Annual Meeting Virtual Event, held on September 11-15, 2020.
On March 9, 2020, we announced the submission of a MAA to the EMA for relugolix combination tablet for the treatment of women with moderate to severe symptoms associated with uterine fibroids. The application has completed validation and is now under evaluation by the EMA. We currently expect the European Commission decision on this application in 2021. If approved, this launch will be executed by Richter, our commercialization partner for relugolix combination tablet for the uterine fibroids and endometriosis indications in Europe and certain other international markets.
On October 21, 2020, we announced the presentation of data at the American Society for Reproductive Medicine (“ASRM”) 2020 Virtual Congress, including long-term extension data in women with symptomatic uterine fibroids. Results indicated that women experienced, on average, a 90% reduction in menstrual blood loss from baseline at one year. Additionally, 87.7% of women achieved the responder criteria for reduction in menstrual blood loss at one year, and lumbar spine and total hip BMD were maintained over one year. A poster presentation also described a validated exposure-response model simulating long-term effects of relugolix combination therapy on BMD at the lumbar spine that projected maintenance of BMD for at least three years. Other data from the LIBERTY program including improvement in quality of life, reduction in menstrual blood loss in the first treatment cycle, and reduction in uterine fibroid-associated pain, were also presented.
Additional data from the Phase 1 ovulation inhibition study from 67 healthy women treated with relugolix combination therapy, resulting in 100% ovulation inhibition and 100% return to ovulation or menses after discontinuation of treatment, were also presented at the ASRM 2020 Virtual Congress.


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Endometriosis:
Data from the replicate Phase 3 SPIRIT 1 and SPIRIT 2 studies were presented at the ASRM 2020 Virtual Congress on October 20, 2020 in an oral presentation named the Prize Paper by the Endometriosis Special Interest Group. Relugolix combination therapy met both co-primary endpoints and resulted in significantly more women with clinically meaningful reductions in dysmenorrhea and non-menstrual pelvic pain compared with those on placebo over 24 weeks of therapy (p < 0.0001) in each study. Changes in BMD at the lumbar spine from both studies pooled over 24 weeks were minimal in the relugolix combination therapy groups. Specifically, relugolix combination therapy achieved both co-primary endpoints by demonstrating 74.5% and 75.2% of women with dysmenorrhea (menstrual pain) and 58.5% and 66.0% of women with non-menstrual pelvic pain achieving clinically meaningful reductions in pain, compared to 26.9% and 30.4% of women with dysmenorrhea and 39.6% and 42.6% of women with non-menstrual pelvic pain in the placebo group, in the SPIRIT 1 and SPIRIT 2 studies respectively (all p-values < 0.0001). On average, women receiving relugolix combination therapy had a 73.3% reduction on the 11-point (0 to 10) Numerical Rating Scale for dysmenorrhea from 7.3 (severe pain) to 1.8 (mild pain) in SPIRIT 1 and a 75.1% reduction in SPIRIT 2 with a decrease from 7.2 (severe pain) to 1.7 (mild pain). All seven key secondary endpoints measured at week 24 and compared to placebo achieved statistical significance in SPIRIT 1, including changes in mean dysmenorrhea and overall pelvic pain, impact of pain on daily activities as measured by the Endometriosis Health Profile-30 (“EHP-30”) pain domain, greater proportions of women not using analgesics (p-values < 0.0001), changes in mean non-menstrual pelvic pain (p = 0.0002), greater proportions of women not using opioids (p = 0.0005), and changes in mean dyspareunia (painful intercourse) (p = 0.0149). Six key secondary endpoints measured at week 24 and compared to placebo achieved statistical significance in SPIRIT 2, including changes in mean dysmenorrhea and overall pelvic pain, impact of pain on daily activities as measured by the EHP-30 pain domain, a greater proportion of women not using opioids (all p-values < 0.0001), changes in non-menstrual pelvic pain (p = 0.0012), and dyspareunia (painful intercourse) (p = 0.0489). A seventh key secondary endpoint evaluating change in analgesic use did not achieve statistical significance in SPIRIT 2. Relugolix combination therapy was generally well-tolerated with minimal BMD loss over 24 weeks. The overall incidence of adverse events in the relugolix combination and placebo groups was similar (71.2% vs. 66.0% in SPIRIT 1; 80.6% vs. 75.0% in SPIRIT 2). In the relugolix combination therapy group, 3.8% and 5.3% of women had adverse events leading to discontinuation of treatment versus 1.9% and 3.9% in the placebo group in SPIRIT 1 and SPIRIT 2, respectively. The only reported adverse events in at least 10% of women in the relugolix combination group for SPIRIT 1 were headache and hot flashes and for SPIRIT 2 were headache, nasopharyngitis, and hot flashes.
We currently expect to submit an NDA with the FDA for relugolix combination tablet for the treatment of women with endometriosis-associated pain in the first half of calendar year 2021.
We currently expect to submit an MAA to the EMA for relugolix combination tablet for the treatment of women with endometriosis-associated pain in 2021. Richter will be the MAA sponsor.
Related Party Agreements
Market Access Services Agreement
On August 1, 2020, our subsidiary, MSG, entered into the Market Access Services Agreement with Sunovion Pharmaceuticals Inc. (“Sunovion”), a subsidiary of Sumitomo Dainippon Pharma, pursuant to which, among other things, Sunovion agreed to provide to MSG certain market access services with respect to the distribution and sale of relugolix monotherapy tablet and relugolix combination tablet. MSG, in turn, appointed Sunovion as the exclusive distributor of relugolix combination tablet and a non-exclusive distributor of relugolix monotherapy tablet, each in the United States, including all of its territories and possessions. For the three and six months ended September 30, 2020, we incurred $1.1 million of expense under this agreement (inclusive of third-party pass through costs billed to us), which is included in G&A expense in the accompanying unaudited condensed consolidated statements of operations. Additional information is included in Note 5 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Sumitomo Dainippon Pharma Loan Commitment
On August 5, 2020, we obtained a debt commitment letter from Sumitomo Dainippon Pharma, as amended by a letter dated September 29, 2020 (the “2020 Commitment Letter”), pursuant to which, subject to the terms and conditions set forth therein, Sumitomo Dainippon Pharma has committed to provide us with an additional $200.0 million low-interest, five-year unsecured revolving term loan commitment, the proceeds of which may be used for business operating expenditures of us and our subsidiaries. The commitments are in addition to the commitments made available to us and our subsidiaries by Sumitomo
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Dainippon Pharma under the existing Sumitomo Dainippon Pharma Loan Agreement. Additional information is included in Note 5 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Manufacturing Update
In June 2020, the FDA issued a warning letter to Takeda following a routine inspection of aseptic finished pharmaceuticals (drug product) manufacturing at Takeda’s manufacturing facility located at Takeda 4720, Mitsui, Hikari, Yamaguchi (the “Hikari Facility”). The warning letter indicated that the FDA was not satisfied with Takeda’s response to an FDA Form 483 issued to Takeda following the inspection and cited significant violations of current good manufacturing practice (“cGMP”) for finished pharmaceuticals. The Hikari Facility is one of two CMOs included in our regulatory filings for the manufacture of relugolix drug substance. We will procure the commercial relugolix drug substance needed for our anticipated U.S. launch in advanced prostate cancer solely from Excella GmbH & Co. KG, the second source contract manufacturing organization included in our initial regulatory filings. We do not expect that the issues relating to the Hikari Facility will have an effect on the FDA’s target action dates or EMA approval date for any of our regulatory filings or our launch readiness.
COVID-19 Pandemic
In December 2019, an outbreak of a novel strain of coronavirus, or COVID-19, was identified. Due to the rapid and global spread of the virus, in March 2020, the World Health Organization categorized COVID-19 as a pandemic and it continues to spread throughout the U.S. and other countries across the world. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders, closing schools, restricting travel, and social distancing guidelines and causing some businesses to suspend operations. It remains unclear how long these measures will remain in place and whether these measures will be effective. Further, recently it has been reported that the rate of the reported number of COVID-19 cases in the United States is increasing, which may further impact the effects that the COVID-19 pandemic may have on us.
Our priorities during the COVID-19 pandemic are protecting the health and safety of our employees and patients while continuing our mission to redefine care for women and for men. We believe the safety measures we are taking in response to the COVID-19 pandemic meet or exceed the guidance required from government and public health officials. Beginning in mid-March 2020, substantially all of our workforce began working from home and we curtailed employee travel. We have adopted remote working tools to minimize the disruption to our business activities. At this time, we have not identified a material change to our productivity as a result of these measures, but this could change, particularly if restricted travel, closed schools, and shelter-in-place orders are not removed or significantly eased.
To date, the impact of the COVID-19 pandemic on our ability to advance our clinical studies, regulatory activities, and preparation for the potential commercialization of our product candidates has been limited and all of our publicly announced milestones remain on track. We submitted our NDA to the FDA for relugolix monotherapy tablet for the treatment of men with advanced prostate cancer in April 2020, which has been accepted by the FDA for Priority Review with a target action date of December 20, 2020. In May 2020, we submitted our NDA to the FDA for relugolix combination tablet for the treatment of women with heavy menstrual bleeding associated with uterine fibroids, which has been accepted by the FDA with a target action date of June 1, 2021. Regulatory agency pre-approval inspections are limited, and it is not clear if virtual inspections are acceptable due to COVID-19 and this may impact the FDA's review process and timing of potential approval of these product candidates. Should relugolix monotherapy tablet or relugolix combination tablet receive regulatory approval, we will likely commercially launch these products in the COVID-19 environment. In response to the COVID-19 pandemic, health professionals may reduce staffing and reduce or postpone appointments with patients, or patients may cancel or miss appointments, resulting in fewer prescriptions. In addition, if our product candidates receive regulatory approval, our sales teams would likely have to make presentations to physicians and the medical community solely by virtual means instead of in-person, which could reduce the number of medical professionals we are able to present to, and these virtual meetings may not be as successful as in-person meetings. At this time, we do not anticipate a substantial impact from the COVID-19 pandemic on our supply chain and ability to launch relugolix monotherapy tablet or relugolix combination tablet.
The ultimate impact of the COVID-19 pandemic is highly uncertain and we do not yet know the full extent of potential delays or impacts on our business, our financial results, our clinical trials, our supply chains, our pre-launch commercial readiness activities, end user demand for our products, if approved, healthcare systems or the global economy as a whole. The extent to which the COVID-19 pandemic impacts us will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. As such, it is uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Refer to the risk factor titled “Business interruptions resulting from effects of pandemics or epidemics such as the novel strain of the coronavirus known as COVID-19, may materially and
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adversely affect our business and financial condition,” as well as other risk factors included in the section titled “Risk Factors” set forth in Part II. Item 1A.
On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic and the negative impacts that it is having on the global economy and U.S. companies. The CARES Act includes various financial measures to assist companies, including temporary changes to income and non-income-based tax laws. We have implemented certain provisions of the CARES Act, such as deferring employer payroll taxes through the end of calendar year 2020. As of September 30, 2020, we have deferred $1.2 million of employer payroll taxes, of which 50% are required to be deposited by December 2021 and the remaining 50% by December 2022. The deferred payroll tax liability is included in other liabilities on the accompanying unaudited condensed consolidated balance sheet.
Financial History
We have incurred, and expect to continue to incur, significant operating losses and negative operating cash flows as we continue to develop our product candidates and prepare for the potential future regulatory approvals and commercialization of relugolix combination tablet and relugolix monotherapy tablet. To date, we have not generated any product revenue, and we do not expect to generate product revenue unless and until we obtain regulatory approval for one of our product candidates. We have historically funded our operations primarily from the issuance and sale of our common shares and from debt financing arrangements. Additional information about our sources of funding is included under “—Liquidity and Capital Resources—Sources of Liquidity” below.
Our Product Candidates
Relugolix
We are currently developing relugolix in three indications: heavy menstrual bleeding associated with uterine fibroids; pain associated with endometriosis; and advanced prostate cancer. Relugolix is an oral, once-daily, small molecule that acts as a GnRH receptor antagonist that binds to and inhibits GnRH receptors in the anterior pituitary gland. Inhibition of GnRH receptors decreases the release of gonadotropins (luteinizing hormone (“LH”) and follicle-stimulating hormone (“FSH”)), thereby decreasing the downstream production of estrogen and progesterone by the ovaries in women and testosterone by the testes in men.
As a GnRH receptor antagonist, relugolix has a clinically-validated mechanism of action in each of our three targeted indications. The direct and rapid action of relugolix on the pituitary-gonadal axis is distinct from approved luteinizing hormone-releasing hormone (“LHRH”) agonists which are administered as depot injections and result in an initial surge in levels of gonadotropins, and estrogen and progesterone or testosterone, before resulting in pituitary desensitization and a fall in hormone levels over weeks. Approved LHRH agonist injections such as leuprolide acetate are used in women to treat the symptoms of uterine fibroids and endometriosis, but the adoption and duration of use is limited due to BMD loss and vasomotor symptoms.
We are developing relugolix combination tablet (relugolix 40 mg, estradiol 1.0 mg and norethindrone acetate 0.5 mg) administered orally once-daily, with the goal of maintaining estrogen levels in the low normal range to achieve the long-term benefit of relugolix on symptoms of uterine fibroids and endometriosis, while maintaining bone health and mitigating side effects from a low-estrogen state, such as vasomotor symptoms. We have successfully completed a bioequivalence study, which demonstrated the bioequivalence of our relugolix combination tablet with relugolix combination therapy, the co-administered regimen used in the LIBERTY and SPIRIT clinical programs (one relugolix 40 mg tablet plus one tablet containing estradiol 1.0 mg and norethindrone acetate 0.5 mg). We expect to launch in the women’s health indications with our single-tablet regimen.
Lowering estrogen and progesterone levels has been demonstrated, including in our two replicate Phase 3 LIBERTY studies, to effectively decrease heavy menstrual bleeding and pain in women with uterine fibroids. Similarly, relugolix combination therapy has been demonstrated in our two replicate Phase 3 SPIRIT studies to reduce pelvic pain associated with endometriosis. Relugolix combination therapy achieved these results while maintaining a generally well-tolerated safety profile. We believe our combination approach has the potential to have a better safety and tolerability profile than the currently approved LHRH agonist therapies and has the potential to be used longer-term. We further believe our single tablet combination approach also has certain benefits over other oral GnRH antagonist therapies that are currently approved or in development. The goal of our relugolix combination tablet is to provide women with uterine fibroids and endometriosis a once-daily oral medical alternative to hysterectomy and other invasive procedures often recommended to treat these conditions that is suitable for long-term use.
Decreasing testosterone slows the growth and progression of advanced prostate cancer, such as when the disease recurs or the prostate-specific antigen (“PSA”) is rising following prostatectomy or radiation therapy, when the disease progresses locally in the prostate bed, or when it becomes metastatic. We demonstrated in our Phase 3 HERO program that relugolix can achieve
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sustained testosterone suppression to castrate levels (< 50 ng/dL) through 48 weeks in 96.7% of patients with a once-daily oral treatment. Relugolix was compared to the standard-of-care leuprolide injections in the HERO study and demonstrated superiority to leuprolide in the cumulative proportion of patients achieving sustained testosterone suppression (96.7% vs 88.0%). Data from this study are the basis for the NDA submission undergoing Priority Review for relugolix in advanced prostate cancer. We are developing a distinct therapeutic candidate, relugolix monotherapy (120 mg), for men with advanced prostate cancer which, if approved, we expect to commercialize as a separately branded product from our relugolix combination tablet.
Our Phase 3 Program for the Treatment of Heavy Menstrual Bleeding Associated with Uterine Fibroids
We initiated a Phase 3 clinical program in January 2017, evaluating relugolix combination therapy in women with heavy menstrual bleeding associated with uterine fibroids. The program consisted of two multinational, replicate pivotal clinical studies (LIBERTY 1 and LIBERTY 2). Women in the LIBERTY 1 and LIBERTY 2 studies underwent a screening period requiring up to two menstrual cycles to document heavy menstrual bleeding and were randomized in a 1:1:1 ratio to one of three groups. Women received treatment either with relugolix combination therapy for 24 weeks, relugolix 40 mg once-daily monotherapy for 12 weeks followed by relugolix combination therapy once-daily for an additional 12 weeks, or placebo once-daily for 24 weeks.
We enrolled 388 women in LIBERTY 1 and 382 women in LIBERTY 2. To be enrolled, women must have had a monthly menstrual blood loss volume of at least 80 mL in two consecutive cycles or 160 mL in one cycle, measured by the alkaline hematin method, a quantitative measure of menstrual blood loss from an assessment of collected menstrual products.
Eligible women who completed the LIBERTY 1 or LIBERTY 2 studies were offered the opportunity to enroll in an active treatment extension study in which all women received relugolix combination therapy for an additional 28-week period for a total treatment period of 52 weeks, designed to evaluate the safety and sustained efficacy of longer-term treatment. Upon completion of this 52-week total treatment period, eligible women could elect to participate in a second 52-week randomized withdrawal study designed to provide two-year safety and efficacy data on relugolix combination therapy, and to evaluate the need for maintenance therapy. We currently expect to present data from the LIBERTY randomized withdrawal study in the first quarter of calendar year 2021.
The primary efficacy endpoint for LIBERTY 1 and LIBERTY 2 was the proportion of all women enrolled who achieved a menstrual blood loss volume of less than 80 mL and at least a 50% reduction in menstrual blood loss volume from baseline during the last 35 days of the 24-week treatment period as measured by the alkaline hematin method. The secondary endpoints included the proportion of women who achieved amenorrhea (defined as no or negligible blood loss) during the last 35 days of treatment, reduction in pelvic pain, reduction in fibroid volume, reduction in uterine volume, percent change from baseline to week 24 in menstrual blood loss, increase in hemoglobin, and an assessment of the impact of therapy on quality-of-life. Safety, including BMD changes as measured by dual-energy x-ray absorptiometry (“DXA”), was also assessed.
On May 14, 2019 and July 23, 2019, we announced positive top-line results for the LIBERTY 1 and LIBERTY 2 studies, respectively. On February 10, 2020, we announced positive safety and efficacy data from the Phase 3 LIBERTY long-term extension study. On September 14, 2020, we announced additional data on BMD in women with uterine fibroids from the LIBERTY program and from a prospective observational study and on October 21, 2020, we presented one-year efficacy and safety data from the LIBERTY long-term extension study at the ASRM 2020 Virtual Congress.
On March 9, 2020, we announced the submission of a MAA to the EMA for relugolix combination tablet for the treatment of women with moderate to severe symptoms associated with uterine fibroids. This application has completed validation and is now under evaluation by the EMA. We currently expect the European Commission decision on this application in 2021. If approved, this launch would be executed by Richter, our commercialization partner for relugolix combination tablet for the uterine fibroids and endometriosis indications in Europe and certain other international markets. In May 2020, we submitted an NDA to the FDA for relugolix combination tablet for the treatment of women with heavy menstrual bleeding associated with uterine fibroids, which has been accepted by the FDA with a target action date of June 1, 2021.
LIBERTY 1
On May 14, 2019, we announced that LIBERTY 1 met its primary efficacy endpoint and six key secondary endpoints. The distribution of the change in BMD, including outliers, was similar for the relugolix combination therapy and placebo groups at 24 weeks, as assessed by DXA.
In the primary endpoint analysis, 73.4% of women receiving relugolix combination therapy achieved the responder criteria compared with 18.9% of women receiving placebo (p < 0.0001). On average, women receiving relugolix combination therapy experienced an 84.3% reduction in menstrual blood loss from baseline, a clinically relevant secondary endpoint. A significantly
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greater proportion of women suffering from moderate-to-severe pain from uterine fibroids at baseline experienced no pain or minimal pain during the last 35 days of treatment with relugolix combination therapy compared with women on placebo (p < 0.0001).
LIBERTY 1 achieved six key secondary endpoints with statistical significance compared to placebo, including mean change in menstrual blood loss from baseline to week 24, reduction in pain in women with pain at baseline, improvement in quality of life, amenorrhea (defined as no or negligible blood loss), improvement in anemia in those women with anemia at baseline, and reduction in uterine volume. The seventh key secondary endpoint, reduction in uterine fibroid volume, did not achieve statistical significance.
The overall incidence of adverse events in the relugolix combination therapy and placebo groups was comparable (62% vs. 66%). In the relugolix combination therapy group, 5% of women discontinued treatment early due to adverse events compared with 4% in the placebo group. The only adverse event in the relugolix combination therapy arm occurring in at least 10% of women and more frequently than in the placebo arm was hot flash (11% vs. 8%). There were no pregnancies in the relugolix combination therapy group and one in the placebo group. There were two serious adverse events related to the study drug: one fibroid expulsion and one for pelvic pain.
LIBERTY 2
On July 23, 2019, we announced that LIBERTY 2 met its primary efficacy endpoint and the same six key secondary endpoints as were achieved in LIBERTY 1. Changes in BMD were comparable between the relugolix combination therapy and placebo groups at the end of treatment as was the distribution of the change in BMD, including outliers.
In the primary endpoint analysis, 71.2% of women receiving relugolix combination therapy achieved the responder criteria compared with 14.7% of women receiving placebo (p < 0.0001). On average, women receiving relugolix combination therapy experienced a highly significant 84.3% reduction in menstrual blood loss from baseline to week 24 (p < 0.0001). In addition, a significantly greater proportion of women suffering from moderate-to-severe pain from uterine fibroids at baseline experienced no pain or minimal pain during the last 35 days of treatment with relugolix combination therapy compared with women on placebo (p < 0.0001).
LIBERTY 2 achieved six key secondary endpoints with statistical significance compared to placebo, including mean change in menstrual blood loss from baseline to week 24, reduction in pain in women with pain at baseline, improvement in quality of life, amenorrhea (defined as no or negligible blood loss), improvement in anemia in those women with anemia at baseline, and reduction in uterine volume. The seventh key secondary endpoint, reduction in uterine fibroid volume, did not achieve statistical significance.
The overall incidence of adverse events in the relugolix combination therapy and placebo groups was comparable (60.3% vs. 58.9%). In the relugolix combination therapy group, 1.6% of women discontinued treatment early due to adverse events compared with 4.7% in the placebo group. There were no adverse events in the relugolix combination therapy group reported by at least 10% of women and more frequently than in the placebo group. The incidence of hot flashes in the relugolix combination therapy group was similar to placebo (5.6% vs. 3.9%). There were no pregnancies in the relugolix combination therapy group and one in the placebo group. There were no serious adverse events related to study drug reported in this study.
LIBERTY Long-Term Extension Study
On February 10, 2020, we announced positive safety and efficacy data from the Phase 3 LIBERTY long-term extension study of relugolix combination therapy in women with heavy menstrual bleeding associated with uterine fibroids.
In the primary endpoint analysis, 87.7% of women achieved the responder criteria. The primary endpoint result in the one-year Phase 3 LIBERTY long-term extension study was consistent with the 24-week primary endpoint data from the pivotal LIBERTY 1 and LIBERTY 2 studies, demonstrating a durability of response through one year. In addition, women experienced, on average, an 89.9% reduction in menstrual blood loss from baseline at one year.
Changes in BMD through one year, as assessed by DXA every three months, demonstrated maintenance of bone density and were consistent with those in LIBERTY 1 and LIBERTY 2. The adverse events over one year were consistent with those observed in LIBERTY 1 and LIBERTY 2, with no new safety signals. Adverse events reported in more than 10% of women treated with relugolix combination therapy for one-year and more frequently than those reported in the placebo group after 6 months included only hot flashes (11% vs. 6%). There were no pregnancies reported in the relugolix combination therapy group.
In October 2020, we presented a poster at the ASRM 2020 Virtual Congress describing a validated exposure-response model simulating long-term effects of relugolix combination therapy on BMD at the lumbar spine. Simulations from this model were
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well correlated with the effect of relugolix combination therapy observed in the Phase 3 LIBERTY program and projected maintenance of BMD for at least three years.
Observational Bone Mineral Density Study
This prospective observational study was designed to characterize the longitudinal natural history of BMD in 262 premenopausal women with uterine fibroids over 52 weeks. Women with documented uterine fibroids by imaging who were not receiving treatment with GnRH agonists or antagonists were enrolled contemporaneously from U.S. centers that participated in the LIBERTY studies. BMD was assessed by DXA at baseline, week 24 and week 52. Mean BMD at the lumbar spine showed minimal changes over the 52-week observational period (0% at week 24 and -0.41% at week 52) and did not appear to be influenced by race or body mass index.
Our Phase 3 Program for the Treatment of Pain Associated with Endometriosis
We initiated a Phase 3 clinical program in June 2017, evaluating relugolix combination therapy in women with pain associated with endometriosis. The program consisted of two multinational, replicate pivotal clinical studies (SPIRIT 1 and SPIRIT 2). Each study randomized women 1:1:1 to one of three treatment arms. Women received treatment either with relugolix combination therapy for 24 weeks, relugolix 40 mg once-daily monotherapy for 12 weeks followed by relugolix combination therapy once-daily for an additional 12 weeks, or placebo once-daily for 24 weeks.
We enrolled 623 and 638 patients in the SPIRIT 2 and SPIRIT 1 studies, respectively. To be enrolled, women must have had a surgical diagnosis of endometriosis in the last 10 years and moderate-to-severe dysmenorrhea (menstrual pelvic pain) and non-menstrual pelvic pain.
Eligible women who completed the SPIRIT 1 or SPIRIT 2 studies were offered the opportunity to enroll in an active treatment long-term extension study in which all women receive relugolix combination therapy for an additional 80-week period, resulting in a total treatment period of up to 104 weeks, designed to evaluate the safety and sustained efficacy of longer-term treatment. We currently expect to announce one-year efficacy and safety data from the SPIRIT extension study in the first quarter of calendar year 2021.
The co-primary efficacy endpoints for the SPIRIT 1 and SPIRIT 2 studies were the proportion of all women enrolled with reductions in both dysmenorrhea and non-menstrual pelvic pain, as assessed by an endometriosis-specific patient questionnaire based on the Numerical Rating Scale (“NRS”) completed daily on an electronic patient diary, with no increase in background pain medication. The NRS is an 11-point scale with 0 representing “no pain” and 10 representing “the worst pain you can imagine.” Secondary endpoints included additional questionnaires assessing functional changes associated with endometriosis-specific pain and quality of life, and the use of pain medications to treat endometriosis, including opioid medications. Safety, including BMD changes as measured by DXA, was also assessed.
On April 22, 2020 and June 23, 2020, we announced positive top-line results from the SPIRIT 2 and SPIRIT 1 studies, respectively. We currently expect to submit an NDA with the FDA for relugolix combination tablet for the treatment of women with endometriosis-associated pain in the first half of calendar year 2021. We currently expect to submit an MAA to the EMA for relugolix combination tablet for the treatment of women with endometriosis-associated pain in 2021. Richter will be the MAA sponsor. Data from these Phase 3 studies were presented at the ASRM 2020 Virtual Congress on October 20, 2020 and the presentation was named the Prize Paper by the Endometriosis Special Interest Group.
SPIRIT 1
On June 23, 2020, we announced that SPIRIT 1 met its co-primary efficacy endpoints and all seven key secondary endpoints. In addition, relugolix combination therapy was generally well-tolerated and resulted in minimal BMD loss over 24 weeks.
Relugolix combination therapy achieved both co-primary endpoints by demonstrating clinically meaningful pain reductions for 74.5% of women with dysmenorrhea (menstrual pain) and 58.5% of women with non-menstrual pelvic pain, compared to 26.9% and 39.6% of women in the placebo group, respectively (p < 0.0001). On average, women receiving relugolix combination therapy had a 73.3% reduction on the 11-point (0 to 10) NRS for dysmenorrhea from 7.3 (severe pain) to 1.8 (mild pain).
All seven key secondary endpoints measured at week 24 and compared to placebo achieved statistical significance, including changes in mean dysmenorrhea and overall pelvic pain, impact of pain on daily activities as measured by the EHP-30 pain domain, greater proportions of women not using analgesics (p-values < 0.0001), changes in mean non-menstrual pelvic pain (p = 0.0002), greater proportions of women not using opioids (p = 0.0005), and changes in mean dyspareunia (painful intercourse) (p = 0.0149).
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The overall incidence of adverse events in the relugolix combination and placebo groups was similar (71.2% vs. 66.0%). In the relugolix combination therapy group, 3.8% of women had adverse events leading to discontinuation of treatment versus 1.9% in the placebo group. The only reported adverse events in at least 10% of women in the relugolix combination group were headache and hot flashes. There was one pregnancy in the relugolix combination group and three in the placebo group.
SPIRIT 2
On April 22, 2020, we announced that SPIRIT 2 met its co-primary efficacy endpoints and six key secondary endpoints. In addition, relugolix combination therapy was generally well-tolerated and resulted in minimal BMD loss over 24 weeks.
In the co-primary endpoint analysis, 75.2% of women achieved a clinically meaningful reduction in dysmenorrhea versus 30.4% of women in the placebo group (p < 0.0001). For non-menstrual pelvic pain, relugolix combination therapy achieved a clinically meaningful reduction in 66.0% of women versus 42.6% of women in the placebo group (p < 0.0001). On average, women receiving relugolix combination therapy had a 75.1% reduction on the 11-point (0 to 10) NRS for dysmenorrhea from 7.2 (severe pain) to 1.7 (mild pain).
Six key secondary endpoints measured at week 24 and compared to placebo achieved statistical significance, including changes in mean dysmenorrhea and overall pelvic pain, impact of pain on daily activities as measured by the EHP-30 pain domain, a greater proportion of women not using opioids (all p-values < 0.0001), changes in non-menstrual pelvic pain (p = 0.0012), and dyspareunia (painful intercourse) (p = 0.0489). An endpoint evaluating change in analgesic use did not achieve statistical significance.
The overall incidence of adverse events in the relugolix combination therapy and placebo groups was similar (80.6% vs. 75.0%). In the relugolix combination therapy group, 5.3% of women discontinued treatment early due to adverse events versus 3.9% in the placebo group. The most frequently reported adverse events, reported in at least 10% of women in the relugolix combination therapy group, were headache, nasopharyngitis, and hot flashes. There were three pregnancies in the relugolix combination therapy group and five in the placebo group.
Bioequivalence Study of Relugolix Combination Therapy and Relugolix Combination Tablet
On July 23, 2019, we announced that a separate clinical study of our relugolix combination tablet met all required and pre-specified criteria for bioequivalence to the two tablets (relugolix 40 mg plus estradiol 1.0 mg and norethindrone acetate 0.5 mg) used in our Phase 3 uterine fibroid and endometriosis clinical studies, providing data necessary to include the once-daily dosing regimen of relugolix combination tablet in our NDA and MAA submissions for the treatment of heavy menstrual bleeding associated with uterine fibroids and endometriosis. In December 2019, we successfully completed one-year stability studies, which are required for FDA approval of relugolix combination tablet.
Ovulation Inhibition Study
On April 22, 2020, we announced results from an open-label, single-arm ovulation inhibition study consisting of a pre-treatment period to confirm ovulatory status, an 84-day treatment period (three cycles) to assess the effects of relugolix combination therapy on ovulation inhibition, and a post-treatment follow-up period to determine the time to the return of ovulation. Ovulation inhibition was based on the Hoogland-Skouby scale. In this study, relugolix combination therapy achieved 100% ovulation inhibition in 67 healthy women with no women ovulating during the 84-day treatment period, as evaluated by the Hoogland-Skouby assessment scale (score < 5). Furthermore, 100% of women resumed ovulation or menses upon discontinuation of treatment with an average time to ovulation of 23.5 days.
In July 2020, we presented data from the ovulation inhibition study and additional data from the LIBERTY program showing improvement in patient-reported outcomes and in hemoglobin levels in women with anemia during the European Society of Human Reproduction and Embryology (“ESHRE”) virtual 36th Annual Meeting. Additional data from the ovulation inhibition study were also presented at the ASRM 2020 Virtual Congress in October 2020.
Our Phase 3 Program for the Treatment of Advanced Prostate Cancer
We initiated a Phase 3 clinical study in March 2017, evaluating the safety and efficacy of relugolix monotherapy in men with advanced prostate cancer, which we refer to as the HERO study. The HERO study randomized 934 men with advanced prostate cancer who required medical therapy to lower testosterone serum levels, also known as androgen deprivation therapy, in a 2:1 ratio to treatment with either oral relugolix 120 mg once-daily (after a single oral loading dose of 360 mg) or a depot injection of leuprolide (per national or regional product label) for a period of at least 48 weeks. Based on FDA discussions, we believe that we will be required to conduct only one Phase 3 study with a single relugolix arm to gain approval for relugolix in men with advanced prostate cancer in the U.S. Nonetheless, we designed the study to include a second arm with leuprolide to demonstrate that treatment with relugolix is noninferior to leuprolide in achieving sustained suppression of testosterone to
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castrate levels over 48 weeks, an outcome expected to be required for approval in other major markets such as Europe and Japan.
We enrolled 934 men in the HERO study for the primary endpoint analysis. To be enrolled, men must have had advanced prostate cancer that required androgen deprivation therapy for at least 48 weeks and included prostate cancer defined as biochemical or clinical relapse, advanced localized disease or newly diagnosed metastatic disease. Screening PSA was > 2.0 ng/mL and serum testosterone levels within the normal range.
The primary efficacy endpoint for HERO accepted by the FDA was testosterone suppression (< 50 ng/dL) from week 5, day 1 through week 48, day 7. Relugolix monotherapy was required to demonstrate that the lower bound of the 2-sided 95% confidence interval for the percent of patients achieving testosterone suppression through 48 weeks was at least 90%. Testosterone suppression is an approvable endpoint in the U.S. and several hormonal therapies have been approved based on this endpoint. The secondary endpoints included rapid suppression of testosterone at Day 4 and Day 15, profound suppression of testosterone at Day 15, rapid suppression of PSA at Day 15, and suppression of FSH at week 24. Testosterone recovery was also evaluated in a subset of men eligible to discontinue ADT at the completion for the 48-week study treatment.
On November 19, 2019, we announced that the Phase 3 HERO study met its primary efficacy endpoint with 96.7% (95% CI: 94.9%, 97.9%) of men achieving sustained testosterone suppression to castrate levels. The study also met the tested key secondary endpoints, while demonstrating a 54% reduction in risk of major adverse cardiovascular events as compared with leuprolide injections administered every 3 months. The incidence of major adverse cardiovascular events was 2.9% in the relugolix group versus 6.2% in the leuprolide group. In men with a reported history of these major adverse cardiovascular events, the relugolix group had 80% fewer major adverse cardiovascular events reported compared to the leuprolide acetate group (3.6% vs. 17.8%, respectively). More than 90% of men in the HERO study had at least one cardiovascular risk factor, including lifestyle risk factors such as tobacco use and obesity, comorbidities such as diabetes and hypertension, and prior history of a major adverse cardiovascular event.
Five key secondary endpoints demonstrated superiority to leuprolide acetate, including rapid suppression of testosterone at Day 4 and Day 15, profound suppression of testosterone at Day 15, rapid suppression of PSA at Day 15, and suppression of FSH at week 24 (all p-values < 0.0001). In addition, relugolix demonstrated non-inferiority to leuprolide acetate on sustained testosterone suppression through 48 weeks (96.7% vs. 88.8%, respectively) with a between-group difference of 7.9% (95% CI: 4.1%, 11.8%), the primary endpoint required for regulatory submissions outside of the U.S. Superiority to leuprolide was also achieved as the lower bound of the 95% confidence interval for the between-group difference was greater than 0 (p-value < 0.0001). In addition, the pharmacodynamic results showed no testosterone flare after initiation of relugolix and mean testosterone levels returned to normal levels within 90 days after treatment discontinuation in a subset of 184 patients.
The overall incidence of adverse events in the relugolix and leuprolide acetate groups was comparable (92.9% vs. 93.5%, respectively). In the relugolix group, 3.5% of men discontinued the study early due to adverse events compared with 2.6% of men in the leuprolide acetate group. The most frequently reported adverse events, reported in at least 10% of men in the relugolix group, were hot flashes, fatigue, constipation, diarrhea, and arthralgia (defined as pain in a joint). Major adverse cardiovascular events were reported in 2.9% of men in the relugolix group versus 6.2% of men in the leuprolide acetate group in a prespecified safety analysis. These events included non-fatal myocardial infarction, non-fatal stroke, and all-cause mortality and were not adjudicated.
We filed an amendment to the HERO study protocol to enroll 139 additional men with metastatic prostate cancer (total cohort of 434 men, including 295 men from the original HERO study) and to add the secondary objective of demonstrating that relugolix can delay the time to progression to the lethal state of the disease, castration-resistant prostate cancer, as compared to leuprolide, that completed enrollment in July 2019. Castration-resistant prostate cancer is defined by disease progression despite achieving testosterone suppression to castrate levels (< 50 ng/dL). On September 29, 2020, we announced that relugolix had a similar rate of castration resistance-free survival in the subgroup of men with metastatic disease compared to leuprolide acetate and did not achieve statistical superiority through 48 weeks. In the subgroup of men with metastatic disease treated with relugolix, 74% were castration resistance-free through 48 weeks compared to 75% of men treated with leuprolide acetate (HR = 1.03 [95% CI: 0.68-1.57]; p = 0.84). In the secondary endpoint analysis, castration resistance-free survival was defined as the time from first dose to PSA progression per the Prostate Cancer Clinical Trials Working Group 3 (PCWG3) criteria or death from any cause. PSA progression was defined as a PSA increase ≥ 25% and ≥ 2 ng/mL above the nadir, and confirmed by a second PSA value ≥ 3 weeks later. The incidence of adverse events in the subgroup of men with metastatic disease was consistent with that observed in the primary analysis of HERO with no new safety signals observed.
In May 2020, efficacy and safety data from the Phase 3 HERO study were simultaneously published online in the New England Journal of Medicine and presented at the American Society of Clinical Oncology (“ASCO”)’s ASCO20 Virtual Scientific Program. In July 2020, these data were also presented in an oral presentation during the American Urological Association 2020
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Virtual Experience. Detailed secondary endpoint data showed notable differences in the rapid and profound suppression of testosterone, PSA response, and testosterone recovery after discontinuation of treatment. In the relugolix group, testosterone suppression to less than 50 ng/dL was achieved in 56.0% of men by Day 4 and 98.7% by Day 15, compared to 0.0% by Day 4 and 12.1% by Day 15 for men in the leuprolide acetate group. Additionally, in the relugolix group, profound testosterone suppression to less than 20 ng/dL was achieved in 78.4% of men at Day 15, compared to 1.0% at Day 15 for men in the leuprolide acetate group. A higher proportion of men in the relugolix group achieved a 50% reduction in PSA by Day 15 and confirmed at Day 29 compared to those in the leuprolide acetate group (79.4% vs. 19.8%, respectively). Within 90 days of treatment discontinuation, 54% of men in the relugolix group achieved normal testosterone levels (≥ 280 ng/dL) with a mean testosterone level of 288.4 ng/dL, compared to 3% of men in the leuprolide acetate group with a mean testosterone level of 58.6 ng/dL.
On October 19, 2020, we presented an economic analysis of the Phase 3 HERO data at the AMCP Nexus 2020 Virtual Meeting, demonstrating that treatment with relugolix may prevent one major adverse cardiovascular event for every 31 patients treated versus patients receiving leuprolide injections.
On April 21, 2020, we announced the submission of an NDA to the FDA for relugolix monotherapy tablet for the treatment of men with advanced prostate cancer. In June 2020, the FDA accepted for Priority Review this NDA, setting a target action date of December 20, 2020. In its acceptance letter, the FDA also stated that it is currently not planning to hold an advisory committee meeting for this application. If approved, relugolix would be the first and only oral GnRH receptor antagonist treatment for men with advanced prostate cancer. We currently expect to submit a MAA to the EMA for relugolix monotherapy tablet for advanced prostate cancer in the first half of calendar year 2021. We may conduct additional clinical studies to further support the commercial potential of relugolix in prostate cancer in the U.S. and other major markets.
MVT-602
As part of our license agreement with Takeda, we acquired the worldwide rights to MVT-602, our second product candidate, which previously had been evaluated in over 150 men. MVT-602 is an oligopeptide kisspeptin-1 receptor agonist