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Table of Contents
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 June 30, 2021
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 July 23, 2021 was 92,077,860.


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MYOVANT SCIENCES LTD.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2021
TABLE OF CONTENTS
 Page
 
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Table of Contents
Risk Factor Summary
Below is a summary of the material factors that make an investment in our common shares speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under the heading “Risk Factors” in Item 1A of Part II of this Quarterly Report. The below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under “Risk Factors” in Item 1A of Part II of this Quarterly Report as part of your evaluation of an investment in our common shares.
Risks Related to Commercialization of Our Drug Products
Our success depends in part on the successful commercialization of our drug products. To the extent our drug products are not commercially successful, our business, financial condition and results of operations will be materially harmed.
Our drug products may fail to achieve the degree of market acceptance by physicians, patients, third-party payers or others in the medical community necessary for commercial success, which would negatively impact our business.
If we and our collaboration partners are unable to effectively market and sell our drug products, the commercialization of our drug products will not be successful and our business will be harmed.
Failure to successfully obtain coverage and reimbursement for ORGOVYX and MYFEMBREE in the United States, or the availability of coverage only at limited levels, would diminish our ability to generate net product revenue.
We face substantial competition in the commercialization of ORGOVYX and MYFEMBREE, and our operating results will suffer if we fail to compete effectively.
Risks Related to Our Financial Position and Capital Requirements
If we do not have adequate funds to cover our development and commercialization activities, we may have to raise additional capital or curtail or cease operations. We may not be able to obtain funding through public or private offerings of our capital shares, debt financings, collaboration or licensing arrangements, or other sources.
We are required to meet certain terms and conditions to draw down funds under the Sumitomo Dainippon Pharma Loan Agreement. If we are unable to meet such terms and conditions, we may not be able to access funding from the Sumitomo Dainippon Pharma Loan Agreement. Further, we may be obligated to repay the loans prior to their scheduled maturity date under certain circumstances.
Risks Related to Our Business Operations
The terms of the Sumitomo Dainippon Pharma Loan Agreement place restrictions on our operating and financial flexibility.
We do not have our own manufacturing capabilities and rely on third parties to produce clinical and commercial supplies of drug substance and drug product. If these third parties do not perform as we expect, do not maintain their regulatory approvals, or become subject to other negative circumstances, it may result in delay in our ability to develop and commercialize our products.
Risks Related to Clinical Development and Regulatory Approval
Clinical studies are very expensive, time-consuming, difficult to design and implement, and involve uncertain outcomes. Clinical study failures can occur at any stage of clinical studies, and we could encounter problems that cause us to suspend, abandon or repeat clinical studies. We cannot predict with any certainty the timing for commencement or completion of current or future clinical studies.
The results of our clinical studies may not support our proposed claims for our product candidates. The results of previous clinical studies may not be predictive of future results, and interim or top-line data may be subject to change or qualification based on the complete analysis of data.
3

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The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming, and inherently unpredictable. If we are not able to obtain required regulatory approvals for our product candidates, our ability to generate net product revenue will be materially impaired.
Adverse events associated with our product candidates could cause us, regulatory authorities, other reviewing entities or clinical study sites to interrupt, delay, request modification of, or halt clinical studies and could result in the denial of regulatory approval.
Risks Related to Our Dependence on Third Parties
We are dependent upon our relationships with collaboration partners to further develop, fund, manufacture and commercialize our drug products and our product candidates. If such relationships are unsuccessful, or if a collaboration partner terminates its collaboration agreement with us, it could negatively impact our ability to conduct our business and generate net product revenue. Failure by a collaboration partner to perform its duties under its collaboration agreement with us (e.g. financial reporting or internal control compliance) may negatively affect us.
We are reliant on third parties to conduct, manage, and monitor our clinical studies, and if those third parties perform in an unsatisfactory manner, it may harm our business.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose intellectual property rights that are necessary for developing and protecting our product candidates.
Risks Related to Our Being a Controlled Company
We have agreements with Sumitovant, our majority shareholder, and with Sumitovant’s parent, Sumitomo Dainippon Pharma, and their affiliates, including Sunovion, that may be perceived to create conflicts of interest which, if other investors perceive that Sumitovant or Sumitomo Dainippon Pharma will not act in the best interests of all of our shareholders, may affect the price of our common shares and have other effects on our company.
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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)
June 30, 2021March 31, 2021
Assets  
Current assets:  
Cash and cash equivalents$484,960 $674,493 
Accounts receivable, net10,608 3,570 
Marketable securities84,826 10,435 
Inventory4,172 2,611 
Milestone receivable from Pfizer100,000  
Prepaid expenses and other current assets17,569 13,536 
Total current assets702,135 704,645 
Property and equipment, net2,968 3,300 
Operating lease right-of-use asset9,252 9,655 
Other assets13,415 7,427 
Total assets$727,770 $725,027 
Liabilities and shareholders’ deficit  
Current liabilities:  
Accounts payable$9,122 $17,809 
Accrued expenses and other current liabilities42,938 44,612 
Share-based compensation liabilities21,151 21,636 
Deferred revenue117,231 100,564 
Amounts due to Pfizer11,025 1,954 
Cost share advance from Pfizer104,178 92,415 
Operating lease liability1,886 1,807 
Amounts due to related parties39 543 
Total current liabilities307,570 281,340 
Deferred revenue, non-current451,193 397,369 
Cost share advance from Pfizer, non-current 29,447 
Long-term operating lease liability8,685 9,189 
Long-term debt, less current maturities (related party)358,700 358,700 
Other liabilities1,248 2,947 
Total liabilities1,127,396 1,078,992 
Commitments and contingencies (Note 9)
Shareholders’ deficit:  
Common shares, par value $0.000017727 per share, 564,111,242 shares authorized, 91,942,643 and 91,000,869 issued and outstanding at June 30, 2021 and March 31, 2021, respectively
2 2 
Additional paid-in capital725,465 709,466 
Accumulated other comprehensive loss(17,285)(17,285)
Accumulated deficit(1,107,808)(1,046,148)
Total shareholders’ deficit (399,626)(353,965)
Total liabilities and shareholders’ deficit$727,770 $725,027 
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 June 30,
 20212020
Revenues:
Product revenue, net$11,554 $ 
Pfizer collaboration revenue29,509  
Richter license and milestone revenue 33,333 
Total revenues41,063 33,333 
Operating costs and expenses:
Cost of product revenue1,032  
Collaboration expense to Pfizer5,261  
Research and development30,880 44,186 
Selling, general and administrative (1)
61,212 22,828 
Total operating costs and expenses98,385 67,014 
Loss from operations(57,322)(33,681)
Interest expense (2)
3,505 2,184 
Interest income(78)(108)
Foreign exchange gain (3,569)
Loss before income taxes(60,749)(32,188)
Income tax expense 911 672 
Net loss$(61,660)$(32,860)
Net loss per common share — basic and diluted$(0.67)$(0.37)
Weighted average common shares outstanding — basic and diluted91,637,151 89,300,210 
(1) Includes $1,323 and $114 of related party expense (inclusive of third-party pass-through costs) for the three months ended June 30, 2021 and 2020, respectively (see Note 5).
(2) Includes $2,904 and $2,184 of interest expense under the Sumitomo Dainippon Pharma Loan Agreement for the three months ended June 30, 2021 and 2020, respectively (see Note 5).
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MYOVANT SCIENCES LTD.
Condensed Consolidated Statements of Comprehensive Loss
(unaudited; in thousands)
Three Months Ended June 30,
20212020
Net loss$(61,660)$(32,860)
Other comprehensive loss:
Foreign currency translation adjustment (3,475)
Total other comprehensive loss (3,475)
Comprehensive loss$(61,660)$(36,335)
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 Shareholders’ Deficit
(unaudited; in thousands, except share data)

Common SharesAdditional
Paid-in Capital
Accumulated
Other Comprehensive
Loss
Accumulated DeficitTotal Shareholders’
 Deficit
SharesAmount
Balance at March 31, 2021
91,000,869 $2 $709,466 $(17,285)$(1,046,148)$(353,965)
Share-based compensation — — 11,262 — — 11,262 
Share-based compensation liabilities reclassified to equity upon settlement of awards— — 1,862 — — 1,862 
Share-based compensation reclassified to current liabilities— — (1,377)— — (1,377)
Issuance of shares upon exercise of stock options and vesting of restricted stock units941,774 — 4,252 — — 4,252 
Net loss— — — — (61,660)(61,660)
Balance at June 30, 2021
91,942,643 $2 $725,465 $(17,285)$(1,107,808)$(399,626)

Common SharesAdditional
Paid-in Capital
Accumulated
Other Comprehensive
Loss
Accumulated DeficitTotal Shareholders’
 Deficit
SharesAmount
Balance at March 31, 2020
89,833,998 $2 $684,381 $(1,646)$(791,014)$(108,277)
Share-based compensation— — 7,812 — — 7,812 
Issuance of shares upon exercise of stock options and vesting of restricted stock units303,014 — 2,190 — — 2,190 
Foreign currency translation adjustment— — — (3,475)— (3,475)
Net loss— — — — (32,860)(32,860)
Balance at June 30, 2020
90,137,012 $2 $694,383 $(5,121)$(823,874)$(134,610)

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)
Three Months Ended June 30,
20212020
Cash flows from operating activities: 
Net loss$(61,660)$(32,860)
Adjustments to reconcile net loss to net cash used in operating activities: 
Share-based compensation11,262 7,812 
Depreciation and amortization (1)
724 551 
Non-cash interest expense601  
Foreign currency transaction gain (3,569)
Other 94 
Changes in operating assets and liabilities: 
Accounts receivable(7,038) 
Inventory(1,561) 
Milestone receivable from Pfizer(100,000) 
Prepaid expenses and other current assets(3,916)(1,101)
Other assets112  
Accounts payable(8,676)(9,946)
Interest payable (related party) 9 
Accrued expenses and other current liabilities(1,674)(254)
Deferred revenue70,491 (23,333)
Amounts due to Pfizer9,071  
Cost share advance from Pfizer(18,285) 
Operating lease liabilities(425)(356)
Amounts due to related parties(504)114 
Other liabilities(1,699)855 
Net cash used in operating activities(113,177)(61,984)
Cash flows from investing activities: 
Purchases of marketable securities(78,426)(14,973)
Maturities of marketable securities4,035 3,000 
Purchases of property and equipment (151)
Net cash used in investing activities(74,391)(12,124)
Cash flows from financing activities: 
Proceeds from related party debt financing 80,000 
Proceeds from stock option exercises4,135 2,190 
Net cash provided by financing activities4,135 82,190 
Net change in cash, cash equivalents and restricted cash(183,433)8,082 
Cash, cash equivalents and restricted cash, beginning of period677,480 78,018 
Cash, cash equivalents and restricted cash, end of period$494,047 $86,100 
Non-cash financing activities:
Change in fair value of share-based awards recorded to additional paid-in capital$1,377 $ 
Reclassification of share-based compensation liabilities to additional paid-in capital upon settlement of awards$1,862 $ 
Stock options exercised receivable, included in prepaid expenses and other current assets$117 $ 
(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—Organization and Summary of Significant Accounting Policies
Description of Business
Myovant Sciences Ltd. (together with its wholly-owned subsidiaries, the “Company”) is a biopharmaceutical company focused on redefining care for women and for men through purpose-driven science, empowering medicines, and transformative advocacy. Founded in 2016, the Company has two FDA-approved products: (1) ORGOVYX® (relugolix 120 mg), which was approved in the U.S. by the U.S. Food and Drug Administration (“FDA”) in December 2020 as the first and only oral gonadotropin-releasing hormone (“GnRH”) receptor antagonist for the treatment of adult patients with advanced prostate cancer; and (2) MYFEMBREE® (relugolix 40 mg, estradiol 1.0 mg, and norethindrone acetate 0.5 mg), which was approved in the U.S. by the FDA in May 2021 as the first and only once-daily oral treatment for the management of heavy menstrual bleeding associated with uterine fibroids. In July 2021, the European Commission approved RYEQO® (relugolix 40 mg, estradiol 1.0 mg, and norethindrone acetate 0.5 mg) as the first and only long-term, once-daily oral treatment in Europe for moderate to severe symptoms of uterine fibroids in adult women of reproductive age. In July 2021, Myovant Sciences GmbH (“MSG”), one of the Company’s subsidiaries, submitted a supplemental New Drug Application (“sNDA”) to the FDA for once-daily MYFEMBREE for the management of moderate to severe pain associated with endometriosis. MYFEMBREE is also being assessed for contraceptive efficacy in women ages 18-35 years who are at risk for pregnancy, pending FDA removal of a partial clinical hold. Relugolix (120 mg) is also under regulatory review in Europe for men with advanced prostate cancer. The Company is also developing MVT-602, an oligopeptide kisspeptin-1 receptor agonist, which has completed a Phase 2a study for the treatment of female infertility as a part of assisted reproduction.
Since its inception, the Company has funded its operations primarily from the issuance and sale of its common shares, from debt financing arrangements, and more recently from the upfront and regulatory milestone payments it received from Pfizer Inc. (“Pfizer”) and Gedeon Richter Plc. (“Richter”). The Company began generating product revenue from the sales of ORGOVYX and MYFEMBREE in the U.S. in January 2021 and June 2021, respectively.
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 June 30, 2021, Sumitovant directly, and Sumitomo Dainippon Pharma indirectly, own 48,641,181, or approximately 52.9%, of the Company’s outstanding common shares.
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, 2021, filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 11, 2021. The unaudited condensed consolidated balance sheet at March 31, 2021 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 months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2022, for any other interim period or for any other future year.
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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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 contingencies 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, collaboration arrangements, revenue recognition, share-based compensation, research and development (“R&D”) expenses and accruals, leases, and income taxes. In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows. 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.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are described in Note 2 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed with the SEC on May 11, 2021. There have been no significant changes in the Company’s significant accounting policies from those disclosed in its Annual Report on Form 10-K for the fiscal year ended March 31, 2021.
Liquidity and Capital Resources
As of June 30, 2021, the Company had approximately $569.8 million in cash, cash equivalents, and marketable securities, which excludes $115.0 million of recently triggered regulatory milestone payments from Pfizer and Richter as discussed in Note 10, “Subsequent Events.” The Company currently believes that its existing cash, cash equivalents, and marketable securities will be sufficient to fund its anticipated operating expenses and capital expenditure requirements for at least the next 12 months from the date of issuance of this Quarterly Report on Form 10-Q.
In future periods, if the Company’s cash, cash equivalents, marketable securities, and amounts that it expects to generate from product sales and/or third-party collaboration payments are not sufficient to enable the Company to fund its operations, the Company may need to raise additional funds in the form of equity, debt, or from other sources. There can be no assurances that such funding sources will be available at terms acceptable to the Company, or at all. If the Company has insufficient funding to meet its working capital needs, it could be required to delay, limit, reduce, or terminate its drug development programs, commercialization efforts, and/or limit or cease operations.
As of June 30, 2021, the Company had approximately $41.3 million of borrowing capacity available to it under the Sumitomo Dainippon Pharma Loan Agreement (see Note 5(A)). As of the date of issuance of this Quarterly Report on Form 10Q, the Company is also eligible to earn up to $3.6 billion and $122.5 million of additional milestone payments from Pfizer and Richter pursuant to the Pfizer Collaboration and License Agreement and the Richter Development and Commercialization Agreement, respectively, as well as potential royalty payments on net sales under each agreement. See Note 8 for additional information about the Pfizer Collaboration and License Agreement and the Richter Development and Commercialization Agreement. See Note 10 for additional information about regulatory milestone payments that were recently triggered under the Pfizer Collaboration and License Agreement and the Richter Development and Commercialization Agreement.
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 shares. 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.
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As of June 30, 2021 and 2020 potentially dilutive securities were as follows:
June 30,
20212020
Stock options8,613,006 8,648,078 
Restricted stock awards (unvested) 564,111 
Restricted stock units and performance stock units (unvested and unreleased)5,170,442 3,603,201 
Warrants73,710 73,710 
Total13,857,158 12,889,100 
Recently Adopted Accounting Standards
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. The Company adopted ASU 2019-12 on April 1, 2021, which did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.
Recently Issued Accounting Standards Not Yet Adopted
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 the London Interbank Offered Rate (“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 June 30, 2021, the Company has not modified its contract that will be impacted by reference rate reform (Sumitomo Dainippon Pharma Loan Agreement). 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 was effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption was 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 amended 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.
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Note 2—Revenue Components
The following table provides information about the Company’s revenues (in thousands):
Three Months Ended June 30,
20212020
Revenues:
Product revenue, net:
ORGOVYX$10,479 $ 
MYFEMBREE1,075  
Total product revenue, net11,554  
Pfizer collaboration revenue:
Amortization of upfront payment20,974  
Amortization of regulatory milestone8,535  
Total Pfizer collaboration revenue29,509  
Richter license and milestone revenue 33,333 
Total revenues$41,063 $33,333 
The Company began generating product revenue from sales of ORGOVYX and MYFEMBREE in the U.S. in January 2021 and June 2021, respectively. The Company records product revenue net of estimated discounts, chargebacks, rebates, product returns, and other gross-to-net revenue deductions.
Pfizer collaboration revenue for the three months ended June 30, 2021 consists of the partial recognition of the upfront payment the Company received from Pfizer in December 2020 and of the regulatory milestone payment due from Pfizer that was triggered upon the FDA approval of MYFEMBREE for the management of heavy menstrual bleeding associated with uterine fibroids on May 26, 2021. There were no such amounts recognized for the three months ended June 30, 2020.
There was no Richter license and milestone revenue for the three months ended June 30, 2021. Richter license and milestone revenue for the three months ended June 30, 2020 consists of the partial recognition of the upfront payment the Company received from Richter in March 2020 and the regulatory milestone payment the Company received from Richter in April 2020.
See Note 8 for additional information regarding collaboration revenue under the Pfizer Collaboration and License Agreement and license and milestone revenue under the Richter Development and Commercialization Agreement.
Note 3—Certain Balance Sheet Components
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):
June 30,
20212020
Cash and cash equivalents$484,960 $84,726 
Restricted cash9,087 1,374 
Total cash, cash equivalents and restricted cash$494,047 $86,100 
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Cash and cash equivalents include cash deposits in banks and all highly liquid investments that are readily convertible to cash (maturity of three months or less at the time of purchase). Restricted cash consists of funds held or designated 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. As of June 30, 2021 and March 31, 2021, restricted cash includes approximately $7.1 million and $1.0 million, respectively, that is held in an escrow fund for use by Sunovion Pharmaceuticals Inc. (“Sunovion”), a subsidiary of Sumitomo Dainippon Pharma, to manage rebates, chargebacks, and similar fees pursuant to the Market Access Services Agreement (see Note 5(C)).
Inventory
As of June 30, 2021 and March 31, 2021, inventory consisted of the following (in thousands):
June 30, 2021March 31, 2021
Raw materials$1,321 $1,390 
Work in process1,883 773 
Finished goods968 448 
Total inventory$4,172 $2,611 
Accrued Expenses and Other Current Liabilities
As of June 30, 2021 and March 31, 2021, accrued expenses and other current liabilities consisted of the following (in thousands):
June 30, 2021March 31, 2021
Accrued R&D expenses$7,894 $8,544 
Accrued compensation-related expenses17,936 20,571 
Accrued commercial expenses8,065 7,770 
Accrued sales discounts, rebates, and allowances4,737 1,315 
Deferred net product revenue 162 
Accrued professional service fees1,075 935 
Accrued other expenses and tax obligations3,231 5,315 
Total accrued expenses and other current liabilities$42,938 $44,612 
Note 4—Fair Value Measurements
The preparation of the Company’s unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires certain assets and liabilities to be reflected at their fair value. 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 measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed into one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
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.
For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of the Company’s financial instruments, see Note 2, “Summary of Significant Accounting Policies,” and Note 3, “Fair Value Measurements,” to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed with the SEC on May 11, 2021.
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Financial Instruments Measured at Fair Value on a Recurring Basis
The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):
Fair Value Measurement Using:
 Level 1Level 2Level 3Total
As of June 30, 2021
Assets:
Money market funds (1)
$4,871 $ $ $4,871 
Commercial paper (2)
 211,029  211,029 
Corporate bonds (3)
 4,002  4,002 
Total assets$4,871 $215,031 $ $219,902 
Liabilities:
Share-based compensation liabilities - stock options (4)
$ $10,615 $ $10,615 
Share-based compensation liabilities - common shares (5)
10,536   10,536 
Total liabilities$10,536 $10,615 $ $21,151 
Fair Value Measurement Using:
 Level 1Level 2Level 3Total
As of March 31, 2021
 
Assets:
Money market funds (1)
$36,903 $ $ $36,903 
Commercial paper (2)
 21,689  21,689 
U.S. agency securities (1)
 10,000  10,000 
Municipal bonds (3)
 1,417  1,417 
Total assets$36,903 $33,106 $ $70,009 
Liabilities:
Share-based compensation liabilities - stock options (4)
$ $12,113 $ $12,113 
Share-based compensation liabilities - common shares (5)
9,523   9,523 
Total liabilities$9,523 $12,113 $ $21,636 
(1) Included in cash and cash equivalents.
(2) Includes $130.2 million in cash and cash equivalents and $80.8 million in marketable securities as of June 30, 2021. Includes $12.7 million in cash and cash equivalents and $9.0 million in marketable securities as of March 31, 2021.
(3) Included in marketable securities.
(4) Includes 1,081,803 and 1,281,803 outstanding stock options remeasured using the Black-Scholes option-pricing model as of June 30, 2021 and March 31, 2021, respectively. See Note 7(F).
(5) As of June 30, 2021, includes 462,705 common shares remeasured using the Company’s June 30, 2021 closing market price of $22.77 per common share. As of March 31, 2021, includes 462,705 common shares remeasured using the Company’s March 31, 2021 closing market price of $20.58 per common share. See Note 7(F).
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The following table includes information regarding the Company’s share-based compensation liabilities (a current liability) for the three months ended June 30, 2021 (in thousands):
March 31, 2021$21,636 
Change in fair value1,377 
Settlements(1,862)
June 30, 2021
$21,151 
The fair value of the share-based compensation liabilities related to outstanding stock options was estimated as of June 30, 2021 using the Black-Scholes option-pricing model and the following assumptions:
Expected common share price volatility53.7 %
Expected risk free interest rate0.06 %
Expected term, in years0.5
Expected dividend yield %
Financial Instruments Not Measured at Fair Value on a Recurring Basis
The Company recorded the cost share advance from Pfizer, which is included in Level 2 of the fair value hierarchy, at its estimated fair value as of the transaction date. As discussed in Note 8(B), on the transaction date, the cost share advance from Pfizer was discounted to fair value using the Company’s estimated incremental borrowing rate over the period in which the cost share advance is expected to be utilized. The recorded amount has been and will continue to be reduced each reporting period by the amount of Allowable Expenses applied to the cost share advance. There were no non-recurring fair value assets as of June 30, 2021 and March 31, 2021.
Note 5—Related Party Transactions
As of June 30, 2021, Sumitovant directly, and Sumitomo Dainippon Pharma indirectly, own 48,641,181, or approximately 52.9%, of the Company’s outstanding common shares. The Company has agreements with Sumitovant, Sumitomo Dainippon Pharma, and their affiliates, including Sunovion, a subsidiary of Sumitomo Dainippon Pharma. These agreements are described below.
(A) Sumitomo Dainippon Pharma Co., Ltd.
Sumitomo Dainippon Pharma Loan Agreement
On December 27, 2019, the Company and one of its subsidiaries, 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. 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, and 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.
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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 June 30, 2021, approximately $41.3 million of borrowing capacity remains available to the Company, subject to the terms of the Sumitomo Dainippon Pharma Loan Agreement and the outstanding loan balance of $358.7 million is classified as a long-term liability on the unaudited condensed consolidated balance sheets under the caption long-term debt, less current maturities (related party). Interest expense under the Sumitomo Dainippon Pharma Loan Agreement was $2.9 million and $2.2 million for the three months ended June 30, 2021 and 2020, respectively, and is included in interest expense in the unaudited condensed consolidated statements of operations.
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 provided 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, provided services to the Company on behalf of Sumitovant under this agreement. The term of the consulting agreement with Sumitovant expired on March 31, 2021. For the three months ended June 30, 2021 and 2020, the Company incurred less than $0.1 million and $0.1 million of expense under this consulting agreement, respectively, which are included in selling, general and administrative (“SG&A”) expenses in the unaudited condensed consolidated statements of operations. In addition, for the three months ended June 30, 2021, the Company agreed to
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reimburse Sumitovant for certain other third-party pass-through expenses that it incurred on behalf of the Company. These expenses, totaling less than $0.1 million are included in R&D expenses in the unaudited condensed consolidated statements of operations.
The Company’s outstanding obligations to Sumitovant were less than $0.1 million as of June 30, 2021 and $0.1 million as of March 31, 2021, and are included in amounts due to related parties on the unaudited condensed consolidated balance sheets.
(C) Sunovion Pharmaceuticals Inc.
Market Access Services Agreement
On August 1, 2020, one of the Company’s subsidiaries, MSG, entered into a Market Access Services Agreement, as amended (“Market Access Services Agreement”), with Sunovion. 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 ORGOVYX (“Prostate Cancer Product”) and MYFEMBREE (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 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. Pursuant to this agreement, Sunovion will also provide certain services to the Company to enable the Company to comply with its obligations under the State Transparency Laws.
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 has paid and will continue to 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 to manage rebates, chargebacks and similar fees (see Note 3). For the three months ended June 30, 2021, the Company incurred $1.3 million under this agreement (inclusive of third-party pass-through costs billed to the Company), which is included in SG&A expenses in the unaudited condensed consolidated statement of operations. No amounts were incurred in the three months ended June 30, 2020. As of each of June 30, 2021 and March 31, 2021, the Company’s outstanding obligation pursuant to this agreement was $0.4 million and are included in accounts payable and amounts due to related parties, respectively, on the unaudited condensed consolidated balance sheets.
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.
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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 June 30, 2021 and 2020 was (1.50)% and (2.09)%, 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 implemented certain provisions of the CARES Act, such as deferring employer payroll taxes through the end of calendar year 2020. As of June 30, 2021, the Company has deferred $1.8 million of employer payroll taxes, of which 50% are required to be deposited by December 2021 and the remaining 50% by December 2022. The current portion of the deferred payroll tax liability of $0.9 million is included in accrued expenses and other current liabilities and the non-current portion of the deferred payroll tax liability of $0.9 million is included in other liabilities on the unaudited condensed consolidated balance sheets.
Note 7—Share-Based Compensation
The Company has two share-based compensation plans, the Myovant Sciences Ltd. 2020 Inducement Plan and the Myovant Sciences Ltd. 2016 Equity Incentive Plan (collectively, the “Equity Plans”).
(A) 2020 Inducement Plan
In November 2020, the compensation committee of the Company’s board of directors adopted the Myovant Sciences Ltd. 2020 Inducement Plan (the “2020 Inducement Plan”), which, subject to the adjustment provisions thereof, reserved 1.0 million shares of the Company’s common shares for issuance. 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. As of June 30, 2021, there were less than 0.1 million common shares available for future issuance under the 2020 Inducement Plan.
(B) 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, 2021, the number of common shares authorized for issuance under the 2016 Plan increased automatically by 3.6 million shares in accordance with the evergreen provision. As of June 30, 2021, a total of 2.4 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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(C) Stock Options
Activity for stock options for the three months ended June 30, 2021 is as follows:
Number of Options
Options outstanding at March 31, 2021
8,293,331 
Granted
892,157 
Exercised
(436,573)
Forfeited
(135,909)
Options outstanding at June 30, 2021
8,613,006 
Options vested and expected to vest at June 30, 2021
8,613,006 
Options exercisable at June 30, 2021
5,308,419 
(D) Restricted Stock and Performance Stock Units
Activity for restricted stock units and performance stock units for the three months ended June 30, 2021 is as follows:
Number of Shares
Unvested balance at March 31, 2021
3,571,235 
Granted2,343,086 
Vested(540,760)
Forfeited(238,678)
Unvested balance at June 30, 2021
5,134,883 
Vested and unreleased35,559 
Outstanding balance at June 30, 2021
5,170,442 
(E) Share-Based Compensation
Share-based compensation was as follows (in thousands):
Three Months Ended June 30,
20212020
Share-based compensation recognized as:
R&D expense$3,957 $4,024 
SG&A expense7,155 3,788 
Capitalized under inventory150  
Total$11,262 $7,812 
Total unrecognized share-based compensation was approximately $102.2 million as of June 30, 2021 and is expected to be recognized over a weighted-average period of approximately 3.3 years.
(F) Separation Agreement with Former Principal Executive Officer
In January 2021, the Company entered into a Separation and General Release Agreement with its former Principal Executive Officer. Pursuant to the terms of this agreement, all of the former Principal Executive Officer’s then outstanding and unvested equity awards became fully vested. In addition, the post-termination period during which the former Principal Executive Officer may exercise her outstanding stock options was extended to 12 months. The former Principal Executive Officer has granted Sumitovant or any Sumitovant affiliate a right of first refusal to purchase her common shares of the Company under certain circumstances and provide the Company and its affiliates a general release of claims. Share-based compensation included in SG&A expense for the three months ended June 30, 2021 includes $1.4 million related to the settlement and remeasurement of these awards.
As a result of the repurchase feature described above, the outstanding awards were reclassified from additional paid-in capital to current liabilities. The share-based compensation liabilities have been and will continue to be remeasured at fair value each
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reporting period end, with the change in fair value recorded as share-based compensation within SG&A until the stock options are exercised and the common shares are sold to Sumitovant, to the market, or otherwise settled, or the former Principal Executive Officer has held the common shares for a period of at least six months. As of June 30, 2021, a total of 1,081,803 outstanding stock options and a total of 462,705 common shares remain subject to the right of first refusal. The former Principal Executive Officer’s outstanding stock options remain exercisable through January 11, 2022. As of June 30, 2021 and March 31, 2021, $21.2 million and $21.6 million, respectively, is included in share-based compensation liabilities on the unaudited condensed consolidated balance sheets.
Note 8—Collaboration and License Agreements
(A) Richter Development and Commercialization Agreement
On March 30, 2020, the Company entered into 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 America, Australia, and New Zealand (the “Richter Development and Commercialization Agreement”). Under the terms of the Richter Development and Commercialization 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. On July 16, 2021, the European Commission approved RYEQO as the first and only long-term, once-daily oral treatment in Europe for moderate to severe symptoms of uterine fibroids in adult women of reproductive age. This approval triggered a $15.0 million regulatory milestone payment due from Richter, which the Company expects to receive and record as Richter license and milestone revenue in the three months ending September 30, 2021.
Under the terms of the Richter Development and Commercialization 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. 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, Revenue from Contracts with Customers. 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 tablet, 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 tablet. 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 delivered 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 tablet clinical and regulatory data packages to Richter, the Company concluded that during the three months ended June 30, 2020, it satisfied approximately two-thirds of the combined performance obligation and recognized $33.3 million of the transaction price as Richter license and milestone revenue during the three months ended June 30, 2020. The remaining $16.7 million of the transaction price is recorded as deferred revenue on the unaudited condensed consolidated balance sheet as of June 30, 2021 and is expected to be recognized as Richter license and milestone revenue during the three months ending September 30, 2021 when the Company expects to deliver the remaining substantive relugolix combination tablet data packages to Richter. No Richter license and milestone revenue was recorded in the three months ended June 30, 2021.
The term of the Richter Development and Commercialization Agreement shall expire on a country-by-country basis upon expiry of the Royalty Term for the Product in a country in the Richter Territory. The Richter Development and Commercialization Agreement may be terminated in its entirety or on a country-by-country basis by mutual consent of the
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parties, or by either party for the uncured material breach of other party, for bankruptcy of the other party, and for certain other reasons in accordance with the terms of the Richter Development and Commercialization Agreement.
(B) Pfizer Collaboration and License Agreement
On December 26, 2020, one of the Company’s subsidiaries, MSG, and Pfizer, entered into a collaboration and license agreement (the “Pfizer Collaboration and License Agreement”), pursuant to which the Company and Pfizer will collaborate to jointly develop and commercialize relugolix in oncology and women’s health in the U.S. and Canada (the “Co-Promotion Territory”). In addition, Pfizer also received an option to acquire exclusive commercialization and development rights to relugolix in oncology outside the Co-Promotion Territory, excluding certain Asian countries (the “Pfizer Territory”). See Note 10, “Subsequent Events.”
In the Co-Promotion Territory, the Company and Pfizer will equally share profits and certain expenses, including certain pre-launch inventory costs incurred by the Company prior to the effective date of the Pfizer Collaboration and License Agreement (the “Allowable Expenses”). The Company will remain responsible for regulatory interactions and drug supply and will continue to lead clinical development for MYFEMBREE in the women’s health indications, while development for ORGOVYX will be shared equally among the parties.
In the Co-Promotion Territory, the Company will be the principal on all sales transactions with third parties and will recognize 100% of product sales to third parties as revenue from contracts with customers. The Company concluded that based on the principal vs. agent guidance in ASC 606, it has primary responsibility for fulfilling customer orders, controls inventory before it is sold to third party customers, assumes the risk of inventory loss, and maintains discretion in establishing product price.
Pursuant to the terms of the Pfizer Collaboration and License Agreement, the Company received an upfront payment of $650.0 million in December 2020, and is eligible to receive up to $3.7 billion of milestone payments, including two regulatory milestones of $100.0 million upon each FDA approval for MYFEMBREE in uterine fibroids and endometriosis ($200.0 million in the aggregate), and tiered sales milestones of up to $3.5 billion upon reaching certain thresholds of annual net sales for oncology and the combined women’s health indications in the Co-Promotion Territory. In July 2021, the Company received a $100.0 million regulatory milestone payment from Pfizer that was triggered upon the FDA approval of MYFEMBREE for the management of heavy menstrual bleeding associated with uterine fibroids on May 26, 2021. This regulatory milestone payment is included in the caption titled, milestone receivable from Pfizer, on the unaudited condensed consolidated balance sheet as of June 30, 2021.
If Pfizer exercises its option to acquire exclusive commercialization and development rights to relugolix in oncology in the Pfizer Territory, the Company will receive an option exercise fee of $50.0 million, will also be eligible to receive double-digit royalties on net sales of relugolix in the Pfizer Territory, and Pfizer will bear 100% of costs incurred in the Pfizer Territory.
Pursuant to the terms of the Pfizer Collaboration and License Agreement, the Company will bear Pfizer’s share of Allowable Expenses, up to a maximum of $100.0 million for calendar year 2021 and up to a maximum of $50.0 million for calendar year 2022. Any unused portion will carry over into the subsequent calendar years until the Company has assumed in aggregate $150.0 million of Pfizer’s share of the Allowable Expenses.
The term of the Pfizer Collaboration and License Agreement continues until no products are sold and all development activities have terminated in the Co-Promotion Territory and, in the case that Pfizer exercises its option for relugolix in the Pfizer Territory, on the last to expire royalty term with respect to a country in the Pfizer Territory. The Pfizer Collaboration and License Agreement may be terminated early by either party for the uncured material breach of the other party or for bankruptcy or other insolvency proceeding of the other party. In addition, Pfizer has certain other termination rights and may terminate the Pfizer Collaboration and License Agreement early upon providing written notice to the Company pursuant to the terms of the Pfizer Collaboration and License Agreement.
The Company assessed the Pfizer Collaboration and License Agreement and determined that it meets both criteria to be considered a collaborative agreement within the scope of ASC 808, Collaborative Arrangements: active participation by both parties and exposures to significant risks and rewards dependent on the commercial success of the activities. Although the Company is lead party and will perform many activities, both development and commercialization responsibilities are assigned between parties and both parties participate on joint steering and other committees overseeing the collaboration activities. Both parties are exposed to significant risks and rewards based on the economic outcomes of the collaboration through cost sharing and profit (loss) sharing provisions. Net payments to/from Pfizer for Pfizer’s share of the net profits and Allowable Expenses will be disaggregated and presented in the Company’s consolidated statements of operations according to the nature of the expense (e.g., collaboration expense, R&D expenses, or SG&A expenses).
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As discussed above, the Company received a $650.0 million upfront payment from Pfizer in December 2020, of which $150.0 million is Pfizer’s advanced reimbursement for Pfizer’s share of Allowable Expenses (up to $100.0 million for calendar year 2021 and up to $50.0 million for calendar year 2022). The Company concluded that the prepayment by Pfizer of its share of Allowable Expenses represents a significant financing component since the Company received the cash flows at the outset of the arrangement, rather than over a two-year period. Accordingly, the Company reduced the amount of the advanced reimbursement by approximately $3.6 million, representing the implied financing costs based on the Company’s incremental borrowing rate that was derived based on the Sumitomo Dainippon Pharma Loan Agreement, and recorded the discounted value on the consolidated balance sheet as a deposit liability (cost share advance from Pfizer) as of the transaction date, split between a current and a non-current portion, based on the expected timing of Allowable Expenses subject to cost share. The financing component has been and will continue to be accreted to interest expense utilizing a method that approximates the effective yield method over the period in which the cost share advance is expected to be used. The remainder of the upfront payment was recorded as deferred revenue and has been and will continue to be recognized as Pfizer collaboration revenue on a straight-line basis over the estimated term of the agreement of six years, which was estimated by the Company based upon the terms of the Pfizer Collaboration and License Agreement, including the termination provisions contained therein. The Company determined straight-line amortization to be appropriate because the upfront payment represents payment for Pfizer’s right to participate in the collaboration activities, including both commercialization and development activities, which are expected to be realized evenly over this period.
The achievement of regulatory milestones is outside of the Company’s control and therefore was not deemed probable at contract inception. Amounts associated with the regulatory milestones were not initially recognized. Upon achievement of the related regulatory milestone, cumulative catch-up revenue will be recorded as Pfizer collaboration revenue in the period in which the respective regulatory milestone is achieved, and the remainder will be recognized over the remaining contract term. The Company determined that, conceptually, the regulatory milestone payments represent payment for development activities that will continue to benefit the collaboration as the products move toward commercialization. Accordingly, the recognition of revenue associated with the regulatory milestones follows the same amortization model as the upfront payment described above.
Similar to the regulatory milestones, sales-based milestone payments will not initially be recognized due to the uncertainty associated with the future commercial outcomes of ORGOVYX and MYFEMBREE. Upon achievement, the sales-based milestones will be recognized as revenue immediately in the period when the annual sales thresholds are met as the payments represent consideration for past activities that are completed and culminated in the annual sales thresholds being met.
Amounts due to Pfizer as of June 30, 2021 totaling approximately $11.0 million consisted of $5.8 million payable to Pfizer for Pfizer’s 50% share of net profits on sales of ORGOVYX and MYFEMBREE in the U.S. and approximately $5.2 million reimbursement of Allowable Expenses incurred by Pfizer (comprised of $0.4 million and $4.8 million in R&D and SG&A expenses, respectively). Amounts due to Pfizer as of March 31, 2021 totaling approximately $1.9 million consisted of $1.8 million payable to Pfizer for Pfizer’s 50% share of net profits on sales of ORGOVYX in the U.S. and approximately $0.1 million reimbursement of Allowable Expenses incurred by Pfizer.
The Company determined that the $50.0 million option for an exclusive license in the Pfizer Territory does not give rise to a material right since the option fee, coupled with the net royalty payments, reflects its standalone selling price. As such, the option is not considered a unit of account under the present arrangement and will be assessed for accounting purposes if and when exercised.
(C) Contract Balances
The following table presents changes in the Company’s contract assets and liabilities during the three months ended June 30, 2021 (in thousands):
Balance at March 31, 2021
AdditionsImputed InterestDeductions
Balance at
June 30, 2021
Contract assets:
Milestone receivable from Pfizer$ $100,000 $ $ $100,000 
Contract liabilities:
Deferred revenue (1)
$497,933 $100,000 $ $(29,509)$568,424 
Cost share advance from Pfizer (2)
$121,862 $ $601 $(18,285)$104,178 
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(1) Includes $117.2 million and $451.2 million presented as current and non-current, respectively, on the unaudited condensed consolidated balance sheet as of June 30, 2021. Includes $100.6 million and $397.4 million presented as current and non-current, respectively, on the unaudited condensed consolidated balance sheet as of March 31, 2021.
(2) Includes $104.2 million presented as current on the unaudited condensed consolidated balance sheet as of June 30, 2021. Includes $92.4 million and $29.4 million presented as current and non-current, respectively, on the unaudited condensed consolidated balance sheet as of March 31, 2021.
During the three months ended June 30, 2021, milestone receivable from Pfizer increased by $100.0 million as the FDA approval of MYFEMBREE for the management of heavy menstrual bleeding associated with uterine fibroids on May 26, 2021 triggered a regulatory milestone payment due from Pfizer. The Company had no contract assets as of March 31, 2021.
During the three months ended June 30, 2021, deferred revenue increased by $70.5 million. The net increase was the result of a $100.0 million regulatory milestone receivable due from Pfizer that was triggered upon the FDA approval of MYFEMBREE for the management of heavy menstrual bleeding associated with uterine fibroids on May 26, 2021, partially offset by the recognition of $29.5 million of Pfizer collaboration revenue.
During the three months ended June 30, 2021, cost share advance from Pfizer decreased by $17.7 million. The decrease was the net result of the application of $18.3 million of shared Allowable Expenses incurred by the Company (comprised of $0.5 million, $7.6 million, and $10.2 million in reductions to collaboration expense, R&D expenses, and SG&A expenses, respectively), partially offset by accretion of the implied financing component of $0.6 million.
Note 9—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.
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(D) Takeda Agreements
On April 29, 2016, 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. Pursuant to the license agreement (the “Takeda License Agreement”), Takeda granted to the Company an exclusive, royalty-bearing license under certain patents and other intellectual property controlled by Takeda to develop and commercialize relugolix and MVT-602, and products containing these compounds for all human diseases and conditions. Under the Takeda License Agreement, 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. As of June 30, 2021 and March 31, 2021, the Company recorded royalties payable to Takeda of $0.9 million and $0.3 million, respectively, which are included in the caption accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets. 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.
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.
In May 2018, the Company entered into a Commercial Manufacturing and Supply Agreement with Takeda (the “Takeda Commercial Supply Agreement”) pursuant to which 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.
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 10—Subsequent Events
(A) Richter Development and Commercialization Agreement
On July 16, 2021, the European Commission approved RYEQO as the first and only long-term, once-daily oral treatment in Europe for moderate to severe symptoms of uterine fibroids in adult women of reproductive age. This approval triggered a $15.0 million regulatory milestone payment due from Richter, which the Company expects to receive and record as Richter license and milestone revenue in the three months ending September 30, 2021.
See Note 8(A) for additional information about the Richter Development and Commercialization Agreement.
(B) Pfizer Collaboration and License Agreement
In July 2021, the Company received a $100.0 million regulatory milestone payment from Pfizer that was triggered upon the FDA approval of MYFEMBREE for the management of heavy menstrual bleeding associated with uterine fibroids on May 26, 2021. This regulatory milestone is included in the caption titled, milestone receivable from Pfizer, on the unaudited condensed consolidated balance sheet as of June 30, 2021.
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In July 2021, the Company and Pfizer agreed to extend the timeline for Pfizer’s decision to exercise its exclusive option to develop and commercialize relugolix in oncology in the Pfizer Territory, through the end of October 2021.
See Note 8(B) for additional information about the Pfizer Collaboration and License Agreement.
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, 2021 included in our Annual Report on Form 10-K, filed with the SEC on May 11, 2021. 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:
our and our collaboration partners’ ability to successfully plan for and commercialize ORGOVYX®, MYFEMBREE®, RYEQO®, as well as any product candidates, if approved;
the success and anticipated timing of our clinical studies for our product candidates;
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 our product candidates;
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 and maintain reimbursement and coverage from government and private payers 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 and third-party logistics providers;
our ability to quickly and efficiently identify and develop new product candidates;
the impact of pandemics, epidemics or outbreaks of infectious diseases, including the effect that the COVID-19 pandemic and related public health measures will have on our business operations, financial conditions and results of operations;
our ability to hire and retain our management and other key personnel;
our ability to obtain, maintain and enforce intellectual property rights for our products and product candidates;
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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 Pfizer under the Pfizer Collaboration and License Agreement and Richter under the Richter Development and Commercialization Agreement;
our ability to borrow under the Sumitomo Dainippon Pharma Loan Agreement;
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 biopharmaceutical company focused on redefining care for women and for men through purpose-driven science, empowering medicines, and transformative advocacy. Founded in 2016, we have two FDA-approved products: (1) ORGOVYX® (relugolix 120 mg), which was approved in the U.S. by the U.S. Food and Drug Administration (“FDA”) in December 2020 as the first and only oral gonadotropin-releasing hormone (“GnRH”) receptor antagonist for the treatment of adult patients with advanced prostate cancer; and (2) MYFEMBREE® (relugolix 40 mg, estradiol 1.0 mg, and norethindrone acetate 0.5 mg), which was approved in the U.S. by the FDA in May 2021 as the first and only once-daily oral treatment for the management of heavy menstrual bleeding associated with uterine fibroids. In July 2021, the European Commission approved RYEQO® (relugolix 40 mg, estradiol 1.0 mg, and norethindrone acetate 0.5 mg) as the first and only long-term, once-daily oral treatment in Europe for moderate to severe symptoms of uterine fibroids in adult women of reproductive age. In July 2021, Myovant Sciences GmbH (“MSG”), one of our subsidiaries, submitted a supplemental New Drug Application (“sNDA”) to the FDA for once-daily MYFEMBREE for the management of moderate to severe pain associated with endometriosis. MYFEMBREE is also being assessed for contraceptive efficacy in women ages 18-35 years who are at risk for pregnancy, pending FDA removal of a partial clinical hold. Relugolix (120 mg) is also under regulatory review in Europe for men with advanced prostate cancer. We are also developing MVT-602, an oligopeptide kisspeptin-1 receptor agonist, which has completed a Phase 2a study for the treatment of female infertility as a part of assisted reproduction.
Since our inception, we have funded our operations primarily from the issuance and sale of our common shares, from debt financing arrangements, and more recently from the upfront and regulatory milestone payments we received from Pfizer Inc. (“Pfizer”) and Gedeon Richter Plc. (“Richter”). We began generating product revenue from the sales of ORGOVYX and MYFEMBREE in the U.S. in January 2021 and June 2021, respectively.
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Our majority shareholder is Sumitovant Biopharma Ltd. (“Sumitovant”), a wholly-owned subsidiary of Sumitomo Dainippon Pharma Co., Ltd. (“Sumitomo Dainippon Pharma”). As of June 30, 2021, Sumitovant directly, and Sumitomo Dainippon Pharma indirectly, own 48,641,181, or approximately 52.9%, of our outstanding common shares.
First Fiscal Quarter Ended June 30, 2021 and Recent Business Updates
Below is a summary of certain events during our first fiscal quarter ended June 30, 2021 and recent business updates. Additional information about our business, our products, and our product candidates is included in Part I. Item 1., “Business,” included in our Annual Report on Form 10-K, filed with the SEC on May 11, 2021.
Products and Product Candidates
On May 26, 2021, the FDA approved MYFEMBREE as the first and only once-daily oral treatment for the management of heavy menstrual bleeding associated with uterine fibroids. MYFEMBREE was launched in the U.S. by us and our collaboration partner, Pfizer, in mid-June 2021. Pursuant to the terms of the Pfizer Collaboration and License Agreement, this approval triggered a $100.0 million regulatory milestone payment due from Pfizer, which we received in July 2021.
On June 15, 2021, the United States Patent and Trademark Office (“USPTO”) granted U.S. Patent. No. 11,033,551 to Myovant. This patent covers the unique and innovative method of treating patients for heavy menstrual bleeding associated with uterine fibroids with MYFEMBREE. This patent will expire in September of 2037 and is listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”). This patent term matches that of two methods patents (U.S. Patent. Nos. 10,786,501 and 10,449,191) previously granted by the USPTO for ORGOVYX that cover methods of treating advanced prostate cancer with relugolix.
On July 6, 2021, one of our subsidiaries, MSG, submitted an sNDA to the FDA for once-daily MYFEMBREE for the management of moderate to severe pain associated with endometriosis. In April and June 2020 and January 2021, we reported positive results from the two replicate Phase 3 SPIRIT studies and the SPIRIT long-term extension study.
On July 16, 2021, the European Commission approved RYEQO for the treatment of moderate to severe symptoms of uterine fibroids in adult women of reproductive age. RYEQO is the first and only long-term, once-daily oral treatment for uterine fibroids in Europe and has no limitation on its duration of use. The approval was based on safety and efficacy data from the Phase 3 LIBERTY program, which consisted of two replicate, 24-week, multinational clinical studies (LIBERTY 1 and LIBERTY 2), a one-year extension study, and supportive bone mineral density data from a randomized withdrawal study. The commercial launch of RYEQO is expected to begin in the second half of calendar year 2021 and will be executed by Richter, our commercialization partner for RYEQO in Europe and certain other international markets. This approval triggered a $15.0 million regulatory milestone payment due from Richter, which we expect to receive and record as Richter license and milestone revenue in the three months ending September 30, 2021.
On May 18, 2021, the FDA informed us that they placed a partial clinical hold on the Phase 3 SERENE study evaluating MYFEMBREE for the prevention of pregnancy, pending certain study protocol modifications. In July 2021, we provided to the FDA an amended study protocol for the SERENE study. Following our discussions with the FDA, we expect the partial clinical hold to be lifted in August 2021.
Corporate
For the three months ended June 30, 2021, we generated net product revenue from sales of ORGOVYX and MYFEMBREE of $10.5 million and $1.1 million, respectively.
As of June 30, 2021, we had cash, cash equivalents and marketable securities of $569.8 million. We currently believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our anticipated operating expenses and capital expenditure requirements for at least the next 12 months from the date of issuance of this Quarterly Report on Form 10-Q. Our June 30, 2021 cash, cash equivalents, and marketable securities balance excludes $115.0 million of recently triggered regulatory milestone payments from Pfizer and Richter, of which $100.0 million was received from Pfizer in July 2021 and $15.0 million is expected to be received from Richter in the three months ending September 30, 2021.
In July 2021, we and Pfizer agreed to extend the timeline for Pfizer’s decision to exercise its exclusive option to develop and commercialize relugolix in oncology outside of the U.S. and Canada, excluding certain Asian countries (the “Pfizer Territory”), through the end of October 2021.
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Expected Upcoming Milestones
The following is a summary of certain of our expected upcoming milestones.
Pfizer’s decision regarding its exclusive option to acquire development and commercialization rights to relugolix in oncology in the Pfizer Territory is expected by the end of October 2021.
Commercial launch of RYEQO in Europe is expected to begin in the second half of calendar year 2021, to be executed by Richter.
Marketing Authorization Application (“MAA”) submission to the European Medicines Agency (“EMA”) for RYEQO for the treatment of women with endometriosis-associated pain is expected in the second half of calendar year 2021. Richter will be the MAA sponsor.
FDA submission of the Phase 3 LIBERTY randomized withdrawal study results for MYFEMBREE in women with uterine fibroids is expected by the end of calendar year 2021.
European Commission decision on the advanced prostate cancer MAA is expected in calendar year 2022.
Effects of the COVID-19 Pandemic
In December 2019, an outbreak of a novel strain of coronavirus, or COVID-19, was identified. In March 2020, the World Health Organization categorized COVID-19 as a pandemic as it spread throughout the U.S. and other countries across the world. The COVID-19 pandemic and related public health measures, including orders to shelter-in-place, socially distance, close schools, restrict travel, and mandate business closures, adversely affected workforces, organizations, consumers and economies, which led to an economic downturn and which may cause market volatility and uncertainty in future periods. As vaccination rates against COVID-19 increase, many restrictions and public health guidelines have been recently eased. However new and potentially more virulent variants of the coronavirus have been recently identified, such as the delta variant, which may further impact the effects that the COVID-19 pandemic may have on us.
Our priorities during the COVID-19 pandemic have been to protect 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 have taken in response to the COVID-19 pandemic meet or exceed the guidelines established by 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 adopted remote working tools to minimize the disruption to our business activities. As vaccination rates against COVID-19 increase, we plan to ease restrictions to our facilities and allow our employees to return to work on-site. In June 2021, our oncology and women’s health sales forces and our medical affairs team resumed in-person interactions with healthcare professionals.
To date, the impact of the COVID-19 pandemic on our ability to advance our clinical studies, our regulatory activities, and our U.S. commercial launch activities for ORGOVYX and MYFEMBREE have been limited. The FDA approved ORGOVYX for the treatment of adult patients with advanced prostate cancer on December 18, 2020 and MYFEMBREE for the management of heavy menstrual bleeding associated with uterine fibroids on May 26, 2021. We and our collaboration partner, Pfizer, commercially launched ORGOVYX and MYFEMBREE in the U.S. in January 2021 and June 2021, respectively. 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, some physician’s offices continue to have limited on-site access for pharmaceutical representatives to reduce exposure risk for their patients or staff. Conducting these interactions virtually could reduce the number of medical professionals we are able to present to, and these virtual meetings may not be as impactful as in-person meetings. The COVID-19 pandemic has presented challenges for our medical affairs team to present scientific data and for our regional medical advisors to engage potential prescribers in scientific exchange. Multiple medical conferences have been cancelled, postponed or moved to virtual formats, resulting in fewer opportunities to present our scientific data and our medical affairs team members have only begun to make in-person presentations to the medical community. Communications to the medical community virtually in many instances may make it less effective to educate and engage in scientific exchange. Reduced access to healthcare providers as a result of social distancing protocols may impact or require adjustments to our planned commercialization activities, including the manner in which our field teams engage with healthcare providers and facilities. At this time, we do not believe that the COVID-19 pandemic has disproportionately impacted us relative to other companies in our industry. To date, we have not experienced supply constraints, and we believe we have procured sufficient quantities of relugolix drug substance to meet our U.S. ORGOVYX and MYFEMBREE launch plans.
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 commercial launch activities for
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ORGOVYX and MYFEMBREE, end user demand for our approved products, 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.
As vaccination rates against COVID-19 increase, we plan to ease restrictions to our facilities and allow our employees to return to work on-site during the third quarter of calendar year 2021. The safety protocols we implement as our employees return to work on-site may not prevent employees from contracting COVID-19. If members of our management and other key personnel in critical functions across our organization are unable to perform their duties or have limited availability due to illness from COVID-19, we may not be able to execute on our business strategy and/or our operations may be negatively impacted. The magnitude of the adverse effect on our business operations will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.
Refer to the risk factor titled “Business interruptions resulting from effects of pandemics or epidemics, such as the COVID-19 pandemic, may materially and 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.
Components of our Results of Operations
Revenues
We currently have two FDA-approved products, ORGOVYX for the treatment of adult patients with advanced prostate cancer and MYFEMBREE for the management of heavy menstrual bleeding associated with uterine fibroids, which generate product revenue in the U.S. We record product revenue net of estimated discounts, chargebacks, rebates, product returns, and other gross-to-net revenue deductions.
Our Pfizer collaboration revenue consists of the partial recognition of the upfront payment we received from Pfizer in December 2020 and of the regulatory milestone payment due from Pfizer that was triggered upon the FDA approval of MYFEMBREE for the management of heavy menstrual bleeding associated with uterine fibroids on May 26, 2021 (see Note 8(B) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).
Our Richter license and milestone revenue consists of the recognition of previously deferred revenue associated with upfront and regulatory milestone payments we received from Richter pursuant to the terms of the Richter Development and Commercialization Agreement in March 2020 and April 2020, respectively (see Note 8(A) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q). We recognize revenue as we satisfy our combined performance obligation to Richter.
Cost of Product Revenue
Our cost of product revenue is composed of the cost of goods sold and royalty expense. Our cost of goods sold consists of raw materials, third-party manufacturing costs to manufacture the raw materials into finished product, freight, and indirect overhead costs associated with sales of ORGOVYX and MYFEMBREE in the U.S. Our royalty expense consists of royalties on net sales of ORGOVYX and MYFEMBREE payable to Takeda pursuant to the terms of the Takeda License Agreement (see Note 9(D) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).
In connection with the FDA approvals of ORGOVYX (on December 18, 2020) and MYFEMBREE (on May 26, 2021), we subsequently began capitalizing inventory manufactured or purchased for each product after its respective approval date. As a result, we expensed certain manufacturing costs of ORGOVYX and MYFEMBREE as research and development (“R&D”) expenses prior to FDA approval and, therefore, these costs are not included in cost of goods sold.
Collaboration Expense to Pfizer
Our collaboration expense to Pfizer consists of Pfizer’s 50% share of net profits from sales of ORGOVYX and MYFEMBREE in the U.S. (see Note 8(B) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).
Research and Development Expenses
Our R&D expenses to date have been primarily attributable to the clinical development of our product candidates including the conduct of multiple Phase 3 and earlier clinical studies, the expansion of our team, and the initiation of activities in preparation for our anticipated commercial launches such as the establishment of our medical affairs function, as well as regulatory and
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certain manufacturing activities. Our R&D expenses include program-specific costs, as well as costs that are not allocated to a specific program.
Our program-specific costs primarily include third-party costs, which include expenses incurred under agreements with CROs and CMOs, the cost of consultants who assist with the development of our product candidates on a program-specific basis, investigator grants, sponsored research, manufacturing costs in connection with producing materials for use in conducting nonclinical and clinical studies, as well as costs related to pre-commercial manufacturing activities and regulatory submissions, and other third-party expenses directly attributable to the development of our product candidates.
Our unallocated R&D costs primarily include employee-related expenses, such as salaries, share-based compensation, fringe benefits and travel for employees engaged in R&D activities including clinical operations, biostatistics, regulatory, and medical affairs, and the cost of contractors and consultants who assist with R&D activities not specific to a program and costs associated with nonclinical studies.
R&D activities have been, and will continue to be, central to our business model. We currently expect R&D expenses for the year ending March 31, 2022, to be modestly lower than the R&D expenses incurred in the year ended March 31, 2021, largely due to our sharing of certain expenses with Pfizer pursuant to the Pfizer Collaboration and License Agreement. Overall, we expect declining spend on our Phase 3 clinical programs that are winding down to be offset primarily by incremental spend on new relugolix development programs, such as the Phase 3 SERENE study, and certain other lifecycle opportunities to potentially expand the commercial opportunity for the relugolix franchise, as well as post-marketing requirements as agreed upon with the FDA.
The duration, costs and timing of clinical studies and development of our product candidates will depend on a variety of factors that include, but are not limited to: the number of studies required for approval; the per patient study costs; the number of patients who participate in the studies; the number of sites included in the studies; the countries in which the studies are conducted; the length of time required to recruit and enroll eligible patients; the number of patients who fail to meet the study’s inclusion and exclusion criteria; the number of study drug doses that patients receive; the drop-out or discontinuation rates of patients; the potential additional safety monitoring or other studies requested by regulatory agencies; the duration of patient follow-up; the timing and receipt of regulatory approvals; the costs of clinical study materials; and the efficacy and safety profile of the product candidate.
In addition, the probability of commercial success for ORGOVYX and MYFEMBREE, or for any of our current or potential future product candidates, if approved, will depend on numerous factors, including competition, manufacturing capability and commercial viability. As a result, we are unable to determine with certainty to what extent we will generate net product revenue from commercialization and sale of any of our product candidates that receive regulatory approval. Our R&D activities may be subject to change from time to time as we evaluate our priorities and available resources.
We expect that certain R&D expenses will be shared equally with Pfizer pursuant to the Pfizer Collaboration and License Agreement.
Selling, General and Administrative Expenses
Our selling, general and administrative (“SG&A”) expenses consist primarily of personnel costs, including salaries, sales incentive compensation, bonuses, fringe benefits, and share-based compensation for our executive, finance, human resources, legal, information technology, commercial operations, marketing, market access, sales, and other administrative functions. Our SG&A expenses also include marketing programs, advertising, conferences, congresses, travel expenses, professional fees for legal, accounting, auditing and tax services, and costs related to rent and facilities, insurance, information technology, commercial operations, and general overhead. Our SG&A expenses also include costs incurred under our Market Access Services Agreement with Sunovion.
We expect SG&A expenses to increase in future periods as we continue to expand our sales and marketing infrastructure and capabilities as well as general administrative functions to support multiple product launches and commercialization activities. We expect SG&A expenses in future periods to include certain expenses related to our patient support programs such as free drug and patient assistance for qualified uninsured patients. The timing of these increased expenditures and their magnitude are primarily dependent on our commercial success and sales growth of ORGOVYX and MYFEMBREE, as well as the timing of any new product launches and other potential business and operational activities.
We expect that certain SG&A expenses will be shared equally with Pfizer pursuant to the Pfizer Collaboration and License Agreement.
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Interest Expense
Our interest expense consists of related party interest expense pursuant to the Sumitomo Dainippon Pharma Loan Agreement, which bears 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 and accretion of the financing component of the cost share advance from Pfizer (see Note 8(B) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).
Interest Income
Our interest income consists primarily of interest earned and the accretion of discounts to maturity for cash equivalents and marketable securities.
Foreign Exchange Gain
Our foreign exchange gain in the three months ended June 30, 2020 consists of the impact of changes in foreign currency exchange rates on our foreign exchange denominated liabilities, relative to the U.S. dollar. The impact of foreign currency exchange rates on our results of operations fluctuates period over period based on our foreign currency exposures resulting from changes in applicable exchange rates associated with our foreign denominated liabilities. Our primary foreign currency exposure has historically been the exchange rate between the Swiss franc and the U.S. dollar.
In December 2020, we changed the functional currency of our wholly-owned subsidiary in Switzerland, MSG, from the Swiss franc to the U.S. dollar. This change in functional currency was accounted for prospectively. As a result of this change, we currently expect that future impacts of changes in foreign currency exchange rates on our results of operations will not be significant. See Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed with the SEC on May 11, 2021.
Results of Operations
The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020 (in thousands):
Three Months Ended June 30,
 20212020
Revenues:
Product revenue, net$11,554 $— 
Pfizer collaboration revenue29,509 — 
Richter license and milestone revenue— 33,333 
Total revenues41,063 33,333 
Operating costs and expenses:
Cost of product revenue1,032 — 
Collaboration expense to Pfizer5,261 — 
Research and development30,880 44,186 
Selling, general and administrative61,212