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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 September 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 October 22, 2021 was 93,309,055.


Table of Contents
MYOVANT SCIENCES LTD.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
 Page
 
2

Table of Contents
In this Quarterly Report on Form 10-Q (“Quarterly Report”), “Myovant,” “the Company,” “we,” “us” and “our” refer to Myovant Sciences Ltd. and its wholly-owned subsidiaries.
This report may contain references to our proprietary intellectual property, including among others, trademarks for our products, ORGOVYX® and MYFEMBREE®.
These trademarks and trade names are the property of Myovant or the property of our wholly-owned subsidiaries and are protected under applicable intellectual property laws. Solely for convenience, our trademarks and trade names referred to in this Quarterly Report may appear without the ® or other symbols, but such references are not intended to indicate in any way that the Company will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names.
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 our approved drug products, and our operating results will suffer if we fail to compete effectively.
If we or our collaboration partner, Pfizer, are found to have improperly promoted unapproved uses of our drug products, we may be subject to restrictions on the sale or marketing of our drug products and significant fines, penalties, sanctions and product liability claims, and our image and reputation within the industry and marketplace could be harmed.
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 may never achieve or maintain profitability.
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 a delay in our ability to develop and commercialize our products.
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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.
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)
September 30, 2021March 31, 2021
Assets  
Current assets:  
Cash and cash equivalents$518,163 $674,493 
Accounts receivable, net14,402 3,570 
Marketable securities97,848 10,435 
Inventories6,141 2,611 
Prepaid expenses and other current assets18,112 13,536 
Total current assets654,666 704,645 
Property and equipment, net3,297 3,300 
Operating lease right-of-use asset8,835 9,655 
Other assets12,742 7,427 
Total assets$679,540 $725,027 
Liabilities and shareholders’ deficit  
Current liabilities:  
Accounts payable$8,642 $17,809 
Accrued expenses and other current liabilities46,334 44,612 
Share-based compensation liabilities5,769 21,636 
Deferred revenue100,564 100,564 
Amounts due to Pfizer19,957 1,954 
Cost share advance from Pfizer84,768 92,415 
Operating lease liability1,968 1,807 
Amounts due to related parties334 543 
Total current liabilities268,336 281,340 
Deferred revenue, non-current426,021 397,369 
Cost share advance from Pfizer, non-current 29,447 
Long-term operating lease liability8,159 9,189 
Long-term debt, less current maturities (related party)358,700 358,700 
Other liabilities1,251 2,947 
Total liabilities1,062,467 1,078,992 
Commitments and contingencies (Note 9)
Shareholders’ deficit:  
Common shares, $0.000017727 par value, 564,111,242 shares authorized, 93,077,789 and 91,000,869 issued and outstanding at September 30, 2021 and March 31, 2021, respectively
2 2 
Additional paid-in capital763,755 709,466 
Accumulated other comprehensive loss(17,285)(17,285)
Accumulated deficit(1,129,399)(1,046,148)
Total shareholders’ deficit (382,927)(353,965)
Total liabilities and shareholders’ deficit$679,540 $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 September 30,Six Months Ended September 30,
 2021202020212020
Revenues:
Product revenue, net$21,063 $ $32,617 $ 
Pfizer collaboration revenue25,172  54,681  
Richter license and milestone revenue31,667  31,667 33,333 
Total revenues77,902  118,965 33,333 
Operating costs and expenses:
Cost of product revenue2,622  3,654  
Collaboration expense to Pfizer8,565  13,826  
Research and development26,280 40,521 57,160 84,707 
Selling, general and administrative (1)
58,781 31,316 119,993 54,144 
Total operating costs and expenses96,248 71,837 194,633 138,851 
Loss from operations(18,346)(71,837)(75,668)(105,518)
Interest expense (2)
3,494 2,115 6,999 4,299 
Interest income(100)(38)(178)(146)
Foreign exchange gain (6,718) (10,287)
Loss before income taxes(21,740)(67,196)(82,489)(99,384)
Income tax (benefit) expense(149)(134)762 538 
Net loss$(21,591)$(67,062)$(83,251)$(99,922)
Net loss per common share — basic and diluted$(0.23)$(0.75)$(0.90)$(1.12)
Weighted average common shares outstanding — basic and diluted92,355,150 89,744,142 92,019,987 89,523,389 
(1) Includes $1,173 and $2,447 of related party expense (inclusive of third-party pass-through costs) for the three and six months ended September 30, 2021, respectively. Includes $1,291 and $1,405 of related party expense (inclusive of third-party pass-through costs) for the three and six months ended September 30, 2020, respectively (see Note 5).
(2) Includes $2,885 and $5,789 of interest expense under the Sumitomo Dainippon Pharma Loan Agreement for the three and six months ended September 30, 2021, respectively. Includes $2,115 and $4,299 of interest expense under the Sumitomo Dainippon Pharma Loan Agreement for the three and six months ended September 30, 2020, respectively (see Note 5).
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MYOVANT SCIENCES LTD.
Condensed Consolidated Statements of Comprehensive Loss
(unaudited; in thousands)
Three Months Ended September 30,Six Months Ended September 30,
2021202020212020
Net loss$(21,591)$(67,062)$(83,251)$(99,922)
Other comprehensive loss:
Foreign currency translation adjustment (6,419) (9,894)
Total other comprehensive loss (6,419) (9,894)
Comprehensive loss$(21,591)$(73,481)$(83,251)$(109,816)
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 release 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)
Share-based compensation— — 11,863 — — 11,863 
Share-based compensation liabilities reclassified to equity upon settlement of awards— — 16,297 — — 16,297 
Share-based compensation reclassified to current liabilities— — (915)— — (915)
Issuance of shares upon exercise of stock options and release of restricted stock units and performance share units1,135,146 — 11,045 — — 11,045 
Net loss— — — — (21,591)(21,591)
Balance at September 30, 2021
93,077,789 $2 $763,755 $(17,285)$(1,129,399)$(382,927)

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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 release 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)
Share-based compensation— — 6,924 — — 6,924 
Issuance of shares upon exercise of stock options and release of restricted stock units and performance share units443,991 — 1,388 — — 1,388 
Foreign currency translation adjustment— — — (6,419)— (6,419)
Net loss— — — — (67,062)(67,062)
Balance at September 30, 2020
90,581,003 $2 $702,695 $(11,540)$(890,936)$(199,779)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MYOVANT SCIENCES LTD.
Condensed Consolidated Statements of Cash Flows
(unaudited; in thousands)
Six Months Ended September 30,
20212020
Cash flows from operating activities: 
Net loss$(83,251)$(99,922)
Adjustments to reconcile net loss to net cash used in operating activities: 
Share-based compensation23,125 14,736 
Depreciation and amortization (1)
1,536 1,146 
Non-cash interest expense1,210  
Foreign currency transaction gain (10,287)
Other 393 
Changes in operating assets and liabilities: 
Accounts receivable(10,832) 
Inventories(3,530) 
Prepaid expenses and other current assets(4,414)2,657 
Other assets1,798 (648)
Accounts payable(9,519)(8,326)
Interest payable (related party) (15)
Accrued expenses and other current liabilities1,722 11,081 
Deferred revenue28,652 (23,333)
Amounts due to Pfizer18,003  
Cost share advance from Pfizer(38,304) 
Operating lease liabilities(869)(728)
Amounts due to related parties(209)1,284 
Other liabilities(1,696)1,386 
Net cash used in operating activities(76,578)(110,576)
Cash flows from investing activities: 
Purchases of marketable securities(94,448)(28,874)
Maturities of marketable securities7,035 14,785 
Purchases of property and equipment(361)(734)
Net cash used in investing activities(87,774)(14,823)
Cash flows from financing activities: 
Proceeds from related party debt financing 140,000 
Proceeds from stock option exercises15,135 3,578 
Net cash provided by financing activities15,135 143,578 
Net change in cash, cash equivalents and restricted cash(149,217)18,179 
Cash, cash equivalents and restricted cash, beginning of period677,480 78,018 
Cash, cash equivalents and restricted cash, end of period$528,263 $96,197 
Non-cash financing activities:
Change in fair value of share-based awards recorded to additional paid-in capital$2,292 $ 
Equipment purchases included in accounts payable$352 $ 
Reclassification of share-based compensation liabilities to additional paid-in capital upon settlement of awards$18,159 $ 
Stock options exercised receivable, included in prepaid expenses and other current assets$162 $ 
(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 and August 2021, the European Commission and the Medicines and Healthcare products Regulatory Agency, respectively, 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 the European Union and the United Kingdom, respectively, for moderate to severe symptoms of uterine fibroids in adult women of reproductive age. In September 2021, the FDA accepted the Company’s supplemental New Drug Application (“sNDA”) for MYFEMBREE for the management of moderate to severe pain associated with endometriosis, setting a target action date of May 6, 2022. MYFEMBREE is also being evaluated for contraceptive efficacy in women with heavy menstrual bleeding associated with uterine fibroids or endometriosis-associated pain who are 18 to 50 years of age and at risk for pregnancy. 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 September 30, 2021, Sumitovant directly, and Sumitomo Dainippon Pharma indirectly, own 50,041,181, or approximately 53.8%, of the Company’s outstanding common shares.
Basis of Presentation and Principles of Consolidation
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.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (“Quarterly Report”) reflect all adjustments necessary for a fair presentation of the Company’s condensed consolidated balance sheets as of September 30, 2021 and March 31, 2021, and its condensed consolidated statements of operations, comprehensive loss, and shareholders’ deficit for the three and six months ended September 30, 2021 and 2020, and its condensed consolidated statements of cash flows for the six months ended September 30, 2021 and 2020. The March 31, 2021 condensed consolidated balance sheet was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP. The results for interim periods are not necessarily indicative of results for the entire year or any other interim period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s previously filed audited consolidated financial statements and the related 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.

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
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Standards Board (“FASB”). The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the accompanying notes, and the reported amounts of revenue and expenses during the reported periods. Actual results could differ materially from those estimates.

On an ongoing basis, management evaluates its estimates, including those related to valuation of inventories, impairment testing for long-lived-assets, variables used in calculating the fair value of the Company’s equity awards, expected achievement of performance-based vesting criteria for equity awards, variable consideration and other relevant inputs impacting the gross and net revenue recognition, contingent liabilities, recoverability of deferred tax assets, determination of lease term and effective income tax rates. Management bases estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities as of the date of the condensed 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. 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.
Summary of Significant Accounting Policies
The accounting policies used by the Company in its presentation of interim financial results are consistent with those 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 September 30, 2021, the Company had approximately $616.0 million in cash, cash equivalents, and marketable securities. The Company 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.
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 September 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, 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 the Richter Development and Commercialization Agreement. See Note 8 for additional information about 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 available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted-average number of common shares and potentially dilutive shares of common stock outstanding during the period. Potential dilutive securities outstanding include stock options, restricted stock units, performance stock units, and warrants. During all periods presented, the Company incurred net losses. Accordingly, the effect of any common share equivalents would be anti-dilutive during those periods and are not included in the calculation of diluted weighted-average number of common shares outstanding.
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As of September 30, 2021 and 2020 potentially dilutive securities were as follows:
September 30,
20212020
Stock options7,747,596 8,484,057 
Restricted stock awards (unvested) 564,111 
Restricted stock units and performance stock units (unvested)4,734,445 3,425,358 
Warrants73,710 73,710 
Total12,555,751 12,547,236 
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 September 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 for the three and six months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended September 30,Six Months Ended September 30,
2021202020212020
Revenues:
Product revenue, net:
ORGOVYX$18,663 $ $29,142 $ 
MYFEMBREE629  1,704  
Richter product supply and royalties1,771  1,771  
Total product revenue, net21,063  32,617  
Pfizer collaboration revenue:
Amortization of upfront payment20,974  41,948  
Amortization of regulatory milestone4,198  12,733  
Total Pfizer collaboration revenue25,172  54,681  
Richter license and milestone revenue31,667  31,667 33,333 
Total revenues$77,902 $ $118,965 $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. For the three and six months ended September 30, 2021, product revenue, net also includes revenues related to product supply to Richter of $1.7 million, as well as royalties on net sales of RYEQO in Richter’s Territory of less than $0.1 million.
Pfizer collaboration revenue for the three and six months ended September 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 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 was no Pfizer collaboration revenue in the prior year periods.
Richter license and milestone revenue for the three and six months ended September 30, 2021 consists of the recognition of a $15.0 million regulatory milestone payment that was triggered upon the European Commission approval of RYEQO for the treatment of moderate to severe symptoms of uterine fibroids in adult women of reproductive age and $16.7 million of previously deferred revenue that was recognized upon the completion of the Company’s delivery of the remaining substantive relugolix combination tablet data packages to Richter. Richter license and milestone revenue for the six months ended September 30, 2020 consists of the recognition of $33.3 million of the upfront and regulatory milestone payments the Company received from Richter in March and April 2020, respectively. There was no Richter license and milestone revenue for the three months ended September 30, 2020.
See Note 8 for additional information regarding the Pfizer Collaboration and License Agreement and the Richter Development and Commercialization Agreement.
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Note 3—Certain Balance Sheet Components
Cash, Cash Equivalents and Restricted Cash
The following represents a reconciliation of cash and cash equivalents in the unaudited condensed consolidated balance sheets to total cash, cash equivalents and restricted cash as of September 30, 2021 and September 30, 2020, respectively, in the unaudited condensed consolidated statements of cash flows (in thousands):
September 30,
20212020
Cash and cash equivalents$518,163 $94,210 
Restricted cash10,100 1,987 
Total cash, cash equivalents and restricted cash$528,263 $96,197 
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 September 30, 2021, restricted cash includes approximately $7.1 million that is held in an escrow fund for use by Sunovion Pharmaceuticals Inc. (“Sunovion”), a subsidiary of Sumitomo Dainippon Pharma, to manage payments for rebates, chargebacks, and similar fees pursuant to the Market Access Services Agreement (see Note 5(C)).
Inventories
As of September 30, 2021 and March 31, 2021, inventories consisted of the following (in thousands):
September 30, 2021March 31, 2021
Raw materials$931 $1,390 
Work in process1,960 773 
Finished goods3,250 448 
Total inventories$6,141 $2,611 
Accrued Expenses and Other Current Liabilities
As of September 30, 2021 and March 31, 2021, accrued expenses and other current liabilities consisted of the following (in thousands):
September 30, 2021March 31, 2021
Accrued compensation-related expenses$17,111 $20,571 
Accrued sales discounts, rebates, and allowances10,493 1,315 
Accrued R&D expenses7,354 8,544 
Accrued commercial expenses7,226 7,770 
Accrued other expenses3,525 5,315 
Accrued professional fees625 935 
Deferred product revenue 162 
Total accrued expenses and other current liabilities$46,334 $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
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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.
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 September 30, 2021
Assets:
Money market funds (1)
$913 $ $ $913 
Commercial paper (2)
 214,829  214,829 
Corporate bonds (3)
 4,002  4,002 
Total assets$913 $218,831 $ $219,744 
Liabilities:
Share-based compensation liabilities - stock options (4)
$ $5,769 $ $5,769 
Total liabilities$ $5,769 $ $5,769 
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 $121.0 million in cash and cash equivalents and $93.8 million in marketable securities as of September 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.
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(4) Includes 573,958 and 1,281,803 outstanding stock options remeasured using the Black-Scholes option-pricing model as of September 30, 2021 and March 31, 2021, respectively. See Note 7(D).
(5) 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(D).
The following table includes information regarding the Company’s share-based compensation liabilities (a current liability) for the six months ended September 30, 2021 (in thousands):
March 31, 2021$21,636 
Change in fair value2,292 
Settlements(18,159)
September 30, 2021
$5,769 
The fair value of the share-based compensation liabilities related to outstanding stock options was estimated as of September 30, 2021 using the Black-Scholes option-pricing model and the following assumptions:
Expected common share price volatility48.7 %
Expected risk free interest rate0.04 %
Expected term, in years0.3
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 September 30, 2021 and March 31, 2021.
Note 5—Related Party Transactions
As of September 30, 2021, Sumitovant directly, and Sumitomo Dainippon Pharma indirectly, own 50,041,181, or approximately 53.8%, 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, Myovant Sciences GmbH (“MSG”), entered into a loan agreement with Sumitomo Dainippon Pharma (the “Sumitomo Dainippon Pharma Loan Agreement”). Pursuant to the Sumitomo Dainippon Pharma Loan Agreement, Sumitomo Dainippon Pharma agreed to make revolving loans to the Company in an aggregate principal amount of up to $400.0 million. 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
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industry accepted successor rates for determining a LIBOR replacement. The Company’s obligations under the Sumitomo Dainippon Pharma Loan Agreement are fully and unconditionally guaranteed by the Company and its subsidiaries. The loans and other obligations are senior unsecured obligations of the Company, MSG, and subsidiary guarantees. The Sumitomo Dainippon Pharma Loan Agreement includes customary representations and warranties and affirmative and negative covenants.
The Sumitomo Dainippon Pharma Loan Agreement also includes customary events of default, including payment defaults, breaches of representations and warranties, breaches of covenants following any applicable cure period, cross acceleration to certain other debt, failure to pay certain final judgments, certain events relating to bankruptcy or insolvency, failure of material provisions of the loan documents to remain in full force and effect or any contest thereto by the Company or any of its subsidiaries and certain breaches by the Company under the Investor Rights Agreement. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% will apply to the outstanding principal amount of the loans, Sumitomo Dainippon Pharma may terminate its obligations to make loans to the Company and declare the principal amount of loans to become immediately due and payable, and Sumitomo Dainippon Pharma may take such other actions as set forth in the Sumitomo Dainippon Pharma Loan Agreement. Upon the occurrence of certain bankruptcy and insolvency events, the obligations of Sumitomo Dainippon Pharma to make loans to the Company would automatically terminate and the principal amount of the loans would automatically become due and payable. In addition, if it becomes unlawful for Sumitomo Dainippon Pharma to maintain the loans under the Sumitomo Dainippon Pharma Loan Agreement or within 30 days of a change of control with respect to the Company, the Company would be required to repay the outstanding principal amount of the Loans.
As of September 30, 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 $5.8 million for the three and six months ended September 30, 2021, respectively, and $2.1 million and $4.3 million for the three and six months ended September 30, 2020, respectively, and is included 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 and its subsidiaries to support commercial planning, commercial launch, and implementation activities. Adele Gulfo, Sumitovant’s Chief Business and Commercial
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Development Officer and a member of the Company’s board of directors, provided services to the Company on behalf of Sumitovant under this agreement. For the three and six months ended September 30, 2020, the Company incurred $0.2 million and $0.3 million, respectively, of expense under this consulting agreement, which are included in SG&A expenses in the unaudited condensed consolidated statements of operations. The term of the consulting agreement with Sumitovant expired on March 31, 2021.
The Company’s outstanding obligation to Sumitovant was $0.1 million as of March 31, 2021, and is included in amounts due to related parties on the unaudited condensed consolidated balance sheet. No amounts were outstanding to Sumitovant as of September 30, 2021.
(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 (“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 payments for rebates, chargebacks and similar fees (see Note 3). For the three and six months ended September 30, 2021, the Company incurred $1.2 million and $2.4 million of expense 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 statements of operations. For the three and six months ended September 30, 2020, the Company incurred $1.1 million of expense under this agreement (inclusive of third-party pass-through costs billed to the Company), which is included in SG&A expenses in the unaudited condensed consolidated statements of operations. As of September 30, 2021 and March 31, 2021, the Company’s outstanding obligation pursuant to this agreement was $0.3 million and $0.4 million, respectively, and are included in amounts due to related parties 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
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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.
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 and six months ended September 30, 2021 was 0.69% and (0.92)%, respectively. The Company’s effective tax rate for the three and six months ended September 30, 2020 was 0.20% and (0.54)%, 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. The evaluation of the need for a valuation allowance is performed on a jurisdiction-by-jurisdiction basis, and includes a review of all available positive and negative evidence. Factors reviewed include projections of pre-tax book income for the foreseeable future, determining of cumulative pre-tax book income after permanent differences, earnings history, and reliability of forecasting. The Company will continue to assess the need for a valuation allowance on its deferred tax assets by evaluating both positive and negative evidence that may exist. Any adjustment to the net deferred tax asset valuation allowance would be recorded in the consolidated statement of operations for the period that the adjustment is determined to be required.
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 had 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 September 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. 2016 Equity Incentive Plan (“Equity Incentive Plan”) and the Myovant Sciences Ltd. 2020 Inducement Plan (“Inducement Plan”) (collectively, the “Equity Plans”). As of September 30, 2021, there were approximately 2.6 million and 0.1 million common shares available for future issuance under the Equity Incentive Plan and the Inducement Plan, respectively. For additional information about the Company’s Equity Plans, see Note 10, “Share-Based Compensation,” 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.
(A) Stock Options
Activity for stock options for the six months ended September 30, 2021 is as follows:
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Number of Options
Options outstanding at March 31, 2021
8,293,331 
Granted
1,057,349 
Exercised
(1,255,578)
Forfeited
(347,506)
Options outstanding at September 30, 2021
7,747,596 
Options vested and expected to vest at September 30, 2021
7,747,596 
Options exercisable at September 30, 2021
4,942,410 
(B) Restricted Stock and Performance Stock Units
Activity for restricted stock units and performance stock units for the six months ended September 30, 2021 is as follows:
Number of Shares
Unvested balance at March 31, 2021
3,571,235 
Granted2,691,005 
Vested(821,342)
Forfeited(706,453)
Unvested balance at September 30, 2021
4,734,445 
(C) Share-Based Compensation
Share-based compensation during the three and six months ended September 30, 2021 and 2020 was as follows (in thousands):
Three Months Ended September 30,Six Months Ended September 30,
2021202020212020
Share-based compensation recognized as:
R&D expense$5,060 $3,725 $9,167 $7,749 
SG&A expense6,803 3,199 13,958 6,987 
Total$11,863 $6,924 $23,125 $14,736 
Total unrecognized share-based compensation was approximately $109.6 million as of September 30, 2021 and is expected to be recognized over a weighted-average period of approximately 3.02 years.
(D) 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 and six months ended September 30, 2021 includes $0.9 million and $2.3 million, respectively, 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 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 September 30, 2021, a total of 573,958 outstanding stock options 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 September 30, 2021 and March 31, 2021, $5.8 million and $21.6 million, respectively, is included in share-based compensation liabilities on the unaudited condensed consolidated balance sheets.
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(E) Separation Agreement with Former Principal Financial and Accounting Officer
In August 2021, the Company entered into a Separation Agreement and General Release with its former Principal Financial and Accounting Officer. Pursuant to the terms of this agreement, 25% of the former Principal Financial and Accounting Officer’s then outstanding and unvested equity awards became fully vested. In addition, the post-termination period during which he may exercise his outstanding stock options was extended to six months. The Company recognized share-based compensation expense within SG&A expenses during the three and six months ended September 30, 2021 of approximately $1.3 million, consisting of share-based compensation expense related to the accelerated vesting of these equity awards and incremental share-based compensation expense related to the modification of the post-termination exercise period.
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 $25.0 million has been received), $107.5 million in sales-related milestones, and tiered royalties on net sales following regulatory approval.
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 six months ended September 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 six months ended September 30, 2020. There was no such revenue in the three months ended September 30, 2020. The Company recognized the remaining $16.7 million of the transaction price as Richter license and milestone revenue during the three and six months ended September 30, 2021, as the Company completed delivery of the remaining substantive relugolix combination tablet data packages to Richter.
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 from Richter, which the Company recorded as Richter license and milestone revenue during the three and six months ended September 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 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.
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(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”). Pfizer notified the Company on October 22, 2021 of their decision to decline this option.
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.
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. 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).
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
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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 milestones, 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.