Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Dec. 31, 2016 | Feb. 13, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | Axovant Sciences Ltd. | |
Entity Central Index Key | 1,636,050 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-31 | |
Entity Current Reporting Status | No | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 99,161,719 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2016 | Mar. 31, 2016 |
Current assets: | ||
Cash | $ 200,405 | $ 276,251 |
Prepaid expenses and other current assets | 4,234 | 4,865 |
Income tax receivable | 938 | 970 |
Total current assets | 205,577 | 282,086 |
Property and equipment, net | 159 | 89 |
Deferred tax assets | 323 | 323 |
Total assets | 206,059 | 282,498 |
Current liabilities: | ||
Accounts payable | 9,251 | 622 |
Due to Roivant Sciences Ltd. and Roivant Sciences, Inc. | 4,947 | 1,814 |
Accrued expenses | 25,397 | 8,319 |
Contingent payment liability | 0 | 5,000 |
Total current liabilities | 39,595 | 15,755 |
Total liabilities | 39,595 | 15,755 |
Commitments and contingencies (Note 8) | ||
Shareholders’ equity: | ||
Common shares, par value $0.00001 per share, 1,000,000,000 shares authorized, 99,161,719 and 99,150,000 issued and outstanding at December 31, 2016 and March 31, 2016 | 1 | 1 |
Additional paid-in capital | 448,773 | 420,934 |
Accumulated deficit | (282,310) | (154,192) |
Total shareholders’ equity | 166,464 | 266,743 |
Total liabilities and shareholders’ equity | $ 206,059 | $ 282,498 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2016 | Mar. 31, 2016 |
Common stock | ||
Common shares par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common shares authorized (in shares) | 1,000,000,000 | 1,000,000,000 |
Common shares issued (in shares) | 99,161,719 | 99,150,000 |
Common shares outstanding (in shares) | 99,161,719 | 99,150,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Operating expenses: | ||||
Research and development expenses | $ 36,630 | $ 34,324 | $ 93,980 | $ 53,209 |
General and administrative expenses | 11,342 | 28,230 | 33,422 | 49,364 |
Total operating expenses | 47,972 | 62,554 | 127,402 | 102,573 |
Loss before provision for income tax | (47,972) | (62,554) | (127,402) | (102,573) |
Income tax (benefit) expense | (161) | 802 | 716 | 901 |
Net loss | (47,811) | (63,356) | (128,118) | (103,474) |
Comprehensive loss | $ (47,811) | $ (63,356) | $ (128,118) | $ (103,474) |
Net loss per common share — basic and diluted (in dollars per share) | $ (0.48) | $ (0.64) | $ (1.29) | $ (1.11) |
Weighted average common shares outstanding - basic and diluted (in shares) | 99,161,719 | 99,150,000 | 99,157,415 | 92,914,909 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Operations and Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Research and development | ||||
Share-based compensation | $ 4,592 | $ 14,599 | $ 14,029 | $ 24,421 |
General and administrative | ||||
Share-based compensation | $ 3,739 | $ 24,457 | $ 13,800 | $ 39,537 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Shareholders' Equity - 9 months ended Dec. 31, 2016 - USD ($) $ in Thousands | Total | Common Shares | Additional Paid in Capital | Accumulated Deficit |
Balance at Mar. 31, 2016 | $ 266,743 | $ 1 | $ 420,934 | $ (154,192) |
Balance (in shares) at Mar. 31, 2016 | 99,150,000 | |||
Increase (Decrease) in Shareholders' Equity (Deficit) | ||||
Exercise of stock options | $ 10 | 10 | ||
Exercise of stock options (in shares) | 11,719 | |||
Share-based compensation expense | $ 19,718 | 19,718 | ||
Capital contribution —share-based compensation expense | 8,111 | 8,111 | ||
Net loss | (128,118) | (128,118) | ||
Balance at Dec. 31, 2016 | $ 166,464 | $ 1 | $ 448,773 | $ (282,310) |
Balance (in shares) at Dec. 31, 2016 | 99,161,719 |
Condensed Consolidated Stateme7
Condensed Consolidated Statement of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (128,118) | $ (103,474) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
In-process research and development expenses | 0 | 5,252 |
Share-based compensation | 27,829 | 63,958 |
Depreciation and amortization | 35 | 8 |
Changes in operating assets and liabilities: | ||
Prepaid expenses and other current assets | 631 | (3,814) |
Accounts payable | 8,629 | 3,153 |
Due to Roivant Sciences Ltd. and Roivant Sciences, Inc. | 3,133 | (781) |
Accrued liabilities | 17,078 | 5,469 |
Income tax receivable | 32 | 98 |
Net cash used in operating activities | (70,751) | (30,131) |
Cash flows from investing activities: | ||
Purchase of in-process research and development | 0 | (4,756) |
Purchase of furniture and equipment | (105) | (59) |
Net cash used in investing activities | (105) | (4,815) |
Cash flows from financing activities: | ||
Cash proceeds from issuance of common shares in initial public offering, net of underwriting discount | 0 | 336,893 |
Initial public offering costs paid | 0 | (2,351) |
Cash capital contribution from Roivant Sciences Ltd. | 0 | 750 |
Repayment of amounts due to Roivant Sciences Ltd. and Roivant Sciences, Inc. for amounts paid on behalf of the Company | 0 | (627) |
Payment of contingent liability | (5,000) | 0 |
Exercise of stock options | 10 | 0 |
Due to Roivant Sciences Ltd. and Roivant Sciences, Inc. for amounts paid on behalf of the Company | 0 | 279 |
Net cash (used in) provided by financing activities | (4,990) | 334,944 |
Net change in cash | (75,846) | 299,998 |
Cash—beginning of period | 276,251 | 0 |
Cash—end of period | 200,405 | 299,998 |
Supplemental disclosure of cash paid: | ||
Income Taxes | $ 684 | $ 804 |
Description of Business
Description of Business | 9 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | Description of Business Axovant Sciences Ltd., inclusive of its wholly-owned subsidiaries (the ‘‘Company’’) is a clinical-stage biopharmaceutical company focused on acquiring, developing and commercializing novel therapeutics for the treatment of dementia. The Company intends to develop a pipeline of product candidates to comprehensively address the cognitive, functional and behavioral aspects of dementia and related neurological disorders. The Company was founded on October 31, 2014 as a Bermuda Exempted Limited Company and a wholly-owned subsidiary of Roivant Sciences Ltd. (‘‘RSL’’), under the name Roivant Neurosciences Ltd. The Company changed its name to Axovant Sciences Ltd. in March 2015 . On February 24, 2015, Axovant Sciences, Inc. (“ASI”) was formed, and on March 7, 2015 it became a wholly-owned subsidiary of the Company based in the United States of America. In August 2016, the Company incorporated as its wholly-owned subsidiaries Axovant Holdings Limited (“AHL”), a private limited company incorporated under the laws of England and Wales, and Axovant Sciences GmbH (“ASG”), a company with limited liability formed under the laws of Switzerland. ASG holds the Company's intellectual property rights and will be the principal operating company for conducting its business. From its inception, the Company has devoted substantially all of its efforts to organizing and staffing the Company, raising capital, acquiring product candidates and preparing for and advancing its lead product candidates, intepirdine, previously referred to as RVT-101, and nelotanserin into clinical development for patients with Alzheimer's disease or Lewy body dementia. In addition, the Company has the rights to develop RVT-103, a combination of donepezil and a peripheral muscarinic receptor antagonist, and RVT-104, a combination of rivastigmine and a peripheral muscarinic receptor antagonist, and intends to develop these product candidates alone and in combination with intepirdine as potential treatments for patients with Alzheimer's disease or Lewy body dementia. The Company has determined that it has one operating and reporting segment. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies (A) Basis of Presentation: The Company’s fiscal year ends on March 31, and its fiscal quarters end on June 30, September 30, and December 31. The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“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 interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016 , filed with the Securities and Exchange Commission (“SEC”) on June 6, 2016. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented have been included. Operating results for the three and nine months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the year ending March 31, 2017, for any other interim period, or for any other future year. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (‘‘ASC’’) and Accounting Standards Update (‘‘ASU’’) of the Financial Accounting Standards Board (‘‘FASB’’). The condensed consolidated financial statements include the accounts of the Company and ASI, AHL and ASG, its wholly-owned subsidiaries. The Company has no unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. There have been no significant changes in the Company’s accounting policies from those disclosed in its Annual Report on Form 10-K for the fiscal year ended March 31, 2016, filed with the SEC on June 6, 2016. (B) Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company regularly evaluates estimates and assumptions related to assets, liabilities, costs and expenses, including compensation expense allocated to the Company under its services agreement with Roivant Sciences, Inc. (“RSI”), a wholly-owned subsidiary of RSL as well as contingent liabilities, share-based compensation and research and development costs. 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 that are not readily apparent from other sources. Actual results could differ from those estimates. (C) 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. Diluted net loss per common share is computed by dividing the net loss applicable to common shareholders by the diluted weighted-average number of common shares outstanding during the period calculated in accordance with the treasury stock method. Stock options to purchase 7.5 million common shares were not included in the calculation of diluted weighted-average common shares outstanding for the three and nine months ended December 31, 2016 because they were anti-dilutive. Stock options to purchase 5.7 million common shares were not included in the calculation of diluted weighted-average common shares outstanding for the three and nine months ended December 31, 2015 because they were anti-dilutive. (D) Financial Instruments: The Company utilizes fair value measurement guidance prescribed by accounting standards to value its financial instruments. The guidance establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. Fair value is identified 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. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a three-tier fair value hierarchy that distinguishes among the following: • Level 1-Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. • Level 2-Valuations are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. • Level 3-Valuations are based on inputs that are unobservable (supported by little or no market activity) and significant to the overall fair value measurement. To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s financial instruments consist of cash and accounts payable. These financial instruments are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature. (E) Recent Accounting Pronouncements: In February 2016, the FASB issued ASU No. 2016-02, ‘‘ Leases (Topic 842)’’ (ASU No. 2016-02), which is a comprehensive new lease standard that amends various aspects of existing accounting guidance for leases. The core principle of ASU No. 2016-02 will require lessees to present the assets and liabilities that arise from leases on their balance sheets. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the new standard and its impact on the Company's consolidated financial position and results of operations. In March 2016, the FASB issued ASU No. 2016-09, ‘‘Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ’’ (ASU No. 2016-09). This ASU makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation, and the financial statement presentation of excess tax benefits or deficiencies. ASU No. 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company expects to adopt this guidance when effective and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures. |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Dec. 31, 2016 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Accrued Expenses As of December 31, 2016 and March 31, 2016 the Company’s accrued expenses consisted of the following (in thousands): December 31, 2016 March 31, 2016 Research and development expenses $ 20,532 $ 5,659 Salaries, bonuses, and other compensation 2,246 1,893 Legal expenses 1,153 183 Other expenses 1,466 584 Total accrued expenses $ 25,397 $ 8,319 |
License Agreement
License Agreement | 9 Months Ended |
Dec. 31, 2016 | |
Research and Development [Abstract] | |
License Agreement | License Agreement In August 2016, the Company entered into an exclusive license agreement with Qaam Pharmaceuticals, LLC (“Qaam”) for intellectual property covering the combination of cholinesterase inhibitors with peripheral muscarinic receptor antagonists. The Company expects to develop and, if successful, commercialize products covered by the licensed intellectual property. The Company will initially develop RVT-103, a combination of a peripheral muscarinic receptor antagonist and donepezil. In addition, the Company expects to develop RVT-104, a combination of a peripheral muscarinic receptor antagonist and high-dose rivastigmine. The Company paid an initial license fee and expense reimbursement totaling $0.6 million , which was recorded as research and development expense in the accompanying condensed consolidated statements of operations and comprehensive loss. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions (A) Services Agreement: During 2015, the Company and ASI entered into a services agreement with RSI (the ‘‘Services Agreement’’) under which RSI has agreed to provide certain administrative and research and development services to the Company. The Company and ASI amended and restated the Services Agreement with RSI on October 13, 2015 effective for the fiscal year commencing April 1, 2015. Under the Services Agreement, as amended and restated, the Company pays or reimburses RSI for any expenses it, or third parties acting on its behalf, incurs for the Company. For any general and administrative and research and development activities performed by RSI employees, RSI charges back the employee compensation expense plus a pre-determined mark-up. Employee compensation expense, inclusive of base salary and fringe benefits, is determined based upon the relative percentage of time utilized on Company matters. All other costs are billed back at cost. The accompanying interim unaudited condensed consolidated financial statements include third-party expenses that have been paid by RSI and RSL. Under the Services Agreement, for the three months ended December 31, 2016 and 2015 , the Company incurred expenses of $1.9 million and $2.1 million respectively, inclusive of the mark-up. For the nine months ended December 31, 2016 and 2015 , the Company incurred expenses of $5.3 million and $5.4 million , respectively. In February 2017, the Company and ASI amended and restated the Services Agreement, effective as of December 13, 2016, to add ASG as a services recipient. In addition, in February 2017, ASG entered into a separate services agreement with Roivant Sciences GmbH ("RSG"), a wholly-owned subsidiary of RSL, effective as of December 13, 2016, for the provision of services by RSG to ASG in relation to the identification of potential product candidates and project management of clinical trials, as well as other services related to development, administrative and financial activities. (B) Family Relationships: Geetha Ramaswamy, MD, the Vice President, Medical Affairs for ASI, is the mother of Vivek Ramaswamy, the Chief Executive Officer of ASI and the Company’s principal executive officer. Shankar Ramaswamy, MD, the Vice President of Medical and Scientific Communications of ASI, is the brother of Vivek Ramaswamy. Sarah Friedhoff, Senior Business Operations and Research and Development Specialist of ASI, is the daughter of Lawrence Friedhoff, the Company's Chief Development Officer. Salary expenses were $65,000 and $62,500 for both Geetha Ramaswamy and Shankar Ramaswamy for the three months ended December 31, 2016 and 2015, respectively. Salary expenses were $194,167 and $187,500 for both Geetha Ramaswamy and Shankar Ramaswamy for the nine months ended December 31, 2016 and 2015, respectively. Salary expenses were $18,750 and $19,456 for Sarah Friedhoff for the three months ended December 31, 2016 and 2015, respectively. Salary expenses were $55,417 and $26,459 for Sarah Friedhoff for the nine months ended December 31, 2016 and 2015, respectively. |
Share-Based Compensation
Share-Based Compensation | 9 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Share-Based Compensation In March 2015, the Company adopted its 2015 Equity Incentive Plan (the ‘‘2015 Plan’’), under which 7.5 million of the Company’s common shares were originally reserved for grant. In May 2015, the Company’s Board of Directors amended the 2015 Plan to increase the number of common shares authorized for issuance thereunder to 9.5 million common shares. The amendment of the 2015 Plan became effective upon the execution of the underwriting agreement relating to the Company’s initial public offering of common shares in June 2015. On April 1, 2016, the number of common shares authorized for issuance increased automatically to 12.5 million in accordance with the terms of the 2015 Plan. At December 31, 2016 , a total of 5.0 million common shares were available for future grant under the 2015 Plan. At December 31, 2016 and 2015 , there were 7.5 million and 5.7 million options outstanding, respectively, with a weighted average exercise price of $7.23 and $4.34 , respectively. At December 31, 2016 , there were 2.3 million vested options. (A) Stock Options Granted to Employees and Directors: During the nine months ended December 31, 2016 and 2015 , the Company granted a total of 2.2 million and 1.5 million options, respectively, to its employees and directors, under the 2015 Plan. The Company recorded share-based compensation expense related to stock options issued to Company employees and directors of $5.2 million and $4.3 million , respectively, for the three months ended December 31, 2016 and 2015, and $18.0 million and $11.9 million , respectively, for the nine months ended December 31, 2016 and 2015. At December 31, 2016 , total unrecognized compensation expense related to non-vested options was $50.0 million and is expected to be recognized over the remaining weighted-average service period of 2.67 years . (B) Share-Based Compensation for Related Parties: (1) Stock Options Granted to Non-Employees: During the nine months ended December 31, 2016 and 2015 , the Company granted stock options to purchase 83,500 and 215,000 shares, respectively, of the Company's common stock to employees of RSI as compensation for support services provided to the Company. The fair value of the stock options granted to RSI employees is accounted for by the Company in accordance with the authoritative guidance for non-employee equity awards and is remeasured on each valuation date until performance is complete using the Black-Scholes pricing model. Each award is subject to a specified vesting schedule. Compensation expense will be recognized by the Company over the required service period to earn each award. The Company recorded $0.3 million and $0.7 million of share-based compensation expense for the three months ended December 31, 2016 and 2015, respectively, and $1.1 million and $1.3 million of share-based compensation expense for the nine months ended December 31, 2016 and 2015, respectively. The share-based compensation was recorded as research and development and general and administrative expense in the accompanying condensed consolidated statements of operations and comprehensive loss. The total remaining unrecognized compensation cost related to the non-vested stock options amounted to $4.0 million as of December 31, 2016 , which will be recognized over the weighted-average remaining requisite service period of 2.42 years. (2) Share-Based Compensation Allocated to the Company by RSL: The Company incurs share-based compensation expense for RSL common share awards and RSL options issued by RSL to RSI employees. Share-based compensation expense is allocated to the Company by RSL based upon the relative percentage of time utilized by RSI employees on Company matters. These share-based compensation amounts include compensation expense for BVC awards prior to the BVC Merger on December 4, 2015. On December 4, 2015, BVC Ltd. (‘‘BVC’’), a non-public entity, which held a non-controlling ownership interest in RSL, the parent of the Company, was merged with and into RSL (the ‘‘BVC Merger’’), with RSL as the surviving entity, as disclosed in Note E(1) to the audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2016. Prior to the BVC Merger, the Company recorded share-based compensation expense, in relation to the share-based awards issued by BVC to RSI employees based on the changes in fair value of BVC share-based awards. As these BVC share-based awards were not based on the Company's or RSL’s shares, they were remeasured at each reporting period date until performance was completed. As a result of the BVC Merger, all outstanding BVC share-based awards were converted into RSL common share awards, with the same vesting and forfeiture terms as the original grant. The RSL common share awards are fair valued on the date of grant and that fair value is recognized over the requisite service period. On December 8, 2015 following the BVC Merger, RSL was recapitalized in conjunction with a private financing. The estimated fair value of these RSL common share awards was determined by the valuation of RSL in the December 8, 2015 private financing. As RSL is a non-public entity, the majority of the inputs used to estimate the fair value of the BVC awards prior to the BVC Merger and the RSL common share awards following the BVC Merger are classified as level 3 due to their unobservable nature. Significant judgment and estimates were used to estimate the fair value of these awards, as they are not publicly traded. RSL common share awards are subject to specified vesting schedules and requirements (a mix of time-based, performance-based and corporate event-based, including targets for RSL’s post-IPO market capitalization and future financing events). The Company estimated the fair value of each RSL option on the date of grant using the Black-Scholes closed-form option-pricing model. The Company recorded share-based compensation expense of $2.6 million and $33.6 million , respectively, for the three months ended December 31, 2016 and 2015 and $8.1 million and $49.5 million , respectively, for the nine months ended December 31, 2016 and 2015, in relation to the RSL common share awards and options issued by RSL to RSI employees. (3) Share-Based Compensation for Family Members: The Company granted Geetha Ramaswamy, Shankar Ramaswamy and Sarah Friedhoff options to purchase 43,000 common shares, 43,000 common shares and 10,000 common shares, respectively, during the nine months ended December 31, 2016 as annual stock option grants in their capacities as employees of ASI. The Company recorded aggregate share-based compensation expense of $0.9 million and $0.9 million for the three months ended December 31, 2016 and 2015, respectively, and $2.7 million and $2.6 million for the nine months ended December 31, 2016 and 2015, respectively, in connection with these option grants. Shankar Ramaswamy, while previously employed by RSI, was also granted restricted stock in BVC. Following the BVC Merger, this restricted stock in BVC was converted into RSL common shares, subject to vesting and forfeiture terms consistent with the original grant. (Refer to Note 6(B)(2)).The Company recorded share-based compensation expense of $0.1 million and $0.2 million , respectively, for the three months ended December 31, 2016 and 2015 and $0.4 million and $0.4 million , respectively, for the nine months ended December 31, 2016 and 2015 related to the RSL common share awards held by Shankar Ramaswamy (inclusive of the compensation expense noted above for BVC awards prior to the BVC Merger on December 4, 2015), which the Company has recorded as research and development expense in the accompanying condensed consolidated statements of operations and comprehensive loss. At December 31, 2016 , total unrecognized compensation expense related to these non-vested RSL common share awards was $0.7 million and is expected to be recognized over the remaining weighted-average service period of 1.52 years . |
Income Taxes
Income Taxes | 9 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company’s provision for income taxes is based on income taxes in the United States, Switzerland and the United Kingdom. The effective income tax rate for the Company for the three months ended December 31, 2016 and 2015 was 0.3% and (1.3)% , respectively. The effective tax rate for the Company for the nine months ended December 31, 2016 and 2015 was (0.6)% and (0.9)% , respectively, primarily due to the organization of the Company as a Bermuda Exempted Limited Company, for which there is no current tax regime, due to the U.S. permanent unfavorable tax differences, and a valuation allowance that effectively eliminates the Company's net deferred tax assets in the United States. The Company assesses the realizability of its deferred tax assets at each balance sheet date based on available positive and negative evidence in order to determine the proper amount, if any, required for a valuation allowance. As a result of this assessment, a valuation allowance of $16.2 million and $6.9 million primarily related to share-based compensation has been recorded as of December 31, 2016 and March 31, 2016, respectively. The Company believes that it is more likely than not, given the weight of available evidence, that all other deferred tax assets will be realized. As of December 31, 2016 and March 31, 2016, the Company had an unrecognized tax benefit of $0.3 million and $0.3 million , respectively, which if recognized would be reflected as an income tax benefit. The Company files income tax returns in the United States for federal, state and local jurisdictions. The Company is subject to tax examinations for fiscal year 2015 and forward in all applicable tax jurisdictions. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company has entered into commitments under an asset purchase agreement with GlaxoSmithKline (“GSK”), a development, marketing, and supply agreement with Arena Pharmaceuticals, GmbH (“Arena”), amended its services agreement with RSI and entered into a separate service agreement with RSG (Refer to Note 5(A)) and a license agreement with Qaam Pharmaceuticals LLC (Refer to Note 4). Under the GSK agreement, the Company made a $ 5.0 million milestone payment in June 2016, which had been recorded as a contingent payment liability as of March 31, 2016 in the accompanying condensed consolidated balance sheet. In addition, the Company has entered into services agreements with third parties for pharmaceutical research and manufacturing activities. The manufacturing agreements can be terminated by the Company with 30 days written notice. The Company expects to enter into other commitments as its business further develops. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On February 2, 2017, the Company and its subsidiaries, AHL, ASG and ASI entered into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc., (“Hercules”), under which the Company, AHL and ASG (the "Borrowers") borrowed an aggregate of $ 55.0 million (the “Term Loan”). ASI has issued a guaranty of the Borrowers’ obligations under the Loan Agreement. At the closing of the Term Loan, the Borrowers paid Hercules a facility charge of $ 550,000 . The Term Loan bears interest at a variable per annum rate calculated for any day as the greater of either (i) the prime rate plus 6.80% , and (ii) 10.55% . Debt issuance fees paid to Hercules will be recorded as a discount on the debt and will be amortized to interest expense using the effective interest method over the life of the Loan Agreement. The Term Loan has a scheduled maturity date of March 1, 2021. The Borrowers are obligated to make monthly payments of accrued interest under the Loan Agreement until September 1, 2018, followed by monthly installments of principal and interest through March 1, 2021. The interest-only period may be extended until March 1, 2019 if the Company achieves certain clinical development milestones as set forth in the Loan Agreement. In connection with the Loan Agreement, the Borrowers and ASI, as guarantor, granted Hercules a first position lien on substantially all of their respective assets, excluding intellectual property. Prepayment of the Term Loan is subject to penalty. In connection with the Loan Agreement, the Company issued a warrant to Hercules, exercisable for an aggregate of 274,086 of the Company’s common shares at an exercise price of $ 12.04 per share (the “Warrant”). The Warrant may be exercised on a cashless basis, and is immediately exercisable through the earlier of (i) February 2, 2024 and (ii) the consummation of certain acquisition transactions involving the Company as set forth in the Warrant. The number of shares for which the Warrant is exercisable and the associated exercise price are subject to certain proportional adjustments as set forth in the Warrant. The Loan Agreement includes customary affirmative and restrictive covenants and representations and warranties, including a minimum cash covenant that applies commencing on July 1, 2017 and ceases to apply if the Company achieves certain clinical development milestones, as set forth in the Loan Agreement, a covenant against the occurrence of a “change in control,” financial reporting obligations, and certain limitations on indebtedness, liens (including a negative pledge on intellectual property and other assets), investments, distributions (including dividends), collateral, transfers, mergers or acquisitions, taxes, corporate changes, and deposit accounts. The Loan Agreement also includes customary events of default, including payment defaults, breaches of covenants following any applicable cure period, the occurrence of certain events that could reasonably be expected to have a “material adverse effect” as set forth in the Loan Agreement, cross acceleration to the debt and certain events relating to bankruptcy or insolvency. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% may be applied to the outstanding principal balance, and Hercules may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Loan Agreement. In addition, for so long as the Term Loan remains outstanding, the Company shall be required to use its commercially reasonable efforts to afford Hercules the opportunity to participate in future underwritten equity offerings of the Company’s common shares up to a specified amount. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation: The Company’s fiscal year ends on March 31, and its fiscal quarters end on June 30, September 30, and December 31. The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“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 interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016 , filed with the Securities and Exchange Commission (“SEC”) on June 6, 2016. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented have been included. Operating results for the three and nine months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the year ending March 31, 2017, for any other interim period, or for any other future year. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (‘‘ASC’’) and Accounting Standards Update (‘‘ASU’’) of the Financial Accounting Standards Board (‘‘FASB’’). The condensed consolidated financial statements include the accounts of the Company and ASI, AHL and ASG, its wholly-owned subsidiaries. The Company has no unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. There have been no significant changes in the Company’s accounting policies from those disclosed in its Annual Report on Form 10-K for the fiscal year ended March 31, 2016, filed with the SEC on June 6, 2016. |
Use of Estimates | Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company regularly evaluates estimates and assumptions related to assets, liabilities, costs and expenses, including compensation expense allocated to the Company under its services agreement with Roivant Sciences, Inc. (“RSI”), a wholly-owned subsidiary of RSL as well as contingent liabilities, share-based compensation and research and development costs. 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 that are not readily apparent from other sources. Actual results could differ from those estimates. |
Net Loss per Common Share | 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. Diluted net loss per common share is computed by dividing the net loss applicable to common shareholders by the diluted weighted-average number of common shares outstanding during the period calculated in accordance with the treasury stock method. Stock options to purchase 7.5 million common shares were not included in the calculation of diluted weighted-average common shares outstanding for the three and nine months ended December 31, 2016 because they were anti-dilutive. Stock options to purchase 5.7 million common shares were not included in the calculation of diluted weighted-average common shares outstanding for the three and nine months ended December 31, 2015 because they were anti-dilutive. |
Financial Instruments | Financial Instruments: The Company utilizes fair value measurement guidance prescribed by accounting standards to value its financial instruments. The guidance establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. Fair value is identified 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. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a three-tier fair value hierarchy that distinguishes among the following: • Level 1-Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. • Level 2-Valuations are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. • Level 3-Valuations are based on inputs that are unobservable (supported by little or no market activity) and significant to the overall fair value measurement. To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s financial instruments consist of cash and accounts payable. These financial instruments are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements: In February 2016, the FASB issued ASU No. 2016-02, ‘‘ Leases (Topic 842)’’ (ASU No. 2016-02), which is a comprehensive new lease standard that amends various aspects of existing accounting guidance for leases. The core principle of ASU No. 2016-02 will require lessees to present the assets and liabilities that arise from leases on their balance sheets. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the new standard and its impact on the Company's consolidated financial position and results of operations. In March 2016, the FASB issued ASU No. 2016-09, ‘‘Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ’’ (ASU No. 2016-09). This ASU makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation, and the financial statement presentation of excess tax benefits or deficiencies. ASU No. 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, with early adoption permitted. The Company expects to adopt this guidance when effective and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures. |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Dec. 31, 2016 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | As of December 31, 2016 and March 31, 2016 the Company’s accrued expenses consisted of the following (in thousands): December 31, 2016 March 31, 2016 Research and development expenses $ 20,532 $ 5,659 Salaries, bonuses, and other compensation 2,246 1,893 Legal expenses 1,153 183 Other expenses 1,466 584 Total accrued expenses $ 25,397 $ 8,319 |
Description of Business (Detail
Description of Business (Details) | 9 Months Ended |
Dec. 31, 2016segment | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of operating segments | 1 |
Number of reporting segments | 1 |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Details) - shares shares in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Stock options | ||||
Net Loss per Common Share | ||||
Anti-dilutive securities not included in calculation of common shares outstanding (in shares) | 7.5 | 5.7 | 7.5 | 5.7 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Mar. 31, 2016 |
Payables and Accruals [Abstract] | ||
Research and development expenses | $ 20,532 | $ 5,659 |
Salaries, bonuses, and other compensation | 2,246 | 1,893 |
Legal expenses | 1,153 | 183 |
Other expenses | 1,466 | 584 |
Total accrued expenses | $ 25,397 | $ 8,319 |
License Agreement (Details)
License Agreement (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expense | $ 36,630 | $ 34,324 | $ 93,980 | $ 53,209 | |
License Agreement with Qaam Pharmaceuticals, LLC | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expense | $ 600 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
RSI | ||||
Related Party Transaction [Line Items] | ||||
Expense under service agreement | $ 1,900,000 | $ 2,100,000 | $ 5,300,000 | $ 5,400,000 |
Geetha Ramaswamy | ||||
Related Party Transaction [Line Items] | ||||
Salary expense | 65,000 | 62,500 | 194,167 | 187,500 |
Shankar Ramaswamy | ||||
Related Party Transaction [Line Items] | ||||
Salary expense | 65,000 | 62,500 | 194,167 | 187,500 |
Sarah Friedhoff | ||||
Related Party Transaction [Line Items] | ||||
Salary expense | $ 18,750 | $ 19,456 | $ 55,417 | $ 26,459 |
Share-Based Compensation (Detai
Share-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |||||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Apr. 01, 2016 | May 31, 2015 | Mar. 31, 2015 | |
RSI | |||||||
Share-Based Compensation | |||||||
Share-based compensation expense | $ 2.6 | $ 33.6 | $ 8.1 | $ 49.5 | |||
Stock options | |||||||
Share-Based Compensation | |||||||
Share-based compensation expense | 0.9 | 0.9 | 2.7 | 2.6 | |||
Total unrecognized compensation expense, stock options | 50 | $ 50 | |||||
Remaining weighted-average service period | 2 years 8 months 1 day | ||||||
Stock options | Directors and Employees | |||||||
Share-Based Compensation | |||||||
Share-based compensation expense | 5.2 | 4.3 | $ 18 | $ 11.9 | |||
Stock options | RSI Employees | |||||||
Share-Based Compensation | |||||||
Number of options granted (in shares) | 83,500 | 215,000 | |||||
Share-based compensation expense | 0.3 | 0.7 | $ 1.1 | $ 1.3 | |||
Total unrecognized compensation expense, stock options | 4 | $ 4 | |||||
Remaining weighted-average service period | 2 years 5 months 1 day | ||||||
Stock options | Geetha Ramaswamy | |||||||
Share-Based Compensation | |||||||
Number of options granted (in shares) | 43,000 | ||||||
Stock options | Shankar Ramaswamy | |||||||
Share-Based Compensation | |||||||
Number of options granted (in shares) | 43,000 | ||||||
Stock options | Sarah Friedhoff | |||||||
Share-Based Compensation | |||||||
Number of options granted (in shares) | 10,000 | ||||||
Common share awards | RSL | |||||||
Share-Based Compensation | |||||||
Share-based compensation expense | 0.1 | $ 0.2 | $ 0.4 | $ 0.4 | |||
Remaining weighted-average service period | 1 year 6 months 7 days | ||||||
Total unrecognized compensation expense, common share awards | $ 0.7 | $ 0.7 | |||||
2015 Plan | Equity Incentive Plan | |||||||
Share-Based Compensation | |||||||
Number of shares reserved for grant (in shares) | 12,500,000 | 9,500,000 | 7,500,000 | ||||
Number of shares available for future grant (in shares) | 5,000,000 | 5,000,000 | |||||
2015 Plan | Stock options | |||||||
Share-Based Compensation | |||||||
Number of options outstanding (in shares) | 7,500,000 | 5,700,000 | 7,500,000 | 5,700,000 | |||
Weighted average exercise price of options outstanding (in dollars per share) | $ 7.23 | $ 4.34 | $ 7.23 | $ 4.34 | |||
Options vested (in shares) | 2,300,000 | 2,300,000 | |||||
Number of options granted (in shares) | 2,200,000 | 1,500,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |||||
Effective income tax rate | 0.30% | (1.30%) | (0.60%) | (0.90%) | |
Deferred tax asset, valuation allowance | $ 16.2 | $ 16.2 | $ 6.9 | ||
Unrecognized tax benefits | $ 0.3 | $ 0.3 | $ 0.3 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Millions | 1 Months Ended | 9 Months Ended |
Jun. 30, 2016 | Dec. 31, 2016 | |
Manufacturing Agreements | ||
Other Commitments [Line Items] | ||
Minimum notice period required to terminate contract | 30 days | |
GSK | ||
Other Commitments [Line Items] | ||
Contingent payment | $ 5 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event | Feb. 02, 2017USD ($)$ / sharesshares |
Subsequent Event [Line Items] | |
Warrants issued, number of common shares exercisable (in shares) | shares | 274,086 |
Exercise price of warrants (in USD per share) | $ / shares | $ 12.04 |
Loan and Security Agreement with Hercules Capital, Inc. | Term Loan | |
Subsequent Event [Line Items] | |
Amount borrowed | $ 55,000,000 |
Facility charge | $ 550,000 |
Loan and Security Agreement with Hercules Capital, Inc. | Term Loan | Minimum | |
Subsequent Event [Line Items] | |
Interest rate | 10.55% |
Default interest rate | 5.00% |
Loan and Security Agreement with Hercules Capital, Inc. | Term Loan | Prime Rate | |
Subsequent Event [Line Items] | |
Interest rate | 6.80% |