Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Sep. 30, 2017 | Nov. 09, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | Myovant Sciences Ltd. | |
Entity Central Index Key | 1,679,082 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 60,987,597 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2017 | Mar. 31, 2017 |
Current assets: | ||
Cash | $ 129,332 | $ 180,838 |
Prepaid expenses and other current assets | 3,738 | 3,221 |
Income tax receivable | 0 | 105 |
Total current assets | 133,070 | 184,164 |
Deferred tax assets | 0 | 208 |
Furniture and equipment, net | 965 | 906 |
Other assets | 2,098 | 0 |
Total assets | 136,133 | 185,278 |
Current liabilities: | ||
Accounts payable | 1,354 | 3,329 |
Income tax payable | 456 | 0 |
Accrued expenses | 14,547 | 11,978 |
Due to Roivant Sciences Ltd. and Roivant Sciences, Inc. | 731 | 3,030 |
Total current liabilities | 17,088 | 18,337 |
Warrant liability | 0 | 52 |
Deferred rent | 326 | 113 |
Total liabilities | 17,414 | 18,502 |
Commitments and contingencies (Note 7) | ||
Shareholders’ equity: | ||
Common shares, par value $0.000017727 per share, 564,111,242 shares authorized, 60,849,236 and 60,275,757 issued and outstanding at September 30, 2017 and March 31, 2017, respectively | 1 | 1 |
Common shares subscribed | (1) | (1) |
Additional paid-in capital | 256,875 | 251,733 |
Accumulated other comprehensive income | 288 | 140 |
Accumulated deficit | (138,444) | (85,097) |
Total shareholders’ equity | 118,719 | 166,776 |
Total liabilities and shareholders’ equity | $ 136,133 | $ 185,278 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2017 | Mar. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common shares par value (in USD per share) | $ 0.000017727 | $ 0.000017727 |
Common shares authorized (in shares) | 564,111,242 | 564,111,242 |
Common shares issued (in shares) | 60,849,236 | 60,275,757 |
Common shares outstanding (in shares) | 60,849,236 | 60,275,757 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Operating expenses: | ||||
Research and development (includes $679 and $814 of share-based compensation expense for the three months ended September 30, 2017 and 2016 and $1,539 and $1,789 for the six months ended September 30, 2017 and 2016, respectively) | $ 24,170 | $ 3,753 | $ 41,878 | $ 18,326 |
General and administrative (includes $2,070 and $1,336 of share-based compensation expense for the three months ended September 30, 2017 and 2016 and $3,411 and $2,982 for the six months ended September 30, 2017 and 2016, respectively) | 6,141 | 2,967 | 10,323 | 5,529 |
Total operating expenses | 30,311 | 6,720 | 52,201 | 23,855 |
Other expenses: | ||||
Changes in the fair value of the warrant liability | 0 | 27,984 | 0 | 29,817 |
Other (income) expense | (138) | 0 | 204 | 0 |
Loss before provision for income taxes | (30,173) | (34,704) | (52,405) | (53,672) |
Income tax (benefit) expense | (265) | 8 | 820 | 11 |
Net loss | $ (29,908) | $ (34,712) | $ (53,225) | $ (53,683) |
Net loss per common share — basic and diluted (in USD per share) | $ (0.50) | $ (0.82) | $ (0.90) | $ (1.29) |
Weighted average common shares outstanding — basic and diluted (in shares) | 59,459,500 | 42,512,254 | 59,353,966 | 41,646,657 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Research and development | ||||
Share-based compensation | $ 679 | $ 814 | $ 1,539 | $ 1,789 |
General and administrative | ||||
Share-based compensation | $ 2,070 | $ 1,336 | $ 3,411 | $ 2,982 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (29,908) | $ (34,712) | $ (53,225) | $ (53,683) |
Other comprehensive (loss) income: | ||||
Foreign currency translation adjustment | (116) | 0 | 148 | 0 |
Total other comprehensive (loss) income | (116) | 0 | 148 | 0 |
Comprehensive loss | $ (30,024) | $ (34,712) | $ (53,077) | $ (53,683) |
Condensed Consolidated Stateme7
Condensed Consolidated Statement of Shareholders' Equity - USD ($) $ in Thousands | Total | Common Shares | Common Shares Subscribed | Additional Paid in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Adjustment to adopt ASU 2016-09 | $ 0 | $ 122 | $ (122) | |||
Beginning balance (in shares) at Mar. 31, 2017 | 60,275,757 | 60,275,757 | ||||
Beginning balance at Mar. 31, 2017 | $ 166,776 | $ 1 | $ (1) | 251,733 | $ 140 | (85,097) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Shares issued to settle the warrant liability to Takeda (in shares) | 4,432 | |||||
Shares issued to settle the warrant liability to Takeda | 58 | $ 0 | 58 | |||
Share-based compensation expense (in shares) | 564,111 | |||||
Share-based compensation expense | 4,473 | $ 0 | 4,473 | |||
Capital contribution — share-based compensation | 477 | 477 | ||||
Translation adjustment | 148 | 148 | ||||
Stock option exercises (in shares) | 4,936 | |||||
Stock option exercises | 12 | 12 | ||||
Net loss | $ (53,225) | (53,225) | ||||
Ending balance (in shares) at Sep. 30, 2017 | 60,849,236 | 60,849,236 | ||||
Ending balance at Sep. 30, 2017 | $ 118,719 | $ 1 | $ (1) | $ 256,875 | $ 288 | $ (138,444) |
Condensed Consolidated Stateme8
Condensed Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (53,225,000) | $ (53,683,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Share-based compensation | 4,950,000 | 4,771,000 |
Depreciation | 104,000 | 1,000 |
Acquisition of in-process research and development | 0 | 13,117,000 |
Changes in the fair value of the warrant liability | 0 | 29,817,000 |
Unrealized currency translation | 148,000 | 0 |
Changes in operating assets and liabilities: | ||
Prepaid expenses and other current assets | (517,000) | (38,000) |
Deferred tax assets | 208,000 | 0 |
Other assets | (2,098,000) | (100,000) |
Accounts payable | (1,975,000) | 370,000 |
Income tax payable | 561,000 | 1,000 |
Accrued expenses | 2,569,000 | 1,043,000 |
Due to Roivant Sciences Ltd. and Roivant Sciences, Inc. | (2,299,000) | 4,014,000 |
Deferred rent | 213,000 | 0 |
Net cash used in operating activities | (51,361,000) | (687,000) |
Cash flows from investing activities: | ||
Purchases of furniture and equipment | (157,000) | 0 |
Net cash used in investing activities | (157,000) | 0 |
Cash flows from financing activities: | ||
Cash capital contribution from Roivant Sciences Ltd. | 0 | 831,000 |
Stock option exercises | 12,000 | 0 |
Deferred initial public offering costs | 0 | (71,000) |
Net cash provided by financing activities | 12,000 | 760,000 |
Net change in cash | (51,506,000) | 73,000 |
Cash—beginning of period | 180,838,000 | 0 |
Cash—end of period | 129,332,000 | 73,000 |
Non-cash investing and financing activities: | ||
Deferred initial public offering costs, unpaid | 0 | 1,603,000 |
Acquisition of in-process research and development | $ 0 | $ 13,117,000 |
Description of Business
Description of Business | 6 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | Description of Business Myovant Sciences Ltd. (or together with its wholly owned subsidiaries, the Company) is a clinical-stage biopharmaceutical company focused on developing and commercializing innovative therapies for women’s health and endocrine diseases. The Company is developing its lead product candidate, relugolix, for the treatment of heavy menstrual bleeding associated with uterine fibroids, endometriosis-associated pain and advanced prostate cancer, and its second product candidate, MVT-602, for the treatment of female infertility as part of assisted reproduction. The Company is an exempted limited company incorporated under the laws of Bermuda in February 2016 under the name Roivant Endocrinology Ltd. The Company changed its name to Myovant Sciences Ltd., or MSL, in May 2016. The Company has four wholly owned subsidiaries. Roivant Endocrinology Inc. was incorporated in Delaware in April 2016 and subsequently changed its name to Myovant Sciences, Inc., or MSI. Myovant Holdings Limited, or MHL, a private limited company incorporated under the laws of England and Wales, and Myovant Sciences GmbH, or MSG, a company with limited liability formed under the laws of Switzerland, were each organized in August 2016. Myovant Sciences Ireland Limited, or MSIL, a company with limited liability formed under the laws of Ireland, was organized in April 2017. MSG holds the Company's intellectual property rights and is the Company’s principal operating subsidiary. Since its inception, the Company has devoted substantially all its efforts to organizing the Company, acquiring its product candidates, and preparing for and advancing the clinical development of its product candidates. The Company has two product candidates under development, relugolix and MVT-602, both of which were licensed from Takeda Pharmaceuticals International AG, or Takeda, on April 29, 2016. 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 Company has incurred and expects to continue to incur significant and increasing operating losses and negative cash flows at least for the next several years. The Company does not expect to generate revenue unless and until it successfully completes development and obtains regulatory approval for one of its product candidates. The Company believes it currently has sufficient funds to meet its financial needs for at least the next 12 months. The Company may need to obtain further funding through other public or private offerings of its capital shares, debt financing, collaboration and licensing arrangements or other sources. Adequate additional funding may not be available to the Company on acceptable terms, or at all. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Sep. 30, 2017 | |
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 unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or 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, 2017, filed with the Securities and Exchange Commission, or SEC, on June 14, 2017. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented have been included. Operating results for the three and six months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending March 31, 2018 , for any other interim period or for any other future year. Certain prior year amounts have been reclassified to conform with the current period presentation. These reclassifications had no effect on the previously reported results of operations. Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company has no unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. 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, 2017, filed with the SEC on June 14, 2017. (B) Use of Estimates: The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in certain circumstances that affect the amounts reported and disclosed in the unaudited condensed consolidated 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 agreements with Roivant Sciences, Inc., or RSI, and Roivant Sciences GmbH, or RSG, each a wholly owned subsidiary of the Company’s parent company, Roivant Sciences Ltd., or RSL, as well as share-based compensation, research and development, or R&D, costs, and income taxes. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period, 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, reduced where applicable for outstanding yet unvested shares of restricted common stock. 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. For the three and six months ended September 30, 2017 , 1.3 million restricted share awards and restricted stock units and 2.2 million options to purchase common shares were not included in the calculation of diluted weighted-average common shares outstanding because they were anti-dilutive given the net loss of the Company. For the three and six months ended September 30, 2016 , 1.1 million restricted share awards and 1.2 million options to purchase common shares were not included in the calculation of diluted weighted-average common shares outstanding because they were anti-dilutive given the net loss of the Company. (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 at the reporting date. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a three-tier fair value hierarchy that distinguishes among the following: • Level 1-Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. • Level 2-Valuations are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. • Level 3-Valuations are based on inputs that are unobservable (supported by little or no market activity) and significant to the overall fair value measurement. To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s financial instruments include cash 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) Recently Issued Accounting Pronouncements: In February 2016, the FASB issued ASU No. 2016-02, “ Leases (Topic 842),” or 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 statements and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, ‘‘ Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, ’’ or 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 Company has adopted this guidance as of April 1, 2017 using a modified retrospective transition method. As a result of the adoption of this standard, the Company elected to change its accounting policy from estimating forfeitures to recognizing forfeitures when they occur and, as a result, recorded an adjustment of $0.1 million to accumulated deficit with a corresponding offset to additional paid-in-capital as of April 1, 2017. The other amended requirements of ASU No. 2016-09 did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures. |
Accrued Expenses
Accrued Expenses | 6 Months Ended |
Sep. 30, 2017 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Accrued Expenses As of September 30, 2017 , and March 31, 2017 , accrued expenses consisted of the following (in thousands): September 30, 2017 March 31, 2017 Accrued research and development expenses $ 11,992 $ 9,737 Accrued compensation-related expenses 1,014 797 Accrued legal expenses 1,174 481 Accrued other expenses 367 963 Total accrued expenses $ 14,547 $ 11,978 |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions In July 2016, the Company entered into a formal services agreement with RSI, effective April 29, 2016, under which RSI agreed to provide certain administrative and R&D services to the Company. Under this services agreement, 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, or G&A, and R&D activities performed by RSI employees, RSI charges the Company the employee compensation expense plus a pre-determined mark-up. RSI also provided such services prior to the formalization of this services agreement, and such costs have been recognized by the Company in the period in which the services were rendered. 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. In February 2017, the Company and MSI amended and restated this services agreement, effective as of November 11, 2016, to include MSG as a services recipient. In addition, in February 2017, MSG entered into a separate services agreement with RSG, effective as of November 11, 2016, for the provisioning of services by RSG to MSG in relation to services related to clinical development, administrative and financial activities. The Company refers to the amended and restated services agreement with RSI and the services agreement with RSG, collectively, as the Services Agreements. Under the Services Agreements, for the three months ended September 30, 2017 and 2016 , the Company incurred expenses of $1.0 million and $3.1 million , respectively, inclusive of the pre-determined mark-up. For the six months ended September 30, 2017 and 2016 , the Company incurred expenses of $2.1 million and $4.1 million , respectively, inclusive of the pre-determined mark-up. |
Income Taxes
Income Taxes | 6 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 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 provision for income taxes is primarily based on income taxes in the United States for federal, state and local income taxes. The effective income tax rate for the Company for the three months ended September 30, 2017 and 2016 was 0.88% and (0.02)% , respectively. The effective income tax rate for the Company for the six months ended September 30, 2017 and 2016 was (1.56)% and (0.02)% , respectively. The Company's effective income tax rate for all periods presented differs from the Bermuda federal statutory rate of 0% primarily 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 to determine the amount which is more likely than not to be realized and records a valuation allowance as necessary. |
Share-Based Compensation
Share-Based Compensation | 6 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Share-Based Compensation In June 2016, the Company adopted its 2016 Equity Incentive Plan, or as amended, the 2016 Plan, under which 4.5 million common shares were originally reserved for grant. On April 1, 2017, the number of common shares authorized for issuance increased automatically to 6.9 million in accordance with the 2016 Plan. At September 30, 2017 , a total of 2.0 million common shares were available for future grant under the 2016 Plan. At September 30, 2017 , there were 3.2 million options outstanding with a weighted average exercise price of $9.22 . (A) Stock Options, Restricted Share Awards and Restricted Stock Units Granted to Employees and Directors: During the three and six months ended September 30, 2017 , the Company granted options to purchase a total of 1.0 million and 1.9 million common shares, respectively, to its employees and directors under the 2016 Plan. During the three and six months ended September 30, 2016 , the Company granted options to purchase a total of 1.1 million common shares to its employees and directors under the 2016 Plan. The Company recorded share-based compensation expense related to stock options issued to Company employees and directors of $1.5 million and $0.3 million , respectively, for the three months ended September 30, 2017 and 2016 and $2.8 million and $0.3 million , respectively, for the six months ended September 30, 2017 and 2016 . At September 30, 2017 , total unrecognized compensation expense related to unvested options issued to employees and directors was $24.9 million , which is expected to be recognized over the remaining weighted-average service period of 3.26 years . During the six months ended September 30, 2017 and 2016 , the Company granted a restricted share award for 0.6 million and 1.1 million , respectively, to the Company’s Principal Executive Officer under the 2016 Plan. The restricted share award granted during the six months ended September 30, 2017 is a market-based award for which the grant date fair value was estimated using a Monte Carlo valuation model. The Company records expense ratably over the applicable vesting period regardless of whether the market condition is satisfied because the awards are subject to market conditions. During the three months ended September 30, 2017 and 2016 , no restricted share awards were granted to employees or directors. During the three and six months ended September 30, 2017 , the Company granted 10,000 restricted stock units to its Chief Medical Officer. During the three and six months ended September 30, 2016 , no restricted stock units were granted to employees or directors. The Company recorded share-based compensation expense related to the restricted share awards and restricted stock units of $0.9 million and $0.4 million , respectively, for the three months ended September 30, 2017 and 2016 and $1.5 million and $0.4 million , respectively, for the six months ended September 30, 2017 and 2016 . At September 30, 2017 , total unrecognized compensation expense related to unvested restricted share awards and restricted stock units was $11.2 million , which is expected to be recognized over the remaining weighted-average service period of 4.05 years. Share-based compensation expense is classified in R&D and G&A expenses in the accompanying interim unaudited condensed consolidated statements of operations consistent with the grantee’s salary. (B) Share-Based Compensation for Related Parties: (1) Stock Options Granted to Non-Employees: The Company recorded share-based compensation expense related to stock options granted to consultants of $0.1 million and $0.1 million , respectively, for the three months ended September 30, 2017 and 2016 and $0.2 million and $0.1 million , respectively, for the six months ended September 30, 2017 and 2016 . At September 30, 2017 , total unrecognized compensation expense related to stock options granted to consultants was $0.1 million , which is expected to be recognized over 2.88 years. This share-based compensation expense is included in R&D and G&A expenses in the accompanying interim unaudited condensed consolidated statements of operations. During the six months ended September 30, 2017 , no options were granted to consultants under the 2016 Plan. During the six months ended September 30, 2016 , 0.1 million options were granted to consultants under the 2016 Plan. (2) Share-Based Compensation Allocated to the Company by RSL: Share-based compensation expense is allocated to the Company by RSL based upon the relative percentage of time utilized by RSL and RSI employees on Company matters. In relation to the RSL common share awards and options issued by RSL to RSL and RSI employees, the Company recorded share-based compensation expense of $0.3 million and $1.4 million , respectively, for the three months ended September 30, 2017 and 2016 and $0.5 million and $4.0 million , respectively, for the six months ended September 30, 2017 and 2016 . The RSL common share awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service period. As RSL is a non-public entity, the RSL common share awards are classified as a level 3 financial instrument within the fair value hierarchy 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). RSL estimated the fair value of each RSL option on the date of grant using the Black-Scholes closed-form option-pricing model. Share-based compensation expense has been and will continue to be allocated to the Company over the requisite service period over which these RSL common share awards and RSL options are expected to vest based upon the relative percentage of time utilized by RSL and RSI employees on Company matters. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company entered into certain commitments under its license agreement with Takeda, or the Takeda Agreement, amended its services agreement with RSI and entered into a separate services agreement with RSG (See Note 4). In addition, the Company has entered into services agreements with third parties for pharmaceutical research and manufacturing activities and has a lease agreement for office space located in Brisbane, California. The manufacturing agreements can be terminated by the Company with 30 days written notice. Expenditures to contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, represent significant costs in the Company’s clinical development of its product candidates. Subject to required notice periods and the Company's obligations under binding purchase orders, the Company can elect to discontinue the work under these agreements at any time. The Company expects to enter into additional commitments as the business further develops. The Company may be, from time to time, a party to various disputes and claims arising from normal business activities. The Company accrues for loss contingencies when available information indicates that it is probable that a liability has been incurred and the amount of such liability can be reasonably estimated. In the cases where the Company believes that a reasonably possible loss exists, the Company discloses the facts and circumstances of the loss contingency, including an estimable range, if possible. During the six months ended September 30, 2017 , there were no other material changes outside the ordinary course of business to the specified contractual obligations set forth in the contractual obligations table included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2017 , filed with the SEC on June 14, 2017. In October 2017, the Company obtained financing commitments of up to $ 140.0 million from NovaQuest Capital Management and Hercules Capital, which require the Company to make interest and principal payments at various intervals. The financing commitments are described further in “Note 8—Subsequent Events.” |
Subsequent Events
Subsequent Events | 6 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events In October 2017, the Company and NovaQuest Capital Management, or NovaQuest, entered into (i) a Securities Purchase Agreement, or the NovaQuest Securities Purchase Agreement, and (ii) an Equity Purchase Agreement, or the NovaQuest Equity Purchase Agreement. Pursuant to the NovaQuest Securities Purchase Agreement the Company has committed, at its discretion, to issue up to $60.0 million aggregate principal amount of notes to NovaQuest through December 31, 2018. The Company has agreed that it will issue at least $30.0 million aggregate principal amount of notes through December 31, 2018, subject to certain terms and conditions. The notes bear interest at 15% per annum, of which 5% is payable quarterly, and 10% is payable on a deferred basis. The notes mature on October 16, 2023 . The Company will be required to amortize the principal amount of the notes in equal quarterly installments commencing on November 1, 2020, subject to extension at the option of the Company to November 1, 2021, provided certain terms and conditions are met as set forth in the NovaQuest Securities Purchase Agreement. Early redemption of the notes is subject to a prepayment penalty. Concurrent with each issuance of notes, NovaQuest is obligated to purchase common shares with a value equal to one third of the note issuance amount or up to $20.0 million in total, subject to certain terms and conditions as set forth in the NovaQuest Securities Purchase Agreement. Pursuant to the NovaQuest Equity Purchase Agreement, NovaQuest has committed to purchase up to an additional $20.0 million of the Company’s common shares from time to time at the discretion of the Company through December 31, 2018 , with an option to extend through December 31, 2019 , subject to certain terms and conditions as set forth in the NovaQuest Equity Purchase Agreement. The Company has agreed that it will exercise its option to sell and issue a minimum of $10.0 million of the Company’s common shares through December 31, 2018, subject to certain terms and conditions. The purchase price for the common shares issued pursuant to the NovaQuest Securities Purchase Agreement and the NovaQuest Equity Purchase Agreement will be equal to 105% of the average of the volume-weighted average price for the five consecutive trading days immediately prior to the relevant purchase date. In October 2017, the Company and Hercules Capital, Inc., or Hercules, entered into a Loan Agreement, or the Hercules Loan Agreement, which provides up to $40.0 million principal amount of term loans, or the Term Loans. A first tranche of $25.0 million principal amount was funded upon execution of the Hercules Loan Agreement on October 16, 2017 and the remaining $15.0 million principal amount is available at the Company’s discretion through March 31, 2018. The Term Loans bear interest at a variable per annum rate at the greater of either (i) the prime rate plus 4.00% and (ii) 8.25% . The Term Loans mature on May 1, 2021 , subject to extension to November 1, 2021 if certain milestones are met. The Company is obligated to make monthly payments of accrued interest until June 1, 2019 , or the Interest-only Period, followed by monthly installments of principal and interest through the maturity date. The Interest-only Period may be extended until June 1, 2020 if certain milestones are met. Prepayment of the Term Loans is subject to a prepayment charge. Concurrent with each funding of the Term Loans, the Company is required to issue to Hercules a warrant, or the Warrants, to purchase a number of the Company’s common shares equal to 3% of the principal amount of the relevant Term Loan funded divided by the exercise price, which will be based on the lowest three-day volume-weighted average price for the three consecutive trading days prior to the funding date for such Term Loan. The Warrants may be exercised on a cashless basis, and are immediately exercisable through the seventh anniversary of the applicable funding date. In connection with the first tranche funded under the Hercules Loan Agreement, the Company issued a warrant to Hercules exercisable for an aggregate of 49,800 of the Company’s common shares at an exercise price of $15.06 per share. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Accounting | 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 unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or 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, 2017, filed with the Securities and Exchange Commission, or SEC, on June 14, 2017. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented have been included. Operating results for the three and six months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending March 31, 2018 , for any other interim period or for any other future year. Certain prior year amounts have been reclassified to conform with the current period presentation. These reclassifications had no effect on the previously reported results of operations. Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company has no unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. 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, 2017, filed with the SEC on June 14, 2017. |
Use of Estimates | Use of Estimates: The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in certain circumstances that affect the amounts reported and disclosed in the unaudited condensed consolidated 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 agreements with Roivant Sciences, Inc., or RSI, and Roivant Sciences GmbH, or RSG, each a wholly owned subsidiary of the Company’s parent company, Roivant Sciences Ltd., or RSL, as well as share-based compensation, research and development, or R&D, costs, and income taxes. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period, 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, reduced where applicable for outstanding yet unvested shares of restricted common stock. 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. |
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 at the reporting date. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a three-tier fair value hierarchy that distinguishes among the following: • Level 1-Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. • Level 2-Valuations are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. • Level 3-Valuations are based on inputs that are unobservable (supported by little or no market activity) and significant to the overall fair value measurement. To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s financial instruments include cash and accounts payable. These financial instruments are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements: In February 2016, the FASB issued ASU No. 2016-02, “ Leases (Topic 842),” or 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 statements and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, ‘‘ Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, ’’ or 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 Company has adopted this guidance as of April 1, 2017 using a modified retrospective transition method. As a result of the adoption of this standard, the Company elected to change its accounting policy from estimating forfeitures to recognizing forfeitures when they occur and, as a result, recorded an adjustment of $0.1 million to accumulated deficit with a corresponding offset to additional paid-in-capital as of April 1, 2017. The other amended requirements of ASU No. 2016-09 did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures. |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 6 Months Ended |
Sep. 30, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Liabilities | As of September 30, 2017 , and March 31, 2017 , accrued expenses consisted of the following (in thousands): September 30, 2017 March 31, 2017 Accrued research and development expenses $ 11,992 $ 9,737 Accrued compensation-related expenses 1,014 797 Accrued legal expenses 1,174 481 Accrued other expenses 367 963 Total accrued expenses $ 14,547 $ 11,978 |
Description of Business - Narra
Description of Business - Narrative (Details) | 6 Months Ended |
Sep. 30, 2017segmentproduct_candidatessubsidiary | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of wholly owned subsidiaries | subsidiary | 4 |
Number of product candidates | product_candidates | 2 |
Number of operating segments | 1 |
Number of reporting segments | 1 |
Summary of Significant Accoun20
Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands, shares in Millions | 3 Months Ended | 6 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Mar. 31, 2017 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Adjustment to adopt ASU 2016-09 | $ 0 | ||||
Additional Paid in Capital | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Adjustment to adopt ASU 2016-09 | 122 | ||||
Accumulated Deficit | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Adjustment to adopt ASU 2016-09 | (122) | ||||
Accounting Standards Update 2016-09 | Additional Paid in Capital | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Adjustment to adopt ASU 2016-09 | 100 | ||||
Accounting Standards Update 2016-09 | Accumulated Deficit | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Adjustment to adopt ASU 2016-09 | $ (100) | ||||
Restricted Share Awards | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Antidilutive securities excluded from calculation of diluted weighted-average common shares outstanding (in shares) | 1.3 | 1.1 | 1.3 | 1.1 | |
Options | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Antidilutive securities excluded from calculation of diluted weighted-average common shares outstanding (in shares) | 2.2 | 1.2 | 2.2 | 1.2 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Mar. 31, 2017 |
Payables and Accruals [Abstract] | ||
Accrued research and development expenses | $ 11,992 | $ 9,737 |
Accrued compensation-related expenses | 1,014 | 797 |
Accrued legal expenses | 1,174 | 481 |
Accrued other expenses | 367 | 963 |
Total accrued expenses | $ 14,547 | $ 11,978 |
Related Party Transactions - N
Related Party Transactions - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
RSL and RSI | RSL and RSI | Services Agreement | ||||
Related Party Transaction [Line Items] | ||||
Base salary, fringe benefits, and share-based compensation | $ 1 | $ 3.1 | $ 2.1 | $ 4.1 |
Income Taxes - Narrative (Deta
Income Taxes - Narrative (Details) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Contingency [Line Items] | ||||
Effective income tax rate | 0.88% | (0.02%) | (1.56%) | (0.02%) |
Foreign Tax Authority | Office of the Tax Commissioner, Bermuda | ||||
Income Tax Contingency [Line Items] | ||||
Federal statutory tax rate | 0.00% |
Share-Based Compensation - Nar
Share-Based Compensation - Narrative (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Apr. 01, 2017 | Jun. 30, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Common shares reserved for grant (in shares) | 2,000,000 | 2,000,000 | 6,900,000 | 4,500,000 | ||
Number of options outstanding (in shares) | 3,200,000 | 3,200,000 | ||||
Weighted average exercise price (in dollars per share) | $ 9.22 | $ 9.22 | ||||
RSI and RSL Employees and Consultants | Share-Based Compensation Allocated to the Company by RSL | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Share-based compensation | $ 300,000 | $ 1,400,000 | $ 500,000 | $ 4,000,000 | ||
Options | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Options granted (in shares) | 1,000,000 | 1,100,000 | 1,900,000 | 1,100,000 | ||
Allocated share-based compensation | $ 1,500,000 | $ 300,000 | $ 2,800,000 | $ 300,000 | ||
Unrecognized compensation expense related to non-vested options | $ 24,900,000 | $ 24,900,000 | ||||
Unrecognized compensation expense, period for recognition | 3 years 3 months 5 days | |||||
Restricted Share Awards | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Restricted stock awards granted (in shares) | 0 | 0 | 600,000 | 1,100,000 | ||
Restricted Stock Units | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Allocated share-based compensation | $ 3,412 | $ 3,412 | ||||
Restricted stock awards granted (in shares) | 10,000 | 0 | 10,000 | 0 | ||
Restricted Stock and Restricted Stock Units | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Allocated share-based compensation | $ 900,000 | $ 400,000 | $ 1,500,000 | $ 400,000 | ||
Unrecognized compensation expense, period for recognition | 4 years 18 days | |||||
Unrecognized compensation expense related to awards other than options | 11,200,000 | $ 11,200,000 | ||||
Non-employee Stock Option | RSI and RSL Employees and Consultants | Stock Options Granted to Non-Employees | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Options granted (in shares) | 0 | 100,000 | ||||
Share-based compensation related to stock options granted to consultants | 100,000 | $ 100,000 | $ 200,000 | $ 100,000 | ||
Unrecognized compensation expense related to options for non-employees | $ 100,000 | $ 100,000 | ||||
Unrecognized compensation expense, period for recognition, related to options for non-employees | 2 years 10 months 17 days |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) - USD ($) | 6 Months Ended | |
Sep. 30, 2017 | Oct. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Contract termination, minimum period of written notice | 30 days | |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Financing commitments | $ 140,000,000 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event - USD ($) | 1 Months Ended | |
Oct. 31, 2017 | Oct. 16, 2017 | |
Subsequent Event [Line Items] | ||
Equity option | $ 20,000,000 | |
Equity option to be exercised in the current year | $ 10,000,000 | |
Equity options, purchase price as a percentage of share price | 105.00% | |
Equity commitment, number of consecutive trading days used for measuring share price | 5 days | |
Common Shares | ||
Subsequent Event [Line Items] | ||
Warrants exercisable as a percentage of principal amount of loan | 3.00% | |
Number of securities exercisable by warrant (in shares) | 49,800 | |
Exercise price of warrants (in USD per share) | $ 15.06 | |
NovaQuest Securities Purchase Agreement | Line of Credit | ||
Subsequent Event [Line Items] | ||
Maximum borrowing commitment | $ 60,000,000 | |
Minimum borrowing commitment | $ 30,000,000 | |
Interest rate | 15.00% | |
Quarterly interest rate | 5.00% | |
Deferred interest rate | 10.00% | |
Equity commitment related to note issuance | $ 20,000,000 | |
Equity commitment related to note issuance, portion of note issuance amount | 0.3333 | |
Hercules Loan Agreement | Term Loan | ||
Subsequent Event [Line Items] | ||
Maximum borrowing commitment | $ 40,000,000 | |
Interest rate | 8.25% | |
Remaining borrowing commitment | $ 15,000,000 | |
Principal amount funded | $ 25,000,000 | |
Hercules Loan Agreement | Term Loan | Prime Rate | ||
Subsequent Event [Line Items] | ||
Variable interest rate | 4.00% |