| Related Party Transactions | Related Party Transactions As of September 30, 2022, Sumitovant directly, and Sumitomo Pharma indirectly, beneficially own 50,041,181, or approximately 51.8%, of the Company’s outstanding common shares. The Company has agreements with Sumitovant, Sumitomo Pharma, and their affiliates, including Sunovion, a subsidiary of Sumitomo Pharma. Certain of these agreements are described below. (A) Merger Agreement On October 23, 2022, Myovant, Sumitovant, Merger Sub, and, solely with respect to Article IX and Annex A of the Merger Agreement, Sumitomo Pharma, entered into the Merger Agreement. Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, at the closing of the merger contemplated thereby, Merger Sub will be merged with and into Myovant (the “Merger”), with Myovant continuing as the surviving company following the Merger as a wholly owned subsidiary of Sumitovant. Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), (i) each of Myovant’s common shares, $0.000017727 par value per share (the “Common Share”), issued and outstanding immediately prior to the Effective Time (other than Excluded Shares, Sumitovant Owned Shares and Dissenting Shares (as each such term is defined below)) will automatically cease to exist, and each holder of a Common Share will cease to have any rights with respect thereto, except for the right to receive the Per Share Merger Consideration; (ii) any Common Share owned by Myovant or any direct or indirect wholly owned subsidiary of Myovant (each, an “Excluded Share”) as of immediately prior to the Effective Time will be cancelled and will automatically cease to exist, and no consideration will be delivered in exchange therefor; (iii) each Common Share that is owned directly by Sumitovant as of immediately prior to the Effective Time (each, a “Sumitovant Owned Share”) will remain outstanding and will constitute a fully paid and nonassesable common share of the Surviving Company; (iv) each Common Share held by a holder who, as of the Effective Time, did not vote in favor of the Merger and complied with certain procedures specified in the Merger Agreement (each, a “Dissenting Share”), will automatically be cancelled and the holder thereof will have the right to receive the Per Share Merger Consideration plus the amount of any excess of the appraised fair value as determined by the Supreme Court of Bermuda above the Per Share Merger Consideration; and (v) each common share, par value $0.000017727 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time will remain outstanding and will constitute a fully paid and nonassesable common share of the Surviving Company. As a result of the Merger, Sumitovant will acquire Myovant and own all of the issued and outstanding shares of the Surviving Company. In addition, immediately prior to the Effective Time, subject to specified exceptions applicable to certain restricted share units to be granted after the execution of the Merger Agreement or as otherwise agreed between the parties thereto, each Myovant equity award that is outstanding, whether vested or unvested, will be cancelled and thereafter only entitle the holder to the right to receive an amount (reduced by any applicable withholding tax) in cash equal to, as applicable: (i) the number of Common Shares subject to a Myovant stock option multiplied by the Per Share Merger Consideration, minus such stock option’s exercise price; provided that each option with an exercise price per Common Share that is equal to or greater than the Per Share Merger Consideration will be cancelled without payment; (ii) the number of restricted share units of Myovant multiplied by the Per Share Merger Consideration; and (iii) the number of restricted share units of Myovant subject to performance-based vesting conditions (deeming performance goals as being satisfied), multiplied by the Per Share Merger Consideration. Completion of the Merger is subject to the satisfaction of certain conditions, including: (i) the adoption of the Merger Agreement at a shareholder meeting to consider such matter by the requisite vote of Myovant’s shareholders, including the approval by the holders of a majority of the outstanding Common Shares entitled to vote and voting at such meeting and by the holders of a majority of the outstanding Common Shares not held by Sumitovant or its affiliates, (ii) the expiration of applicable waiting period of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the absence of any law, injunction, judgment or other legal restraint that prohibits the consummation of the Merger, (iv) the accuracy of each party’s representations and warranties (subject to certain materiality and Company Material Adverse Effect (as defined in the Merger Agreement) qualifications), (v) each party’s performance in all material respects of its obligations contained in the Merger Agreement and (vi) the absence of a Company Material Adverse Effect following the date of the Merger Agreement that is continuing. Sumitovant and Myovant have each made customary representations, warranties and covenants in the Merger Agreement, including covenants: (i) in the case of Myovant, to cause a meeting of its shareholders to be duly called and held as soon as reasonably practicable following the clearance of a proxy statement and Statement on Schedule 13E-3 in connection with the Merger by the SEC for the purpose of voting on the adoption of the Merger Agreement and (ii) in the case of each party, to use its reasonable best efforts to promptly take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under the Merger Agreement and applicable laws to consummate and make effective as promptly as practicable the Merger, subject to certain limitations set forth in the Merger Agreement. Subject to certain exceptions, Myovant has agreed to conduct its business in the ordinary course consistent with past practice, including not taking certain specified actions, prior to the consummation of the Merger or the termination of the Merger Agreement pursuant to its terms. Under the Merger Agreement, Myovant has agreed not to: (i) initiate, solicit, propose, knowingly encourage or knowingly facilitate any inquiry or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, an Alternative Proposal (as defined in the Merger Agreement); (ii) engage in, continue or otherwise participate in any discussions with or negotiations relating to any Alternative Proposal, subject to certain exceptions, or any inquiry, proposal or offer that would reasonably be expected to lead to an Alternative Proposal; (iii) provide any non-public information to any person in connection with any Alternative Proposal or any proposal or offer that would reasonably be expected to lead to an Alternative Proposal; (iv) otherwise knowingly facilitate any effort or attempt to make an Alternative Proposal; or (v) cause or permit the Company to enter into an Alternative Proposal. However, subject to the satisfaction of certain conditions, the Company Board (acting upon the recommendation of the Special Committee) or the Special Committee is permitted to take certain actions which may, as more fully described in the Merger Agreement, include, prior to adoption and approval of the Merger Agreement and the other transactions contemplated thereby, including the Merger, by the requisite vote of Myovant’s shareholders, changing the Company Board’s or the Special Committee’s recommendation in response to a Superior Proposal or Intervening Event (each as defined in the Merger Agreement). The Merger Agreement contains certain termination rights for each of Sumitovant and Myovant, including the right to terminate (i) by mutual written consent, (ii) by either the Company (acting at the recommendation of the Special Committee) or by Sumitovant under specific circumstances, (iii) if the Merger is not consummated on or before 5:00 p.m., Pacific Time, on May 31, 2023 or (iv) to enter into a definitive agreement related to a Superior Proposal. Additionally, the Merger Agreement provides that, upon termination of the Merger Agreement, under specified circumstances, Myovant will be required to pay Sumitovant a termination fee of $55.25 million. No amounts have been paid to or received from Sumitovant under the Merger Agreement; however, the Company believes the Merger Agreement is material to its business and operations. (B) Voting and Support Agreement In connection with the entry into the Merger Agreement, on October 23, 2022, Sumitovant and Myovant entered into a Voting and Support Agreement (the “Voting and Support Agreement”) whereby Sumitovant has agreed, among other things, that at any meeting of the shareholders of Myovant or in connection with any written consent of the shareholders of Myovant, Sumitovant will appear at such meeting or cause its Common Shares to be counted as present at such meeting for purposes of establishing a quorum and, so long as Sumitovant is not prohibited from doing so by applicable law, vote or consent all of its Common Shares in favor of the Merger and the adoption of the Merger Agreement. No amounts have been paid to or received from Sumitovant under the Voting and Support Agreement; however, the Company believes the Voting and Support Agreement is material to its business and operations. (C) Sumitomo Pharma Loan Agreement On December 27, 2019, the Company and one of its subsidiaries, Myovant Sciences GmbH (“MSG”), entered into a Loan Agreement with Sumitomo Pharma (the “Sumitomo Pharma Loan Agreement”). Pursuant to the Sumitomo Pharma Loan Agreement, Sumitomo Pharma agreed to make revolving loans to the Company in an aggregate principal amount of up to $400.0 million. Funds may be drawn down by the Company once per calendar quarter, subject to certain terms and conditions, including consent of the Company’s board of directors. The maturity date of the loans under the Sumitomo Pharma Loan Agreement is December 27, 2024 or the date the outstanding principal of the loans is declared due and payable due to an event of default pursuant to the terms of the Sumitomo Pharma Loan Agreement. In addition, if Sumitomo Pharma fails to own at least a majority of the Company’s outstanding common shares, it may become unlawful under Japanese law for Sumitomo Pharma to fund loans to the Company, and in which case the Company would not be able to continue to borrow under the Sumitomo Pharma Loan Agreement. Interest is due and payable quarterly, and the outstanding principal amounts are due and payable in full on the five-year anniversary of the closing date of the Sumitomo Pharma Loan Agreement. Loans under the Sumitomo Pharma Loan Agreement are prepayable at any time without premium or penalty upon 10 business days’ prior written notice. Loans under the Sumitomo Pharma Loan Agreement bear interest at a variable rate per annum equal to 3-month LIBOR plus a margin of 3% payable on the last day of each calendar quarter. Publication of 3-month LIBOR is currently expected to be discontinued on June 30, 2023. In the event that 3-month LIBOR becomes unavailable, the Company and Sumitomo Pharma will negotiate in good faith to select an alternative interest rate and, if applicable as a result of such alternative interest rate, margin adjustment that is consistent with industry accepted successor rates for determining a LIBOR replacement. The Company’s obligations under the Sumitomo Pharma Loan Agreement are fully and unconditionally guaranteed by the Company and its subsidiaries. The loans and other obligations are senior unsecured obligations of the Company, MSG, and subsidiary guarantors. The Sumitomo Pharma Loan Agreement includes customary representations and warranties and affirmative and negative covenants. The Sumitomo Pharma Loan Agreement also includes customary events of default, including payment defaults, breaches of representations and warranties, breaches of covenants following any applicable cure period, cross acceleration to certain other debt, failure to pay certain final judgments, certain events relating to bankruptcy or insolvency, failure of material provisions of the loan documents to remain in full force and effect or any contest thereto by the Company or any of its subsidiaries and certain breaches by the Company under the Investor Rights Agreement. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% will apply to the outstanding principal amount of the loans, Sumitomo Pharma may terminate its obligations to make loans to the Company and declare the principal amount of loans to become immediately due and payable, and Sumitomo Pharma may take such other actions as set forth in the Sumitomo Pharma Loan Agreement. Upon the occurrence of certain bankruptcy and insolvency events, the obligations of Sumitomo Pharma to make loans to the Company would automatically terminate and the principal amount of the loans would automatically become due and payable. In addition, if it becomes unlawful for Sumitomo Pharma to maintain the loans under the Sumitomo Pharma Loan Agreement or within 30 days of a change of control with respect to the Company, the Company would be required to repay the outstanding principal amount of the Loans. As of September 30, 2022, approximately $41.3 million of borrowing capacity remains available to the Company, subject to the terms of the Sumitomo Pharma Loan Agreement and the outstanding loan balance of $358.7 million is classified as a long-term liability on the unaudited condensed consolidated balance sheet under the caption long-term debt, less current maturities (related party). Interest expense under the Sumitomo Pharma Loan Agreement was $4.8 million and $8.4 million for the three and six months ended September 30, 2022, respectively, and $2.9 million and $5.8 million for the three and six months ended September 30, 2021, respectively, and is included in interest expense in the unaudited condensed consolidated statements of operations and comprehensive loss. (D) Investor Rights Agreement On December 27, 2019, the Company entered into an Investor Rights Agreement with Sumitomo Pharma and Sumitovant (the “Investor Rights Agreement”). Pursuant to the Investor Rights Agreement, among other things, the Company agreed, at the request of Sumitovant, to register for sale, under the Securities Act of 1933, common shares beneficially owned by Sumitovant, subject to specified conditions and limitations. In addition, the Company agreed to periodically provide Sumitovant (i) certain financial statements, projections, capitalization summaries and other information and (ii) access to the Company’s books, records, facilities and employees during the Company’s normal business hours as Sumitovant may reasonably request, subject to specified limitations. The Investor Rights Agreement also contains certain protections for the Company’s minority shareholders for so long as Sumitomo Pharma or certain of its affiliates beneficially owns more than 50% of the Company’s common shares. These protections include: (i) a requirement that Sumitovant vote its shares for the election of independent directors in accordance with the recommendation of the Company’s board of directors (the “board”) or in the same proportion as the shareholders not affiliated with Sumitovant vote its shares; (ii) a requirement that the audit committee of the Company’s board be composed solely of three independent directors; (iii) a requirement that any transaction proposed by Sumitomo Pharma or certain of its affiliates that would increase Sumitomo Pharma’s beneficial ownership to over 60% of the outstanding voting power of the Company must be approved by the Company’s audit committee (if occurring prior to December 27, 2022), and be conditioned on the approval of shareholders not affiliated with Sumitovant approving the transaction by a majority of the common shares held by such shareholders; and a requirement that any related person transactions between Sumitomo Pharma or certain of its affiliates and the Company must be approved by the Company’s audit committee. Pursuant to the Investor Rights Agreement, the Company also agreed that at all times that Sumitomo Pharma beneficially owns more than 50% of the Company’s common shares, Sumitomo Pharma, by purchasing common shares in the open market or from the Company in certain specified circumstances, will have the right to maintain its percentage ownership in the Company’s common shares in the event of a financing event or acquisition event conducted by the Company, or specified other events, subject to specific conditions. (E) Services and Information Sharing Agreement In February 2022, the Company and two of its subsidiaries, MSG and Myovant Sciences, Inc. (“MSI”), entered into a services and information sharing agreement with Sumitovant Biopharma, Inc., a wholly-owned subsidiary of Sumitovant. Under the agreement, for so long as Sumitovant is a majority owner of the Company, the Company agrees to (1) subject to Sumitovant’s reasonable request and on a timeline to be reasonably agreed by the parties, supply certain information summarizing material aspects of the Company’s business to Sumitovant, and with reasonable advanced notice, give Sumitovant and its representatives the reasonable opportunity to discuss such information with the Company’s senior management; and (2) subject to the oversight of the chairperson of the Company’s Audit Committee, provide certain additional, more detailed information on business-essential matters in order to collaborate with Sumitovant or to enable the Company to leverage Sumitovant’s expertise. Under the agreement, Sumitovant also agrees to provide, upon the Company’s election, various administrative and general business support services as well as research and development services to the Company and its subsidiaries, and the Company agrees to reimburse Sumitovant for 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 employees of Sumitovant, the agreement provides for Sumitovant to charge the Company based upon the relative percentage of time utilized on matters related to the Company by the respective employee and a mutually agreed upon mark-up on such expenses. Under the agreement, all other third-party pass-through costs are billed to the Company at cost. For both the three and six months ended September 30, 2022, the Company incurred less than $0.1 million, under this agreement. (F) Market Access Services Agreement On August 1, 2020, one of the Company’s subsidiaries, entered into a Market Access Services Agreement, as amended (“Market Access Services Agreement”), with Sunovion. Pursuant to the Market Access Services Agreement, among other things, Sunovion agreed to provide certain market access services with respect to the distribution and sale of ORGOVYX (“Prostate Cancer Product”) and MYFEMBREE (“Women’s Health Product,” and collectively with Prostate Cancer Product, the “Products”, and each a “Product”), including, among other things: (i) adding the Products to Sunovion’s agreements with its third party logistics providers; (ii) adding the Women’s Health Product to certain of Sunovion’s contracts with wholesalers, group purchasing organizations and integrated delivery networks and negotiating rates for the Products with certain market access customers; (iii) providing order-to-cash services; (iv) providing certain employees to provide market access account director services; (v) performing activities required in connection with supporting and maintaining contracts between the Company and market access customers for the coverage, purchase, or dispensing of the Products; (vi) managing the validation, processing and payment of rebates, chargebacks, and certain administrative, distribution and service fees related to the Products; (vii) providing the Company with price reporting metrics and other information required to allow the Company to comply with applicable government price reporting requirements; (viii) coordinating with the Company and any applicable wholesalers and distributors to address any recalls, investigations, or product holds; (ix) configuring, or causing to be configured, the appropriate software systems to enable Sunovion to perform its obligations under the Market Access Services Agreement; and (x) providing training and certain other ancillary support services to facilitate the foregoing. Pursuant to this agreement, Sunovion will also provide certain services to the Company to enable the Company to comply with its obligations under the State Transparency Laws. The Company, in turn, appointed Sunovion as the exclusive distributor of the Women’s Health Product and a non-exclusive distributor of the Prostate Cancer Product, each in the U.S., including all of its territories and possessions. In order to facilitate Sunovion’s provision of these services, the Company agreed, among other things, to: (i) grant Sunovion a non-exclusive license under all intellectual property owned or controlled by the Company, solely for Sunovion’s use in connection with its performance of the contemplated services; (ii) provide Sunovion periodic reports of sales projections and estimated volume requirements, as well as such other information as Sunovion reasonably requests or may need to perform the services; (iii) comply with the provisions of any agreements between Sunovion and third parties pursuant to which the Products will be distributed or sold; (iv) cooperate with certain investigations related to orders and audits of the Company’s quality systems solely related, as reasonably determined by Myovant, to Sunovion’s performance of certain regulatory services, at Sunovion’s costs; and (v) promptly notify Sunovion in the event relugolix is recalled. As consideration for the services, the Company has paid and will continue to pay Sunovion an agreed-upon monthly service charge for each of the first two years of the Market Access Services Agreement term and any agreed regulatory and training service charges. After the second year of the Market Access Services Agreement term, the monthly service charges will be determined by the parties. In addition, the Company also agreed to (x) reimburse Sunovion for any pass-through expenses it incurs while providing the services, and (y) establish an escrow fund for use by Sunovion to manage payments for rebates, chargebacks and similar fees. For the three and six months ended September 30, 2022, the Company incurred $1.2 million and $2.4 million, respectively, under this agreement (inclusive of third-party pass-through costs billed to the Company) which are included in SG&A expenses, in the accompanying consolidated statements of operations and comprehensive loss. For the three and six months ended September 30, 2021, the Company incurred $1.2 million and $2.4 million of expense under this agreement (inclusive of third-party pass-through costs billed to the Company), which is included in SG&A expenses in the unaudited condensed consolidated statements of operations. The Market Access Services Agreement also contains customary representations and warranties by the parties and customary provisions related to confidentiality, indemnification and insurance. The initial term of the Market Access Services Agreement is three years. Thereafter, the term will be automatically extended for one-year periods, unless either party provides notice of its intent not to renew the Market Access Services Agreement at least nine (9) months prior to the expiration of the applicable term. Either party may also terminate the Market Access Services Agreement prior to the end of its term in the event of an uncured material breach by the other party, if there are certain changes of law, or if such other party becomes insolvent or undergoes a change of control. The Company may also terminate the Market Access Services Agreement with respect to one or both Products if Sunovion fails to satisfy certain market access milestones or for convenience upon payment of a break-up fee. |
