MYOVANT SCIENCES LTD.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with our unaudited condensed
consolidated financial statements and notes thereto included in Part I, Item 1
of this Quarterly Report on Form 10-Q ("Quarterly Report") and our audited
consolidated financial statements and notes thereto for the fiscal year ended
March 31, 2021 included in our Annual Report on Form 10-K, filed with the SEC on
May 11, 2021 .
Unless otherwise indicated, all results presented are prepared in a manner that
complies, in all material respects, with U.S. generally accepted accounting
principles ("U.S. GAAP"). Additionally, unless otherwise indicated, all changes
identified for the current period results represent comparisons to the results
for the corresponding prior year period.
Forward-Looking Statements
This Quarterly Report contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"). These statements are often identified by the use of words such
as "anticipate," "believe," "can," "continue," "could," "estimate," "expect,"
"intend," "likely," "may," "might," "objective," "ongoing," "plan," "potential,"
"predict," "project," "should," "to be," "will," "would," or the negative or
plural of these words, or similar expressions or variations, although not all
forward-looking statements contain these words. We cannot assure you that the
events and circumstances reflected in the forward-looking statements will be
achieved or occur and actual results could differ materially from those
expressed or implied by these forward-looking statements.
The forward-looking statements appearing in a number of places throughout this
Quarterly Report include, but are not limited to, statements regarding our
intentions, beliefs, projections, outlook, analyses or current expectations
concerning, among other things:
•our and our collaboration partners' ability to successfully plan for and
commercialize ORGOVYX®, MYFEMBREE®, RYEQO®, as well as any product candidates,
if approved;
•the success and anticipated timing of our clinical studies for our product
candidates;
•the anticipated start dates, durations and completion dates of our ongoing and
future nonclinical and clinical studies;
•the anticipated designs of our future clinical studies;
•the anticipated future regulatory submissions and the timing of, and our
ability to, obtain and maintain regulatory approvals for our product candidates;
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•our ability to procure sufficient quantities of commercial relugolix drug
substance and drug product from approved third party CMOs;
•our ability to achieve commercial sales of any approved products, whether alone
or in collaboration with others;
•our ability to obtain and maintain reimbursement and coverage from government
and private payers for our products if commercialized;
•the rate and degree of market acceptance and clinical utility of any approved
products;
•our ability to initiate and continue relationships with third-party clinical
research organizations and manufacturers and third-party logistics providers;
•our ability to quickly and efficiently identify and develop new product
candidates;
•the impact of pandemics, epidemics or outbreaks of infectious diseases,
including the effect that the COVID-19 pandemic and related public health
measures will have on our business operations, financial conditions and results
of operations;
•our ability to hire and retain our management and other key personnel;
•our ability to obtain, maintain and enforce intellectual property rights for
our products and product candidates;
•our estimates regarding our results of operations, financial condition,
liquidity, capital requirements, access to capital, prospects, growth and
strategies;
•our ability to continue to fund our operations with the cash, cash equivalents,
and marketable securities currently on hand, including our expectations for how
long these capital resources will enable us to fund our operations;
•our expectations regarding potential future payments that we are eligible to
receive from Pfizer under the Pfizer Collaboration and License Agreement and
Richter under the Richter Development and Commercialization Agreement;
•our ability to borrow under the Sumitomo Dainippon Pharma Loan Agreement;
•third party collaboration partners' abilities to perform their obligations
under our agreements with them;
•our ability to raise additional capital if needed, on acceptable terms to us;
•industry trends;
•developments and projections relating to our competitors or our industry; and
•the success of competing drugs that are or may become available.
Such forward-looking statements are subject to a number of risks, uncertainties,
assumptions and other factors known and unknown that could cause actual results
and the timing of certain events to differ materially from future results
expressed or implied by the forward-looking statements. Factors that could cause
or contribute to such differences include, but are not limited to, those
identified herein, particularly in the section titled "Risk Factors" set forth
in Part II. Item 1A. of this Quarterly Report, and in our other filings with the
SEC . These risks are not exhaustive. New risk factors emerge from time to time
and it is not possible for our management to predict all risk factors, nor can
we assess the impact of all factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements. In addition, statements
that "we believe" and similar statements reflect our beliefs and opinions on the
relevant subject. These statements are based upon information available to us as
of the date of this Quarterly Report, and while we believe such information
forms a reasonable basis for such statements, such information may be limited or
incomplete, and our statements should not be read to indicate that we have
conducted an exhaustive inquiry into, or review of, all potentially available
relevant information. These statements are inherently uncertain and investors
are cautioned not to unduly rely upon these statements. Except as required by
law, we undertake no obligation to update any forward-looking statements to
reflect events or circumstances after the date of such statements.
Business Overview
We are a biopharmaceutical company focused on redefining care for women and for
men through purpose-driven science, empowering medicines, and transformative
advocacy. Founded in 2016, we have two FDA-approved products: (1) ORGOVYX®
(relugolix 120 mg), which was approved in the U.S. by the U.S. Food and Drug
Administration ("FDA") in
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December 2020 as the first and only oral gonadotropin-releasing hormone ("GnRH")
receptor antagonist for the treatment of adult patients with advanced prostate
cancer; and (2) MYFEMBREE® (relugolix 40 mg, estradiol 1.0 mg, and norethindrone
acetate 0.5 mg), which was approved in the U.S. by the FDA in May 2021 as the
first and only once-daily oral treatment for the management of heavy menstrual
bleeding associated with uterine fibroids. In July 2021 and August 2021 , the
European Commission and the Medicines and Healthcare products Regulatory Agency,
respectively, approved RYEQO® (relugolix 40 mg, estradiol 1.0 mg, and
norethindrone acetate 0.5 mg) as the first and only long-term, once-daily oral
treatment in the European Union and the United Kingdom , respectively, for
moderate to severe symptoms of uterine fibroids in adult women of reproductive
age. In September 2021 , the FDA accepted our supplemental New Drug Application
("sNDA") for MYFEMBREE for the management of moderate to severe pain associated
with endometriosis, setting a target action date of May 6, 2022 . MYFEMBREE is
also being evaluated for contraceptive efficacy in women with heavy menstrual
bleeding associated with uterine fibroids or endometriosis-associated pain who
are 18 to 50 years of age and at risk for pregnancy. Relugolix (120 mg) is also
under regulatory review in Europe for men with advanced prostate cancer. We are
also developing MVT-602, an oligopeptide kisspeptin-1 receptor agonist, which
has completed a Phase 2a study for the treatment of female infertility as a part
of assisted reproduction.
Since our inception, we have funded our operations primarily from the issuance
and sale of our common shares, from debt financing arrangements, and more
recently from the upfront and regulatory milestone payments we received from
Pfizer Inc. ("Pfizer") and Gedeon Richter Plc . ("Richter"). We began generating
product revenue from the sales of ORGOVYX and MYFEMBREE in the U.S. in January
2021 and June 2021 , respectively.
Our majority shareholder is Sumitovant Biopharma Ltd. ("Sumitovant"), a
wholly-owned subsidiary of Sumitomo Dainippon Pharma Co., Ltd. ("Sumitomo
Dainippon Pharma"). As of September 30, 2021 , Sumitovant directly, and Sumitomo
Dainippon Pharma indirectly, own 50,041,181, or approximately 53.8%, of our
outstanding common shares.
Second Fiscal Quarter Ended September 30, 2021 and Recent Business Updates
Below is a summary of certain events during our second fiscal quarter ended
September 30, 2021 and recent business updates. Additional information about our
business, our products, and our product candidates is included in Part I. Item
1., "Business," included in our Annual Report on Form 10-K, filed with the SEC
on May 11, 2021 .
Products and Product Candidates
•In October 2021 , we and Pfizer presented data from clinical studies of
MYFEMBREE at the American Society for Reproductive Medicine ("ASRM") 2021
Congress , including results of the Phase 3 LIBERTY randomized withdrawal study,
which was designed to evaluate the efficacy and safety of relugolix combination
therapy for up to two years in women with heavy menstrual bleeding associated
with uterine fibroids, and was designated an ASRM Prize Paper. Additional data
presentations at ASRM included data from the SPIRIT 1 and 2 studies of women
with pain associated with endometriosis as well as pooled safety and
tolerability data from the LIBERTY and SPIRIT clinical programs.
•In September 2021 , the FDA accepted our sNDA for MYFEMBREE for the management
of moderate to severe pain associated with endometriosis, setting a target
action date of May 6, 2022 . FDA approval of MYFEMBREE for this indication would
trigger a $100.0 million regulatory milestone payment from Pfizer.
•In August 2021 , the FDA informed us that the partial clinical hold for the
Phase 3 SERENE study evaluating MYFEMBREE for the prevention of pregnancy was
lifted following study protocol amendments. The primary analysis of the study,
prevention of pregnancy, remains unchanged, but now the SERENE study will only
evaluate women with a confirmed diagnosis of uterine fibroids or endometriosis.
Bone mineral density monitoring will occur throughout the treatment period as
well as after treatment is discontinued to gain additional insights into bone
health, which will augment the safety profile observed in the LIBERTY and SPIRIT
programs. The enrollment target was increased to 1,020 patients who are 18 to 50
years of age and at risk for pregnancy, enhancing the power of the study.
Patient screening with this updated protocol began in September 2021 , with
initial patients dosed in October 2021 .
•On July 16, 2021 and August 9, 2021 , the European Commission and the Medicines
and Healthcare products Regulatory Agency, respectively, approved RYEQO for the
treatment of moderate to severe symptoms of uterine fibroids in adult women of
reproductive age. RYEQO is the first and only long-term, once-daily oral
treatment for uterine fibroids with no limitation on its duration of use
approved in the European Union and the United Kingdom . The approval was based on
safety and efficacy data from the global Phase 3 LIBERTY program, which
consisted of two replicate, 24-week, multinational clinical studies (LIBERTY 1
and LIBERTY 2), a one-year extension study, and supportive bone mineral density
data from a randomized withdrawal study. Richter, our commercialization partner
for RYEQO in Europe and certain other international markets, has launched RYEQO
in seven countries since these regulatory approvals.
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Corporate
•For the three months ended September 30, 2021 , we generated net product revenue
from sales of ORGOVYX and MYFEMBREE of $18.7 million and $0.6 million ,
respectively.
•In the three months ended September 30, 2021 , we received a $100.0 million
regulatory milestone payment from Pfizer that was triggered upon the FDA
approval of MYFEMBREE on May 26, 2021 as the first and only once-daily oral
treatment for the management of heavy menstrual bleeding associated with uterine
fibroids in the U.S. In the three months ended September 30, 2021 , we also
received a $15.0 million regulatory milestone payment from Richter that was
triggered upon the European Commission approval of RYEQO for the treatment of
moderate to severe symptoms of uterine fibroids in adult women of reproductive
age.
•As of September 30, 2021 , we had cash, cash equivalents and marketable
securities of $616.0 million . We believe that our existing cash, cash
equivalents, and marketable securities will be sufficient to fund our
anticipated operating expenses and capital expenditure requirements for at least
the next 12 months from the date of issuance of this Quarterly Report.
•On October 22, 2021 , we were notified by Pfizer of their decision to decline
the exclusive option for international commercialization and development rights
(excluding Canada and certain Asian countries) to relugolix in oncology, as
offered under the Pfizer Collaboration and License Agreement. Pfizer's decision
is based on their assessment of their current strategic investment priorities in
international markets and does not impact the companies' collaboration in the
U.S. and Canada for ORGOVYX and MYFEMBREE. We are currently assessing
partnership opportunities, focusing on potential partners with a European
commercial presence in urology or oncology.
•On September 7, 2021 , Uneek Mehra was appointed Chief Financial and Business
Officer of Myovant Sciences, Inc. Concurrent with this appointment, Mr. Mehra
was also appointed Principal Financial Officer of Myovant Sciences Ltd. Mr.
Mehra succeeds Frank Karbe who left our company in August 2021 .
Expected Upcoming Milestones
The following is a summary of certain of our expected upcoming milestones.
•FDA submission of the Phase 3 LIBERTY randomized withdrawal study results for
MYFEMBREE in women with uterine fibroids is expected by the end of calendar year
2021 or in the first quarter of calendar year 2022.
•Two-year data from the SPIRIT long-term extension study of MYFEMBREE in women
with endometriosis-associated pain is expected in the first quarter of calendar
year 2022.
•FDA decision for the MYFEMBREE sNDA seeking approval for the management of
moderate to severe pain associated with endometriosis is expected by its May 6,
2022 target action date. FDA approval of MYFEMBREE for this indication would
trigger a $100.0 million regulatory milestone payment from Pfizer.
•European Commission decision on the advanced prostate cancer Marketing
Authorisation Application is expected in mid-calendar year 2022.
•European Medicines Agency regulatory submission for RYEQO for the treatment of
women with endometriosis-associated pain is expected in calendar year 2022.
Richter will be the sponsor.
Effects of the COVID-19 Pandemic on our Business
We continue to closely monitor the impact of the COVID-19 pandemic on all
aspects of our business. Our priorities during the COVID-19 pandemic have been
to protect the health and safety of our employees, patients and healthcare
providers while continuing our mission to redefine care for women and for men.
We believe the safety measures we have taken in response to the COVID-19
pandemic meet or exceed the guidelines established by government and public
health officials. Most of our employees worked remotely during much of 2020 and
2021, and many of our employees continue to do so on a part-time or full-time
basis, which has required that we devised new ways of working and collaborating,
including adopting remote working tools to minimize the disruption to our
business activities.
As of the date of this Quarterly Report, we do not believe that the impact of
the COVID-19 pandemic has disproportionately impacted us relative to other
companies in which we compete on our ability to advance our clinical studies,
our regulatory activities, and our U.S. commercial launch activities for ORGOVYX
and MYFEMBREE. We and our collaboration partner,
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Pfizer, commercially launched ORGOVYX and MYFEMBREE in the U.S. in January 2021
and June 2021 , respectively. To date, our partner, Richter, has launched RYEQO
in seven countries.
We believe that the COVID-19 pandemic continues to have an impact on our
commercialization activities that is consistent with other companies in our
industry. As a result of the COVID-19 pandemic, there have been changes in the
practice of medical care and medical education. For example, many health care
providers initially expanded their utilization of telemedicine to conduct
patient visits, and in many regions of the U.S. , the ability of commercial and
medical affairs field teams to call on healthcare providers was restricted or
converted to virtual access. Our oncology sales and medical affairs field teams
resumed in-person interactions with healthcare providers in January 2021 and our
women's health sales and medical affairs field teams began in-person
interactions with healthcare providers in June 2021 . Despite this, some
physician's offices and many hospitals continue to have limited on-site access
for pharmaceutical representatives in order to reduce exposure risk for their
patients or staff. Conducting these interactions virtually could reduce the
number of medical professionals we are able to engage with, limit our ability to
engage with important staff members and virtual meetings have been shown to be
less impactful than in-person meetings. The cancellation, postponement or
virtual formats for medical conferences also limit access to physicians and
reduce awareness of information shared at conferences (medical and promotional).
In response to the COVID-19 pandemic, health professionals may also reduce
staffing and reduce or postpone appointments with patients, or patients may
delay, cancel or miss appointments, resulting in fewer prescriptions. Reduced
access to healthcare providers may impact or require adjustments to our planned
commercialization activities, including the manner in which our field teams
engage with healthcare providers and facilities and supplementing field
activities with additional marketing spend.
The COVID-19 pandemic has also resulted in fewer opportunities for our medical
affairs team to present scientific data as multiple medical conferences have
been canceled, postponed, or moved to virtual formats and for our regional
medical advisors to engage potential prescribers in scientific exchange. To
date, we have not experienced supply constraints, and we believe we have
procured sufficient quantities of relugolix drug substance to meet our U.S.
ORGOVYX and MYFEMBREE launch plans.
Future developments regarding COVID-19 remain uncertain and the extent to which
the COVID-19 pandemic ultimately impacts our business, financial condition or
results of operations will depend on numerous factors, including the magnitude
and duration of the pandemic, the distribution, acceptance and effectiveness of
COVID-19 vaccines and treatments, the impact of new and potentially more
virulent variants of the coronavirus (e.g., the Delta variant), the duration of
governmental measures to mitigate the pandemic and how quickly and to what
extent normal economic and operating conditions can resume, all of which remain
uncertain and difficult to predict. Additionally, even after normalcy resumes,
there will likely be some permanent changes to how healthcare is provided, how
healthcare providers engage with our industry and perhaps how conferences are
implemented. None of these changes can be anticipated at this point, nor the
potential impact on our business. As such, it is uncertain as to the full
magnitude that the COVID-19 pandemic will have on our financial condition,
liquidity, and future results of operations.
Refer to the risk factor titled "Business interruptions resulting from effects
of pandemics or epidemics, such as the COVID-19 pandemic, may materially and
adversely affect our business and financial condition," as well as other risk
factors included in the section titled "Risk Factors" set forth in Part II. Item
1A.
Components of our Results of Operations
Revenues
We currently have two FDA-approved products, ORGOVYX for the treatment of adult
patients with advanced prostate cancer and MYFEMBREE for the management of heavy
menstrual bleeding associated with uterine fibroids, which generate product
revenue in the U.S. We record product revenue net of estimated discounts,
chargebacks, rebates, product returns, and other gross-to-net revenue
deductions. We expect the ORGOVYX gross-to-net discount will continue to
increase in the coming quarters, reflecting the impact of rebates for
incremental covered lives before stabilizing in 2022, once commercial and
Medicare Part D coverage has been fully implemented. Product revenue, net also
includes revenues related to product supply to Richter as well as royalties on
net sales of RYEQO in Richter's Territory.
Our Pfizer collaboration revenue consists of the partial recognition of the
upfront payment and of the regulatory milestone payment that was triggered upon
the FDA approval of MYFEMBREE for the management of heavy menstrual bleeding
associated with uterine fibroids.
Our Richter license and milestone revenue consists of the recognition of the
regulatory milestone payment that was triggered upon the European Commission
approval of RYEQO for the treatment of moderate to severe symptoms of uterine
fibroids in adult women of reproductive age and the recognition of revenue
associated with upfront and regulatory milestone payments we received from
Richter pursuant to the terms of the Richter Development and Commercialization
Agreement.
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See Note 8 to our unaudited condensed consolidated financial statements included
elsewhere in this Quarterly Report for additional information regarding the
Pfizer Collaboration and License Agreement and the Richter Development and
Commercialization Agreement.
Cost of Product Revenue
Our cost of product revenue is composed of the cost of goods sold and royalty
expense. Our cost of goods sold consists of raw materials, third-party
manufacturing costs to manufacture the raw materials into finished product,
freight, and indirect overhead costs associated with sales of ORGOVYX and
MYFEMBREE in the U.S and sales of product supply to Richter. Our royalty expense
consists of royalties on net sales of relugolix payable to Takeda pursuant to
the terms of the Takeda License Agreement (see Note 9(D) to our unaudited
condensed consolidated financial statements included elsewhere in this Quarterly
Report).
In connection with the FDA approvals of ORGOVYX (on December 18, 2020 ) and
MYFEMBREE (on May 26, 2021 ), we subsequently began capitalizing inventory
manufactured or purchased for each product after its respective approval date.
As a result, we expensed certain manufacturing costs of ORGOVYX and MYFEMBREE as
research and development ("R&D") expenses prior to FDA approval and, therefore,
these costs are not included in cost of goods sold.
Collaboration Expense to Pfizer
Our collaboration expense to Pfizer consists of Pfizer's 50% share of net
profits from sales of ORGOVYX and MYFEMBREE in the U.S. (see Note 8(B) to our
unaudited condensed consolidated financial statements included elsewhere in this
Quarterly Report).
Research and Development Expenses
Our R&D expenses to date have been primarily attributable to the clinical
development of our product candidates including the conduct of multiple Phase 3
and earlier clinical studies, the expansion of our team, and the initiation of
activities in preparation for our anticipated commercial launches such as the
establishment of our medical affairs function, as well as regulatory and certain
manufacturing activities. Our R&D expenses include program-specific costs, as
well as costs that are not allocated to a specific program.
Our program-specific costs primarily include third-party costs, which include
expenses incurred under agreements with CROs and CMOs, the cost of consultants
who assist with the development of our product candidates on a program-specific
basis, investigator grants, sponsored research, manufacturing costs in
connection with producing materials for use in conducting nonclinical and
clinical studies, as well as costs related to pre-commercial manufacturing
activities and regulatory submissions, and other third-party expenses directly
attributable to the development of our product candidates.
Our unallocated R&D costs primarily include employee-related expenses, such as
salaries, share-based compensation, fringe benefits and travel for employees
engaged in R&D activities including clinical operations, biostatistics,
regulatory, and medical affairs, and the cost of contractors and consultants who
assist with R&D activities not specific to a program and costs associated with
nonclinical studies.
R&D activities have been, and will continue to be, central to our business
model. We currently expect R&D expenses for the remaining fiscal 2021 quarters
to be in line with the R&D spend incurred in the three months ended September
30, 2021 . Overall, we expect declining spend on our Phase 3 clinical programs
that are winding down to be offset primarily by incremental spend on new
relugolix development programs, such as the Phase 3 SERENE study, and certain
other lifecycle activities to potentially expand the commercial opportunity for
the relugolix franchise, as well as post-marketing requirements as agreed upon
with the FDA.
The duration, costs and timing of clinical studies and development of our
product candidates will depend on a variety of factors that include, but are not
limited to: the number of studies required for approval; the per patient study
costs; the number of patients who participate in the studies; the number of
sites included in the studies; the countries in which the studies are conducted;
the length of time required to recruit and enroll eligible patients; the number
of patients who fail to meet the study's inclusion and exclusion criteria; the
number of study drug doses that patients receive; the drop-out or
discontinuation rates of patients; the potential additional safety monitoring or
other studies requested by regulatory agencies; the duration of patient
follow-up; the timing and receipt of regulatory approvals; the costs of clinical
study materials; and the efficacy and safety profile of the product candidate.
In addition, the probability of commercial success for ORGOVYX and MYFEMBREE, or
for any of our current or potential future product candidates, if approved, will
depend on numerous factors, including competition, manufacturing capability and
commercial viability. Our R&D activities may be subject to change from time to
time as we evaluate our priorities and available resources.
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We expect that certain R&D expenses will be shared equally with Pfizer pursuant
to the Pfizer Collaboration and License Agreement. See Note 8(B) to our
unaudited condensed consolidated financial statements included elsewhere in this
Quarterly Report for additional information regarding the Pfizer Collaboration
and License Agreement.
Selling, General and Administrative Expenses
Our selling, general and administrative ("SG&A") expenses consist primarily of
personnel costs, including salaries, sales incentive compensation, bonuses,
fringe benefits, and share-based compensation for our executive, finance, human
resources, legal, information technology, commercial operations, marketing,
market access, sales, and other administrative functions. Our SG&A expenses also
include marketing programs, patient assistance and support programs,
advertising, conferences, congresses, travel expenses, professional fees for
legal, accounting, auditing and tax services, and costs related to rent and
facilities, insurance, information technology, commercial operations, and
general overhead. Our SG&A expenses also include related party expenses pursuant
to our agreements with Sunovion and Sumitovant (see Note 5 to our unaudited
condensed consolidated financial statements included elsewhere in this Quarterly
Report).
We currently expect SG&A expenses for the remaining fiscal 2021 quarters to
increase modestly from the SG&A spend incurred in the three months ended
September 30, 2021 as we continue to expand our sales and marketing
infrastructure and capabilities as well as general administrative functions to
support multiple product launches and commercialization activities. We expect
SG&A expenses in future periods to include certain expenses related to our
patient support programs such as free drug and patient assistance for qualified
uninsured patients. The timing of these increased expenditures and their
magnitude are primarily dependent on our commercial success and sales growth of
ORGOVYX and MYFEMBREE, as well as the timing of any new product launches and
other potential business and operational activities.
We expect that certain SG&A expenses will be shared equally with Pfizer pursuant
to the Pfizer Collaboration and License Agreement. See Note 8(B) to our
unaudited condensed consolidated financial statements included elsewhere in this
Quarterly Report for additional information regarding the Pfizer Collaboration
and License Agreement.
Interest Expense
Our interest expense consists of related party interest expense pursuant to the
Sumitomo Dainippon Pharma Loan Agreement, which bears interest at a rate per
annum equal to 3-month LIBOR plus a margin of 3% payable on the last day of each
calendar quarter, and accretion of the financing component of the cost share
advance from Pfizer (see Note 8(B) to our unaudited condensed consolidated
financial statements included elsewhere in this Quarterly Report).
Interest Income
Our interest income consists primarily of interest earned and the accretion of
discounts to maturity for cash equivalents and marketable securities.
Foreign Exchange Gain
Our foreign exchange gain in the three and six months ended September 30, 2020
consists of the impact of changes in foreign currency exchange rates on our
foreign exchange denominated liabilities, relative to the U.S. dollar. The
impact of foreign currency exchange rates on our results of operations
fluctuates period over period based on our foreign currency exposures resulting
from changes in applicable exchange rates associated with our foreign
denominated liabilities. Our primary foreign currency exposure has historically
been the exchange rate between the Swiss franc and the U.S. dollar.
In December 2020 , we changed the functional currency of our wholly-owned
subsidiary in Switzerland , Myovant Sciences GmbH ("MSG"), from the Swiss franc
to the U.S. dollar. This change in functional currency was accounted for
prospectively. As a result of this change, we currently expect that future
impacts of changes in foreign currency exchange rates on our results of
operations will not be significant. See Note 2 to our audited consolidated
financial statements included in our Annual Report on Form 10-K for the fiscal
year ended March 31, 2021 , filed with the SEC on May 11, 2021 .
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Results of Operations
The following table summarizes our results of operations for the three and six
months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended September 30, Six Months Ended September 30,
2021 2020 2021 2020
Revenues:
Product revenue, net $ 21,063 $ - $ 32,617 $ -
Pfizer collaboration revenue 25,172 - 54,681 -
Richter license and milestone revenue 31,667 - 31,667 33,333
Total revenues 77,902 - 118,965 33,333
Operating costs and expenses:
Cost of product revenue 2,622 - 3,654 -
Collaboration expense to Pfizer 8,565 - 13,826 -
Research and development 26,280 40,521 57,160 84,707
Selling, general and administrative 58,781 31,316 119,993 54,144
Total operating costs and expenses 96,248 71,837 194,633 138,851
Loss from operations (18,346) (71,837) (75,668) (105,518)
Interest expense 3,494 2,115 6,999 4,299
Interest income (100) (38) (178) (146)
Foreign exchange gain - (6,718) - (10,287)
Loss before income taxes (21,740) (67,196) (82,489) (99,384)
Income tax (benefit) expense (149) (134) 762 538
Net loss $ (21,591) $ (67,062) $ (83,251) $ (99,922)
Revenues
The following table provides information about our revenues for the three and
six months ended
Three Months Ended September
30, Six Months Ended
2021 2020 2021 2020
Revenues:
Product revenue, net:
ORGOVYX $ 18,663 $ - $ 29,142 $ -
MYFEMBREE 629 - 1,704 -
Richter product supply and royalties 1,771 - 1,771 -
Total product revenue, net 21,063 - 32,617 -
Pfizer collaboration revenue:
Amortization of upfront payment 20,974 - 41,948 -
Amortization of regulatory milestone 4,198 - 12,733 -
Total Pfizer collaboration revenue 25,172 - 54,681 -
Richter license and milestone revenue 31,667 - 31,667 33,333
Total revenues $ 77,902 $ - $ 118,965 $ 33,333
We began generating product revenue from sales of ORGOVYX and MYFEMBREE in the
U.S. in January 2021 and June 2021 , respectively. For the three and six months
ended September 30, 2021 , product revenue, net also includes revenues related to
product supply to Richter of $1.7 million , as well as royalties on net sales of
RYEQO in Richter's Territory of less than $0.1 million .
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Pfizer collaboration revenue for the three and six months ended September 30,
2021 , consists of the partial recognition of the upfront payment and of the
regulatory milestone payment that was triggered upon the FDA approval of
MYFEMBREE for the management of heavy menstrual bleeding associated with uterine
fibroids. There were no such amounts recognized for the three and six months
ended September 30, 2020 .
Richter license and milestone revenue for the three and six months ended
September 30, 2021 consists of the recognition of a $15.0 million regulatory
milestone payment that was triggered upon the European Commission approval of
RYEQO for the treatment of moderate to severe symptoms of uterine fibroids in
adult women of reproductive age and $16.7 million of previously deferred revenue
that was recognized upon the completion of our delivery of the remaining
substantive relugolix combination tablet data packages to Richter. Richter
license and milestone revenue for the six months ended September 30, 2020
consists of the recognition of $33.3 million of the upfront and regulatory
milestone payments we received from Richter in March and April 2020 ,
respectively. There was no Richter license and milestone revenue for the three
months ended September 30, 2020 .
Cost of Product Revenue
For the three and six months ended September 30, 2021 , our cost of product
revenue was $2.6 million and $3.7 million , respectively, which includes the cost
of goods sold and royalty expense payable to Takeda. There were no such amounts
recognized for the three and six months ended September 30, 2020 .
In connection with the FDA approvals of ORGOVYX for adult patients with advanced
prostate cancer (on December 18, 2020 ) and MYFEMBREE for the management of heavy
menstrual bleeding associated with uterine fibroids (on May 26, 2021 ), we
subsequently began capitalizing inventory manufactured or purchased for each
product after its respective approval date. Previously, costs to manufacture
ORGOVYX and MYFEMBREE were expensed as incurred as R&D expenses. We expect our
cost of goods sold to increase in future periods as quantities of previously
expensed ORGOVYX and MYFEMBREE inventory are depleted from our inventory stock.
Collaboration Expense to Pfizer
For the three and six months ended September 30, 2021 , our collaboration expense
to Pfizer was $8.6 million and $13.8 million , respectively and represents
Pfizer's 50% share of net profits from the sales of ORGOVYX and MYFEMBREE in the
U.S. There were no such amounts recognized for the three and six months ended
September 30, 2020 .
Research and Development Expenses
For the three months ended September 30, 2021 and 2020, our R&D expenses
consisted of the following (in thousands):
Three Months Ended September 30,
2021 2020 Change
Program-specific costs:
Relugolix $ 5,524 $ 19,793 $ (14,269)
MVT-602 50 15 35
Unallocated costs:
Personnel expense 13,733 11,827 1,906
Share-based compensation 5,060 3,725 1,335
Other expense 1,913 5,161 (3,248)
Total R&D expenses $ 26,280 $ 40,521 $ (14,241) For the six months ended
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Six Months Ended September 30,
2021 2020 Change
Program-specific costs:
Relugolix $ 12,715 $ 45,686 $ (32,971)
MVT-602 113 239 (126)
Unallocated costs:
Personnel expense 28,497 23,663 4,834
Share-based compensation 9,167 7,749 1,418
Other expense 6,668 7,370 (702)
Total R&D expenses $ 57,160 $ 84,707 $ (27,547)
R&D expenses decreased by $14.2 million , to $26.3 million , in the three months
ended September 30, 2021 compared to $40.5 million in the three months ended
September 30, 2020 . The decrease in R&D expenses reflects cost share
reimbursements from Pfizer for certain R&D expenses during three months ended
September 30, 2021 , and a reduction in clinical study costs as a result of the
completion and wind down of our Phase 3 LIBERTY, HERO, and SPIRIT studies. This
decrease was partially offset by an increase in medical affairs personnel
expenses to support the U.S. launches of ORGOVYX and MYFEMBREE.
R&D expenses for the three months ended September 30, 2021 consisted primarily
of personnel expenses of $13.7 million , program-specific costs composed of CRO,
drug supply and other study, regulatory, and manufacturing related costs of $5.6
million , share-based compensation of $5.1 million and other unallocated costs of
$1.9 million .
R&D expenses for the three months ended September 30, 2020 consisted primarily
of program-specific costs composed of CRO, drug supply and other study,
regulatory, and manufacturing related costs of $19.8 million , personnel expenses
of $11.8 million , share-based compensation of $3.7 million , and other
unallocated costs of $5.2 million .
R&D expenses decreased by $27.5 million , to $57.2 million , in the six months
ended September 30, 2021 compared to $84.7 million in the six months ended
September 30, 2020 . The decrease in R&D expenses reflects cost share
reimbursements from Pfizer for certain R&D expenses during the six months ended
September 30, 2021 and a reduction in clinical study costs as a result of the
completion and wind down of our Phase 3 LIBERTY, HERO, and SPIRIT studies. The
decrease also reflects lower regulatory expenses during the six months ended
September 30, 2021 , as the prior year period included submission fees for our
NDAs for ORGOVYX for advanced prostate cancer and MYFEMBREE for the uterine
fibroids indication. This decrease was partially offset by an increase in
medical affairs personnel expenses to support the U.S. launches of ORGOVYX and
MYFEMBREE.
R&D expenses for the six months ended September 30, 2021 consisted primarily of
personnel expenses of $28.5 million , program-specific costs composed of CRO,
drug supply and other study, regulatory, and manufacturing related costs of
$12.8 million , share-based compensation of $9.2 million , and other unallocated
costs of $6.7 million ,
R&D expenses for the six months ended September 30, 2020 consisted primarily of
program-specific costs composed of CRO, drug supply and other study, regulatory,
and manufacturing related costs of $40.1 million , personnel expenses of $23.7
million , fees related to our NDA submissions for MYFEMBREE for the management of
heavy menstrual bleeding associated with uterine fibroids and ORGOVYX for adult
patients with advanced prostate cancer of $5.8 million , share-based compensation
of $7.7 million , and other unallocated costs of $7.4 million .
Selling, General and Administrative Expenses
SG&A expenses increased by $27.5 million , to $58.8 million , in the three months
ended September 30, 2021 compared to $31.3 million in the three months ended
September 30, 2020 , primarily due to higher expenses to support the U.S
commercial launches of ORGOVYX and MYFEMBREE, including higher personnel
expenses primarily related to the hiring of our commercial operations,
marketing, and market access teams, and our oncology and women's health sales
forces, and other general overhead, administrative, and information technology
expenses to support our organizational growth.
SG&A expenses in the three months ended September 30, 2021 consisted primarily
of personnel expenses of $27.4 million , commercial expenses of $10.0 million ,
general overhead, administrative and information technology expenses of $10.7
million , share-based compensation of $6.8 million , professional service fees of
$1.7 million , related party expenses of $1.2 million related to our Market
Access Services Agreement with Sunovion, and rent and other facilities-related
costs of $1.0 million . Share-based compensation includes approximately $2.2
million of incremental expenses related to our former Principal Executive
Officer's and our former Principal Financial Officer's equity awards as
discussed further in Note 7(D) and Note 7(E),
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respectively, to our unaudited condensed consolidated financial statements
included elsewhere in this Quarterly Report. SG&A expenses are presented net of
costs shared with Pfizer pursuant to the terms of the Pfizer Collaboration and
License Agreement.
SG&A expenses in the three months ended September 30, 2020 consisted primarily
of commercial operations expenses of $10.0 million , personnel expenses of $8.6
million , general overhead, administrative and information technology expenses of
$5.4 million , share-based compensation of $3.2 million , professional service
fees of $2.0 million , and rent and other facilities-related costs of $0.9
million . For the three months ended September 30, 2020 , SG&A expenses also
includes $1.3 million of related party expenses pursuant to our agreements with
Sumitovant and Sunovion.
SG&A expenses increased by $65.9 million , to $120.0 million , in the six months
ended September 30, 2021 compared to $54.1 million in the six months ended
September 30, 2020 , primarily due to higher expenses related to commercial
activities to support the U.S commercial launches of ORGOVYX and MYFEMBREE as
well as higher personnel expenses primarily related to the hiring of our
commercial operations, marketing, and market access teams, and our oncology and
women's health sales forces, and other general overhead, administrative, and
information technology expenses to support our organizational growth.
SG&A expenses in the six months ended September 30, 2021 consisted primarily of
personnel expenses of $54.9 million , commercial expenses of $22.7 million ,
general overhead, administrative and information technology expenses of $20.5
million , share-based compensation of $14.0 million , legal and professional
service fees of $3.5 million , related party expenses of $2.5 million related to
our Market Access Services Agreement with Sunovion, and rent and other
facilities-related costs of $1.9 million . Share-based compensation includes
approximately $3.6 million of incremental expenses related to our former
Principal Executive Officer's and our former Principal Financial Officer's
equity awards as discussed further in Note 7(D) and Note 7(E), respectively, to
our unaudited condensed consolidated financial statements included elsewhere in
this Quarterly Report. SG&A expenses are presented net of costs shared with
Pfizer pursuant to the terms of the Pfizer Collaboration and License Agreement.
SG&A expenses in the six months ended September 30, 2020 consisted primarily of
personnel expenses of $16.2 million , commercial operations expenses of $15.6
million , general overhead, administrative and information technology expenses of
$9.0 million , shared-based compensation of $7.0 million , professional service
fees of $3.3 million , and rent and other facilities-related costs of $1.7
million . For the six months ended September 30, 2020 , SG&A expenses also
includes $1.4 million of related party expenses pursuant to our agreements with
Sumitovant and Sunovion.
Interest Expense
Interest expense was $3.5 million and $7.0 million in the three and six months
ended September 30, 2021 , respectively, compared to $2.1 million and $4.3
million in the three and six months ended September 30, 2020 , respectively, and
was primarily related to the Sumitomo Dainippon Pharma Loan Agreement. The
increase in interest expense related to the Sumitomo Dainippon Pharma Loan
Agreement was primarily driven by a higher balance in the current fiscal year
periods. Interest expense in the three and six months ended September 30, 2021
also includes $0.6 million and $1.2 million , respectively, of accretion of the
financing component of the cost share advance from Pfizer. There was no such
accretion for the three and six months ended September 30, 2020 .
Interest Income
Interest income was $0.1 million and $0.2 million for the three and six months
ended September 30, 2021 , respectively. Interest income was approximately $0.1
million for both the three and six months ended September 30, 2020 .
Foreign Exchange Gain
For the three and six months ended September 30, 2020 , we recorded foreign
exchange gains of $6.7 million and $10.3 million , respectively, primarily as the
result of the impact of fluctuations in the foreign currency exchange rate
between the Swiss franc and the U.S. dollar on our outstanding balance under the
Sumitomo Dainippon Pharma Loan Agreement. There were no such amounts for the
three and six months ended September 30, 2021 .
Income Tax (Benefit) Expense
Our income tax (benefit) expense was $(0.1) million and $0.8 million for the
three and six months ended September 30, 2021 , respectively. Our income tax
(benefit) expense was $(0.1) million and $0.5 million for the three and six
months ended September 30, 2020 , respectively. Our effective tax rate for the
three and six months ended September 30, 2021 was 0.69% and (0.92)%,
respectively, and for the three and six months ended September 30, 2020 was
0.20% and (0.54)%, respectively. Our effective tax rates are driven by our
jurisdictional earnings by location and a valuation allowance that eliminates
our global net deferred tax assets.
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Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have funded our operations primarily from the issuance
and sale of our common shares, from debt financing arrangements, and more
recently from upfront and milestone payments we received from Pfizer and
Richter. We began generating net product revenue from the sales of ORGOVYX and
MYFEMBREE in the U.S. in January 2021 and June 2021 , respectively.
As of September 30, 2021 , we had cash, cash equivalents, marketable securities,
and amounts available to us under the Sumitomo Dainippon Pharma Loan Agreement
of $657.3 million , consisting of $616.0 million of cash, cash equivalents, and
marketable securities and $41.3 million of borrowing capacity available to us
under the Sumitomo Dainippon Pharma Loan Agreement, as compared to cash, cash
equivalents, marketable securities, and amounts available to us under the
Sumitomo Dainippon Pharma Loan Agreement of $726.2 million , consisting of $684.9
million of cash, cash equivalents, and marketable securities and $41.3 million
of borrowing capacity available to us under the Sumitomo Dainippon Pharma Loan
Agreement, as of March 31, 2021 . Additional funds under the Sumitomo Dainippon
Pharma Loan Agreement may be drawn down by us no more than once per calendar
quarter, subject to certain terms and conditions, including consent of our board
of directors.
Pursuant to the Pfizer Collaboration and License Agreement, we are eligible to
receive up to $3.6 billion of additional milestone payments, including a
regulatory milestone of $100.0 million upon the FDA approval for MYFEMBREE in
endometriosis, and tiered sales milestones of up to $3.5 billion upon reaching
certain thresholds of annual net sales for oncology and the combined women's
health indications in the Co-Promotion Territory. We and Pfizer equally share
profits and certain expenses in the Co-Promotion Territory.
Pursuant to the Richter Development and Commercialization Agreement, we are
eligible to receive up to $122.5 million of additional milestone payments,
including regulatory milestones of up to $15.0 million and tiered sales
milestones of up to $107.5 million upon reaching certain thresholds of annual
net sales in Richter's Territory, and tiered royalties on net sales in Richter's
Territory.
Capital Requirements
We believe that our existing cash, cash equivalents, and marketable securities
will be sufficient to fund our anticipated operating expenses and capital
expenditure requirements for at least the next 12 months from the date of
issuance of this Quarterly Report. This estimate is based on our current
assumptions, including assumptions related to our ability to manage our spend,
that might prove to be wrong, and we could use our available capital resources
sooner than we currently expect. In future periods, if our cash, cash
equivalents, marketable securities, and amounts that we expect to generate from
product sales and/or third-party collaboration payments, are not sufficient to
enable us to fund our operations, we may need to raise additional funds in the
form of equity, debt, or from other sources. In addition, we may choose to raise
additional funds in the form of equity, debt, or from other sources due to
market conditions or strategic considerations even if we believe we have
sufficient funds for our current and future operating plans. To the extent that
we raise additional capital through the sale of equity or convertible debt
securities, our common shareholders' ownership interest may experience
substantial dilution, and the terms of these securities may include liquidation
or other preferences that adversely affect our common shareholders' rights. The
Sumitomo Dainippon Pharma Loan Agreement involves, and any agreements for future
debt or preferred equity financings, if available, may involve, covenants
limiting or restricting our ability to take specific actions, such as incurring
additional debt, raising capital through equity offerings, making capital
expenditures or declaring dividends.
We expect our operating expenses, net of costs that are expected to be shared
with Pfizer pursuant to the Pfizer Collaboration and License Agreement, to
increase as we continue to commercialize ORGOVYX and MYFEMBREE in the U.S. ,
prepare for additional potential regulatory approvals, initiate life cycle
management activities as well as conduct post-marketing requirements as agreed
upon with the FDA for our relugolix franchise, and potentially further develop
our product candidates and expand our pipeline. However, while we expect our
future capital requirements and operating expenses to continue to be
significant, we expect our net cash burn to gradually decrease as our net
revenues increase. Our operating expenses and operating cash flows may fluctuate
significantly from quarter-to-quarter and year-to-year and our future funding
requirements, both near and long-term, will depend on many factors, including,
but not limited to:
•the price, level of demand and net product revenues generated from commercial
sales of our drug products and from any product candidates that may receive
marketing approval in the future;
•the achievement of regulatory milestones, sales milestones, and/or royalties
that we are eligible to earn pursuant to our collaboration agreements;
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•the timing, shared costs, and level of investment in our and our collaboration
partners' activities related to sales, marketing, market access, manufacturing,
and distribution for our drug products and for any product candidates that may
receive marketing approval in the future;
•the timing, shared costs, and level of investment in our and our collaboration
partners' research and development activities involving ORGOVYX, MYFEMBREE,
RYEQO, and any product candidates;
•costs, timing, and outcomes of regulatory submissions and regulatory reviews of
our product candidates;
•costs to expand our chemistry, manufacturing, and control and other
manufacturing related activities;
•costs to identify, acquire, develop, and commercialize additional product
candidates;
•costs to integrate acquired technologies into a comprehensive regulatory and
product development strategy;
•costs to maintain, expand, and protect our patent claims and other intellectual
property rights;
•costs to hire additional commercial operations, sales and marketing,
scientific, clinical, regulatory, quality, and other personnel to support our
commercialization, sales and marketing, regulatory, and clinical development
efforts;
•costs to implement or enhance operational, accounting, finance, quality,
commercial, and management information systems;
•costs to service our debt obligations and associated interest payments; and
•costs to operate as a public company.
Until such time, if ever, as we can generate substantial net product revenue
from sales of ORGOVYX, MYFEMBREE, or any product candidate, we expect to fund
our operations through a combination of cash, cash equivalents, and marketable
securities currently on hand and amounts available to us under the Sumitomo
Dainippon Pharma Loan Agreement, subject to the consent of our board of
directors, as well as potential payments we are eligible to receive from Pfizer
and Richter pursuant to the terms of our agreements with them.
Cash Flows
The following table sets forth a summary of our cash flows for the six months
ended September 30, 2021 and 2020 (in thousands):
Six Months Ended
2021 2020
Net cash used in operating activities$ (76,578) $ (110,576) Net cash used in investing activities$ (87,774) $ (14,823) Net cash provided by financing activities$ 15,135
Operating Activities Net cash used in operating activities was$76.6 million for the six months endedSeptember 30, 2021 and consisted of our net loss of$83.3 million adjusted for non-cash operating items of$25.9 million , offset by changes in operating assets and liabilities of$19.2 million . The significant non-cash operating items included share-based compensation of$23.1 million , depreciation and amortization expense of$1.5 million , and accretion of the implied financing component of the cost share advance from Pfizer of$1.2 million . The changes in operating assets and liabilities included the following: •$38.3 million decrease in cost share advance from Pfizer due to the application of shared Allowable Expenses (see Note 8(B) and Note 8(C) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report); •$28.7 million net increase in deferred revenue due to a$100.0 million regulatory milestone payment from Pfizer, partially offset by the recognition of$54.7 million of Pfizer collaboration revenue and$16.7 million of Richter license and milestone revenue (see Note 8 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report); 38 -------------------------------------------------------------------------------- Table of Contents •$18.0 million increase in amounts due to Pfizer as a result of an increase in profit share and reimbursement of Allowable Expenses incurred by Pfizer (see Note 8(B) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report); •$10.8 million increase in accounts receivable, net as a result of an increase in net product revenues, mainly driven by sales of ORGOVYX in theU.S. ; •$9.5 million decrease in accounts payable, primarily driven by the timing of vendor invoice payments; •$3.5 million increase in inventories, driven by the capitalization of inventory manufactured or purchased after the FDA approval of ORGOVYX (onDecember 18, 2020 ) and MYFEMBREE (onMay 26, 2021 ); and •$3.7 million net change in other operating assets and liabilities. Net cash used in operating activities was$110.6 million for the six months endedSeptember 30, 2020 , and consisted of our net loss of$99.9 million adjusted for non-cash operating items of$5.9 million , offset by changes in operating assets and liabilities of$16.6 million . The significant non-cash operating items included share-based compensation of$14.7 million , foreign currency transaction gain of$10.3 million related to the Sumitomo Dainippon Pharma debt outstanding, and depreciation and amortization expense of$1.1 million . The changes in operating assets and liabilities included the following: •$23.3 million net decrease in deferred revenue consisting of the recognition of$33.3 million of Richter license and milestone revenue, partially offset by an increase in deferred revenue of$10.0 million related to a regulatory milestone payment we received from Richter inApril 2020 (see Note 8(A) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report); •$11.1 million increase in accrued expenses primarily due to increases in accrued commercial, compensation-related, and R&D expenses; •$8.3 million decrease in accounts payable due to the timing of vendor invoice payments; and •$3.9 million net change in other operating assets and liabilities. Investing Activities For the six months endedSeptember 30, 2021 , we used$87.8 million in investing activities, of which$87.4 million was for the purchases of marketable securities, net of maturities, and$0.4 million was for the purchases of property and equipment. For the six months endedSeptember 30, 2020 , we used$14.8 million in investing activities, of which$14.1 million was for the purchases of marketable securities, net of maturities, and$0.7 million was for the purchases of property and equipment. Financing Activities For the six months endedSeptember 30, 2021 ,$15.1 million was provided by financing activities, which was from proceeds from the exercise of stock options. For the six months endedSeptember 30, 2020 ,$143.6 million was provided by financing activities. This was due to proceeds of$140.0 million borrowed under the Sumitomo Dainippon Pharma Loan Agreement and proceeds of$3.6 million from the exercise of stock options. Contractual Obligations During the six months endedSeptember 30, 2021 , there were no material changes to our contractual obligations and commitments described under Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year endedMarch 31, 2021 . Off-Balance Sheet Arrangements During the six months endedSeptember 30, 2021 , we did not have any off-balance sheet arrangements, as defined in the rules and regulations of theSEC . 39 -------------------------------------------------------------------------------- Table of Contents Critical Accounting Policies and Significant Judgments and Estimates The preparation of our unaudited condensed consolidated financial statements and related notes requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent liabilities. We have based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Management periodically reviews our estimates and makes adjustments when facts and circumstances dictate. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. We believe that our critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements. Our critical accounting policies are more fully described in "Critical Accounting Policies and Significant Judgments and Estimates" in Part II. Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year endedMarch 31, 2021 , filed with theSEC onMay 11, 2021 . We believe there have been no material changes to our critical accounting policies and use of estimates as disclosed in our Annual Report on Form 10-K. Recent Accounting Pronouncements For information regarding the impact of recently adopted accounting pronouncements and the expected impact of recently issued accounting pronouncements not yet adopted on our consolidated financial statements, see Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. Item 3. Quantitative and Qualitative Disclosures About Market Risk Under SEC rules and regulations, as a "smaller reporting company," we are not required to provide the information otherwise required by this item in this Quarterly Report. Item 4. Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in theSEC's rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Evaluation of Disclosure Controls and Procedures Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934 as amended) as of the end of the period covered by this Quarterly Report, have concluded that, based on such evaluation, our disclosure controls and procedures were effective at the reasonable assurance level. Changes in Internal Control over Financial Reporting We continually seek to improve the efficiency and effectiveness of our internal control over financial reporting. In the fourth quarter of our fiscal year endedMarch 31, 2021 and in the six months endedSeptember 30, 2021 , we began to generate net product revenue from sales of ORGOVYX and MYFEMBREE, respectively. Commensurate with the evolution of our business operations, we have implemented and continue to optimize new procedures and controls pertaining to the order to cash, including net revenue and inventory accounting processes. These new or enhanced internal controls were designed and implemented to ensure the completeness and accuracy over financial reporting. 40
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Table of Contents We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees continue to work remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the impact of the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness. There were no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter endedSeptember 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, withinMyovant Sciences Ltd. have been detected.
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