MYOVANT SCIENCES LTD. Objective
The purpose of the following discussion and analysis is to provide material information relevant to an assessment of our financial condition and results of operations from management's perspective, including to describe and explain key trends, events, and other factors that impacted our reported results for the periods presented and that are reasonably likely to impact our future performance.
The discussion and analysis below is organized as follows:
•executive summary, including a description of our business and recent events that are important to understand our results of operations and financial condition;
•a description of the components of our results of operations and a discussion of our results of operations, including an explanation of significant changes between the periods presented in the specific line items of our condensed consolidated statements of operations and comprehensive loss;
•financial condition addressing our liquidity position, sources and uses of cash, capital resources and requirements, and commitments; and
•critical accounting policies and significant judgments and use of estimates which are most important to our financial condition and results of operations.
As you read this discussion and analysis, refer to our unaudited condensed
consolidated financial statements and footnotes included in Part 1. Item 1. of
this Quarterly Report on Form 10-Q ("Quarterly Report"). Also refer to our
Annual Report on Form 10-K ("Annual Report") for the year ended March 31, 2022 ,
filed with the United States Securities and Exchange Commission ("SEC") on
May 11, 2022 , which is available free of charge on the SEC's website at
www.sec.gov and our investor relations website at investors.myovant.com. This
discussion and analysis contains forward looking statements and should also be
read in conjunction with the cautionary statement set forth in the section below
titled, "Information Relating to Forward-Looking Statements."
Dollar amounts reported in millions within this Quarterly Report are computed
based on the amounts in thousands, and therefore, the sum of components may not
equal the total amount reported in millions due to rounding.
Information Relating to Forward-Looking Statements
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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:
•the effects that our entry into the Merger Agreement (as such term is defined below) may have on our business prior to the closing of the Merger (as such term is defined below), or if the Merger does not close;
•our and our collaboration and commercialization partners' ability to successfully plan for and commercialize ORGOVYX®, MYFEMBREE®, and 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, including any decisionthe United States ("U.S.")Food and Drug Administration ("FDA") may make regarding our supplemental New Drug Application ("sNDA") that proposes updates to MYFEMBREE's United States Prescribing Information ("USPI") based on safety and efficacy data from the Phase 3 LIBERTY randomized withdrawal study of MYFEMBREE in premenopausal women with heavy menstrual bleeding associated with uterine fibroids for up to two years; •our ability to procure sufficient quantities of commercial relugolix drug substance and drug product from approved third party commercial manufacturing organizations ("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 condition and results of operations;
•the impact of various social, political, economic, industry, inflationary, global supply chain, or other market conditions in theU.S. and around the world (including wars and other forms of conflict such as the conflict inUkraine );
•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;
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•our expectations regarding potential future payments that we are eligible to
receive from Pfizer Inc. ("Pfizer") under the Pfizer Collaboration and License
Agreement, Gedeon Richter Plc . ("Richter") under the Richter Development and
Commercialization Agreement, and Accord Healthcare, Ltd. ("Accord") under the
Accord License Agreement;
•our ability to borrow under the Sumitomo Pharma Co., Ltd. ("Sumitomo Pharma") Loan Agreement;
•third party collaboration or commercialization 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 theSEC . 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 that aspires to redefine care for women and for men through purpose-driven science, empowering medicines, and transformative advocacy. Founded in 2016, we have executed multiple successful Phase 3 clinical trials across oncology and women's health leading to three regulatory approvals by the FDA: (1) ORGOVYX® (relugolix 120 mg), which was approved in theU.S. inDecember 2020 as the first and only oral gonadotropin-releasing hormone ("GnRH") receptor antagonist for the treatment of adult patients with advanced prostate cancer; (2) MYFEMBREE® (relugolix 40 mg, estradiol 1.0 mg, and norethindrone acetate 0.5 mg), which was approved in theU.S. inMay 2021 as the first and only once-daily oral GnRH treatment for the management of heavy menstrual bleeding associated with uterine fibroids; and (3) MYFEMBREE which was approved inAugust 2022 for the management of moderate to severe pain associated with endometriosis, establishing MYFEMBREE as the first and only once-daily oral GnRH treatment approved for both uterine fibroids and endometriosis. InJuly 2021 , theEuropean Commission ("EC"), and inAugust 2021 , theUnited Kingdom ("U.K.") Medicines and Healthcare products Regulatory Agency ("MHRA"), 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 theEuropean Union ("EU") andU.K. , respectively, for moderate to severe symptoms of uterine fibroids in adult women of reproductive age. InApril 2022 , the EC, and inJune 2022 , the MHRA, approved ORGOVYX (relugolix 120 mg) as the first and only oral androgen deprivation therapy for advanced hormone-sensitive prostate cancer in the EU andU.K. , respectively. InJune 2022 , the FDA accepted for review our supplemental New Drug Application ("sNDA") that proposes updates to theU.S. Prescribing Information based on the safety and efficacy data from the Phase 3 LIBERTY randomized withdrawal study ("RWS") of MYFEMBREE in premenopausal women with heavy menstrual bleeding due to uterine fibroids for up to two years. The FDA set a Prescription Drug User Fee Act ("PDUFA") goal date ofJanuary 29, 2023 for this sNDA. 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. We are also developing MVT-602, an investigational oligopeptide kisspeptin-1 receptor agonist, which has completed a Phase 2a study for the treatment of female infertility as a part of assisted reproduction. 31
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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 milestone payments we have received from our collaboration and commercialization partners, as well as net revenues generated from sales of ORGOVYX and MYFEMBREE in theU.S.
Our majority shareholder is
OnOctober 23, 2022 ,Myovant , Sumitovant,Zeus Sciences Ltd. , a wholly owned subsidiary of Sumitovant ("Merger Sub"), and, solely with respect to Article IX and Annex A of the Merger Agreement, Sumitomo Pharma, entered into an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Merger Sub with and intoMyovant (the "Merger"), withMyovant continuing as the surviving company following the Merger as a wholly owned subsidiary of Sumitovant (the "Surviving Company"). Subject to the terms and conditions set forth in Merger Agreement, in the event the Merger is consummated, holders of our common shares (other than Excluded Shares, Parent Owned Shares and Dissenting Shares (as each such term is defined in the Merger Agreement)) will be entitled to receive$27.00 per share in cash, without interest and less any applicable withholding taxes (the "Per Share Merger Consideration"). See Note 5(A) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. In connection with the entry into the Merger Agreement, onOctober 23, 2022 , Sumitovant andMyovant 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 ofMyovant or in connection with any written consent of the shareholders ofMyovant , Sumitovant will appear at such meeting or cause the common shares ofMyovant it holds 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. See Note 5(B) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
Second Fiscal Quarter Ended
In this section, we summarize certain of our second fiscal quarter ended
Financial Highlights
•Total revenues for the three months ended
•Product revenue, net for the three months ended
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were$43.3 million and$6.4 million , respectively, for the three months endedSeptember 30, 2022 , compared to$18.7 million and$0.6 million , respectively, for the three months endedSeptember 30, 2021 . •Pfizer collaboration revenue for the three months endedSeptember 30, 2022 , was$54.6 million , compared to$25.2 million for the three months endedSeptember 30, 2021 . •Total operating costs and expenses for the three months endedSeptember 30, 2022 , were$138.5 million , compared to$96.2 million for the three months endedSeptember 30, 2021 . •Net loss for the three months endedSeptember 30, 2022 , was$45.6 million , or$0.47 per common share, compared to a net loss of$21.6 million , or$0.23 per common share for the three months endedSeptember 30, 2021 .
•Cash, cash equivalents, and marketable securities were
See "Results of Operations" below for a discussion of our results of operations for the three and six months endedSeptember 30, 2022 , as compared to the three and six months endedSeptember 30, 2021 .
Recent Business Updates
Corporate
•OnOctober 23, 2022 , we announced thatMyovant entered into the Merger Agreement with Sumitovant,Zeus Sciences Ltd. , a wholly owned subsidiary of Sumitovant, and, solely with respect to Article IX and Annex A of the Merger Agreement, Sumitomo Pharma, under which Sumitovant has agreed to acquire the remaining shares ofMyovant that Sumitovant does not currently hold. Subject to the terms and conditions set forth in the Merger Agreement, in the event the Merger is consummated, holders of our common shares (other than Excluded Shares, Parent Owned Shares and Dissenting Shares) will be entitled to receive$27.00 per share in cash. See Note 5(A) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
Regulatory
•OnAugust 5, 2022 , the FDA approved MYFEMBREE for the management of moderate to severe pain associated with endometriosis, establishing it as the first and only once-daily oral GnRH treatment approved for both uterine fibroids and endometriosis. MYFEMBREE was launched in theU.S. for this indication by us and Pfizer inAugust 2022 . Pursuant to the terms of the Pfizer Collaboration and License Agreement, this approval triggered a$100.0 million regulatory milestone payment from Pfizer, which we received inSeptember 2022 . •InSeptember 2022 andOctober 2022 , we and Pfizer completed New Drug Submissions toHealth Canada seeking marketing approval inCanada for MYFEMBREE for heavy menstrual bleeding associated with uterine fibroids and MYFEMBREE for the treatment of endometriosis-associated pain, respectively. •InSeptember 2022 , our commercialization partner, Richter submitted a Type II variation application to the MHRA seeking approval for RYEQO for moderate to severe pain associated with endometriosis in adult women of reproductive age with a history of previous medical or surgical treatment for their endometriosis. •InOctober 2022 , Richter, submitted a Type II variation application to theEuropean Medicines Agency ("EMA") seeking approval for RYEQO for the treatment of moderate to severe pain associated with endometriosis in adult women of reproductive age with a history of previous medical or surgical treatment for their endometriosis. The acceptance of the Type II variation submission is pending validation by the EMA. Pursuant to theRichter Development and Commercialization Agreement, the acceptance of the Type II variation application by the EMA would trigger a$4.0 million milestone payment due from Richter.
Clinical
•We and Pfizer are initiating a new Phase 3 randomized open label clinical
study, the REPLACE-CV study, to assess the risk of major adverse cardiovascular
events ("MACE") associated with ORGOVYX compared with leuprolide. The REPLACE-CV
study is designed to enroll 2,250 men 18 years of age or older with prostate
cancer who require treatment with androgen deprivation therapy ("ADT") for at
least one year. The primary efficacy endpoint will be the time to first
adjudicated MACE, with MACE defined as a non-fatal myocardial infarction,
non-fatal stroke, or a
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cardiovascular death. Reported events will be adjudicated by a blinded adjudication committee. The study will be considered complete once 237 men have had an adjudicated MACE.
•The REPLACE-CV study design was agreed upon with the FDA. The study could further differentiate ORGOVYX by potentially adding additional data to the prescribing information concerning MACE events versus leuprolide, if approved by the FDA. Ex-U.S. Commercial •InOctober 2022 , our commercialization partner, Accord, launched ORGOVYX for the treatment of advanced hormone-sensitive prostate cancer inEurope . Pursuant to the Accord License Agreement, the first commercial sale of ORGOVYX inEurope triggered a$5.0 million milestone payment due from Accord.
Expected Upcoming Milestones
The following is a summary of certain of our expected upcoming milestones.
•We expect to submit a New Drug Submission toHealth Canada seeking marketing approval for ORGOVYX for advanced prostate cancer by the end of calendar year 2022. •We expect the FDA decision for the MYFEMBREE sNDA proposing updates to MYFEMBREE's USPI based on the safety and efficacy data from the Phase 3 LIBERTY RWS of MYFEMBREE in premenopausal women with heavy menstrual bleeding associated with uterine fibroids for up to two years by theJanuary 29, 2023 PDUFA goal date.
•We expect to submit an sNDA to the FDA for the SPIRIT 2-year long-term extension study for MYFEMBREE in women for the management of pain associated with endometriosis in the first half of calendar year 2023.
Effects of the COVID-19 Pandemic on our Business
While the COVID-19 pandemic has created certain operational complexities, we have thus far been successful at devising solutions to mitigate its impact on our business operations. To date, we do not believe that the COVID-19 pandemic has disproportionately impacted us relative to other commercial stage oncology and women's health biopharmaceutical companies with which we compete. We will continue to monitor developments with respect to COVID-19 that could pose additional risks for us, including the spread of the Omicron variant and its subvariants in theU.S. and other countries, and the potential emergence of new SARS-CoV-2 variants that may prove especially contagious or virulent. Despite our COVID-19 pandemic mitigation efforts, we may experience delays or an inability to execute our business plans, reduced revenues, or other adverse impacts to our business. 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 of this Quarterly Report.
Effects of the Russian Federation-Ukraine Conflict on our Business
The uncertain nature, magnitude, and duration of hostilities stemming from the conflict inUkraine , including the potential effects of sanctions, retaliatory cyber-attacks on the world economy and markets, and potential shipping delays, have contributed to increased market volatility and uncertainty, which could have an adverse impact on macroeconomic factors that affect our business. As a result of the conflict inUkraine , theU.S. ,U.K. , and the EU governments, among others, have developed and coordinated economic and financial sanctions. As the conflict inUkraine continues, there is no certainty regarding whether such governments or other governments will impose additional sanctions, or other economic or military measures against theRussian Federation . The impact of the conflict inUkraine , including economic sanctions or additional war or military conflict, as well as potential responses to them by theRussian Federation , is currently unknown and they could adversely affect our business, supply chain, clinical studies, suppliers or customers. In addition, the continuation of the conflict inUkraine by theRussian Federation could lead to other disruptions, instability and volatility in global markets and industries that could negatively impact our operations. It is not possible to predict the broader consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, the availability and cost of raw materials and fuel, supplies, freight and labor, inflation, and fluctuations in currency exchange rates, all of which could impact our business, financial condition and results of operations. 34 -------------------------------------------------------------------------------- T a b l e o f C o n t e n t s Refer to the risk factor titled "The conflict between theRussian Federation andUkraine and other government policies and actions could negatively affect our clinical trial sites inUkraine . We and/or our collaboration or commercialization partners may not be able to launch our commercial products in theRussian Federation ,Ukraine or other regions which may negatively affect our financial results. The uncertain nature, magnitude, and duration of hostilities stemming from such conflict may result in changes in the world's macroeconomic conditions which negatively affect our business operations."
Certain Components of our Results of Operations
Revenues
We record product revenue from sales of ORGOVYX and MYFEMBREE in theU.S. net of estimated discounts, chargebacks, rebates, product returns, and other gross-to-net revenue deductions. For the three and six months endedSeptember 30, 2022 , the gross-to-net deduction for ORGOVYX was approximately 43.2%, and 43.8%, respectively, and we expect it to be in the low-to-mid 40%'s for the remainder of fiscal year 2022. 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 the regulatory milestone payments from Pfizer that were triggered upon the FDA approval of MYFEMBREE for the management of heavy menstrual bleeding associated with uterine fibroids and for the management of moderate to severe pain associated with endometriosis.
Our Accord license revenue consists of the recognition of the upfront payment we received from Accord inMay 2022 pursuant to the Accord License Agreement. We recognized the upfront payment as revenue upon delivery of the license to Accord during the three months endedJune 30, 2022 .
Our Richter license and milestone revenue consists of the recognition of the upfront payment we received from Richter, as well as regulatory milestone payments from Richter that were triggered upon approvals of RYEQO.
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, the
Cost of Product Revenue
Our cost of product revenue is composed of the cost of goods sold and royalty expense payable to Takeda. 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 theU.S. and sales of product supply to Richter. The cost of inventories written down as a result of excess, obsolescence, or other reasons is also charged to cost of goods sold. 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).
Collaboration Expense to Pfizer
Our collaboration expense to Pfizer consists of Pfizer's 50% share of net profits from sales of ORGOVYX and MYFEMBREE arising in theU.S. (see Note 8(A) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report).
Selling, General and Administrative Expenses
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 for qualified uninsured and underinsured patients, promotion and advertising, conferences, congresses, travel expenses, professional fees for legal, business development, 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). Without consideration of additional costs that may arise due to the Merger Agreement (see Note 5(A) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report), SG&A expenses in the remaining quarters of fiscal year 2022 are expected to be similar to the second quarter of fiscal year 2022 driven largely by marketing and promotional expenses to support the ongoing commercialization of ORGOVYX and MYFEMBREE in theU.S. , including 35
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annualization of the MYFEMBREE marketing and promotional spend and targeted patient activation primarily for MYFEMBREE. The timing and magnitude of our SG&A expenses are primarily dependent on our commercial success and sales growth of ORGOVYX and MYFEMBREE, as well as the timing of any new indications or product launches and other potential business and operational activities. SG&A expenses are presented net of cost sharing of certain expenses arising in respect of the Co-Promotion Territory with Pfizer (see Note 8(A) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report). We are unable to estimate the amount of additional expenses that may arise due to the Merger Agreement.
Research and Development Expenses
R&D activities have been, and will continue to be, central to our business
model. 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.
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, 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.
Without consideration of additional costs that may arise due to the Merger
Agreement (see Note 5(A) to our unaudited condensed consolidated financial
statements included elsewhere in this Quarterly Report), R&D expenses in the
remaining quarters of fiscal year 2022 are expected to be higher than the second
quarter of fiscal year 2022, driven largely by spending on relugolix lifecycle
opportunities, such as the SERENE study and the REPLACE-CV study, as well as on
post-marketing requirements as agreed upon with the FDA. R&D expenses are
presented net of cost sharing of certain expenses arising in respect of the
Co-Promotion Territory with Pfizer (see Note 8(A) to our unaudited condensed
consolidated financial statements included elsewhere in this Quarterly Report).
We are unable to estimate the amount of additional expenses that may arise due
to the Merger Agreement.
Interest Expense
Our interest expense consists of related party interest expense pursuant to the
Sumitomo Pharma Loan Agreement, which bears interest at a variable rate per
annum equal to 3-month London Interbank Offered Rate ("LIBOR") plus a margin of
3% payable on the last day of each calendar quarter (see Note 5(C)to our
unaudited condensed consolidated financial statements included elsewhere in this
Quarterly Report), and the accretion of the financing component of the cost
share advance from Pfizer (see Note 8(A) to our unaudited condensed consolidated
financial statements included elsewhere in this Quarterly Report). Fluctuations
in 3-month LIBOR could negatively impact our financial results.
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Interest Income
Our interest income consists primarily of interest earned and the accretion of discounts to maturity for cash equivalents and marketable securities.
Income Tax Expense (Benefit)
Our income tax expense (benefit) currently is primarily attributable toU.S. federal, state and local taxes. For the three and six months endedSeptember 30, 2022 , our income tax expense is significantly affected by the changed requirement under Internal Revenue Code Section 174 to capitalize and subsequently amortize over five years R&D expenditures, pursuant to changes made to Internal Revenue Code Section 174 effective for years beginning afterDecember 31, 2021 , under the Tax Cuts and Jobs Act of 2017 ("TCJA"). Previously, Section 174 allowed for immediate expensing for accounting periods beginning beforeDecember 31, 2021 . Although it is understood thatCongress has been considering legislation that would extend the TCJA relief by one or more years, the possibility that this will happen is uncertain and we are required to calculate our income tax liabilities based on the provisions of current law. Without consideration of additional costs that may arise due to the Merger Agreement (see Note 5(A) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report), we currently estimate our total tax expense for fiscal year 2022 to be approximately$28.0 million to$32.0 million . This estimate is subject to assumptions in relation to matters that are variable and difficult to predict, such as assumptions related to our common share price at the time equity awards vest or are exercised, as well as option exercise behavior of participants in our equity plans. Actual results could differ from our estimates and assumptions. We are unable to estimate the amount of additional expenses that may arise due to the Merger Agreement.
Results of Operations
The following table summarizes our results of operations for the three and six
months ended
Three Months Ended September 30, Six Months Ended September 30,
2022 2021 2022 2021
Revenues:
Product revenue, net $ 49,947 $ 21,063 $ 91,298 $ 32,617
Pfizer collaboration revenue 54,577 25,172 79,718 54,681
Accord license revenue - - 50,000 -
Richter license and milestone revenue 300 31,667 300 31,667
Total revenues 104,824 77,902 221,316 118,965
Operating costs and expenses:
Cost of product revenue 4,942 2,622 9,857 3,654
Collaboration expense to Pfizer 22,418 8,565 40,434 13,826
Selling, general and administrative 84,259 58,781 163,291 119,993
Research and development 26,916 26,280 50,806 57,160
Total operating costs and expenses 138,535 96,248 264,388 194,633
Loss from operations (33,711) (18,346) (43,072) (75,668)
Interest expense 4,813 3,494 9,013 6,999
Interest income (1,018) (100) (1,504) (178)
Loss before income taxes (37,506) (21,740) (50,581) (82,489)
Income tax expense (benefit) 8,113 (149) 16,277 762
Net loss $ (45,619) $ (21,591) $ (66,858) $ (83,251)
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Revenues
The following table provides information about our revenues for the three and
six months ended
Three Months Ended September 30 ,
Six Months Ended
2022 2021 2022 2021
Revenues:
Product revenue, net:
ORGOVYX $ 43,319 $ 18,663 $ 79,353 $ 29,142
MYFEMBREE 6,403 629 10,402 1,704
Richter product supply and royalties 225 1,771 1,543 1,771
Total product revenue, net 49,947 21,063 91,298 32,617
Pfizer collaboration revenue:
Amortization of upfront payment 20,974 20,974 41,948 41,948
Amortization of regulatory milestones 33,603 4,198 37,770 12,733
Total Pfizer collaboration revenue 54,577 25,172 79,718 54,681
Accord license revenue - - 50,000 -
Richter license and milestone revenue 300 31,667 300 31,667
Total revenues $ 104,824 $ 77,902 $ 221,316 $ 118,965
Product Revenue, net
We generate product revenue from sales of ORGOVYX and MYFEMBREE in the U.S. We
record product revenue net of estimated discounts, chargebacks, rebates, product
returns, and other gross-to-net revenue deductions.
For the six months ended September 30, 2022 , product revenue, net, also includes
revenues related to product supply to Richter of $1.1 million , and for the three
and six months ended September 30, 2022 , product revenue, net, also includes
royalties on net sales of RYEQO in Richter's Territory of $0.2 million and
$0.4 million , respectively. There was no revenue related to product supply to
Richter for the three months ended September 30, 2022 . For the three and six
months ended September 30, 2021 , product revenue, net, also includes revenues
related to product supply to Richter of $1.7 million , as well as royalties on
net sales of RYEQO in Richter's Territory of less than $0.1 million .
Pfizer Collaboration Revenue
Pfizer collaboration revenue for the three and six months endedSeptember 30, 2022 and 2021 consists of the partial recognition of the upfront payment we received from Pfizer inDecember 2020 and of the$100.0 million regulatory milestone payment we received from Pfizer that was triggered upon the FDA approval of MYFEMBREE for the management of heavy menstrual bleeding associated with uterine fibroids onMay 26, 2021 . Pfizer collaboration revenue for the three and six months endedSeptember 30, 2022 also includes the partial recognition of the$100.0 million regulatory milestone payment we received from Pfizer that was triggered upon the FDA approval of MYFEMBREE for the management of moderate to severe pain associated with endometriosis onAugust 5, 2022 .
Accord License Revenue
We recognized$50.0 million of Accord license revenue for the six months endedSeptember 30, 2022 , which consists of an upfront payment we received from Accord inMay 2022 pursuant to the Accord License Agreement. There was no Accord license revenue for the three months endedSeptember 30, 2022 , or for the three and six months endedSeptember 30, 2021 .
Richter License and Milestone Revenue
We recognized$31.7 million of Richter license and milestone revenue for the three and six months endedSeptember 30, 2021 , which consists of a$15.0 million regulatory milestone payment that was triggered upon the EC 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 three and six months endedSeptember 30, 2022 consists of a$0.3 million regulatory milestone payment that was triggered upon the approval of RYEQO for the uterine fibroids indication inAustralia . 38
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Cost of Product Revenue
For the three and six months ended
For the three and six months ended
The$2.3 million and$6.2 million increase in our cost of product revenue for the three and six months endedSeptember 30, 2022 , respectively, compared to the year ago periods, was due to increases in cost of goods sold and royalty expense payable to Takeda primarily as a result of higher sales of ORGOVYX and MYFEMBREE in theU.S. during the three and six months endedSeptember 30, 2022 .
Collaboration Expense to Pfizer
For the three and six months endedSeptember 30, 2022 , our collaboration expense to Pfizer was$22.4 million and$40.4 million , respectively. For the three and six months endedSeptember 30, 2021 , our collaboration expense to Pfizer was$8.6 million and$13.8 million , respectively. Collaboration expense to Pfizer increased$13.9 million and$26.6 million for the three and six months endedSeptember 30, 2022 , compared to the year ago periods, primarily due to an increase in net profits generated from sales of ORGOVYX and MYFEMBREE in theU.S.
Selling, General and Administrative Expenses
SG&A expenses increased by
The most significant components of the
•$20.2 million increase in commercialization expenses, net of cost sharing of certain expenses arising in respect of the Co-Promotion Territory with Pfizer, to support ourU.S. commercialization activities for ORGOVYX and MYFEMBREE;
•$4.2 million increase in personnel expenses, including personnel expenses
related to our
•$3.8 million decrease in general overhead, administrative, information technology, and other expenses; and
•$3.5 million increase in legal and professional fees.
SG&A expenses increased by
The most significant components of the
•$28.2 million increase in commercialization expenses, net of cost sharing of certain expenses arising in respect of the Co-Promotion Territory with Pfizer, to support ourU.S. commercialization activities for ORGOVYX and MYFEMBREE;
•$10.6 million increase in personnel expenses, including personnel expenses
related to our
•$4.1 million increase in legal and professional fees.
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Research and Development Expenses
For the three months ended
Three Months Ended September 30,
2022 2021 Change
Program-specific costs:
Relugolix $ 2,715 $ 5,524 $ (2,809)
MVT-602 14 50 (36)
Unallocated costs:
Personnel expense 16,692 13,733 2,959
Share-based compensation 3,832 5,060 (1,228)
Other expense 3,663 1,913 1,750
Total R&D expenses $ 26,916 $ 26,280 $ 636 For the six months ended
Six Months Ended September 30,
2022 2021 Change
Program-specific costs:
Relugolix $ 3,558 $ 12,715 $ (9,157)
MVT-602 39 113 (74)
Unallocated costs:
Personnel expense 33,342 28,497 4,845
Share-based compensation 7,498 9,167 (1,669)
Other expense 6,369 6,668 (299)
Total R&D expenses $ 50,806 $ 57,160 $ (6,354)
R&D expenses increased by $0.6 million , to $26.9 million , in the three months
ended September 30, 2022 compared to $26.3 million in the three months ended
September 30, 2021 . The increase in R&D expenses in the three months ended
September 30, 2022 was primarily driven by higher personnel expenses and other
expenses, partially offset by a reduction in relugolix clinical study costs due
to the completion and wind down of our Phase 3 clinical trials. R&D expenses
decreased by $6.4 million , to $50.8 million , in the six months ended September
30, 2022 compared to $57.2 million in the six months ended September 30, 2021 .
The decrease in R&D expenses in the six months ended September 30, 2022 was
primarily driven by a reduction in relugolix clinical study costs due to the
completion and wind down of our Phase 3 clinical trials, partially offset by
lower personnel expenses.
Interest Expense
Interest expense was
Interest expense associated with the Sumitomo Pharma Loan Agreement increased$1.9 million to$4.8 million in the three months endedSeptember 30, 2022 compared to$2.9 million in the year ago period, and increased$2.7 million to$8.4 million in the six months endedSeptember 30, 2022 compared to$5.8 million in the year ago period, as a result of an increase in 3-month LIBOR as compared to the year ago periods. Accretion of the financing component of the cost share advance from Pfizer was$0.6 million for six months endedSeptember 30, 2022 , and$0.6 million and$1.2 million for the three and six months endedSeptember 30, 2021 , respectively. There was no accretion for the three months endedSeptember 30, 2022 . 40
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Interest Income
Interest income was$1.0 million and$1.5 million for the three and six months endedSeptember 30, 2022 , respectively. Interest income was$0.1 million and$0.2 million for the three and six months endedSeptember 30, 2021 , respectively. Interest income was derived from our investments in marketable securities and cash equivalents. The increase in interest income in the three and six months endedSeptember 30, 2022 compared to the year ago periods was primarily due to higher interest rates.
Income Tax Expense (Benefit)
Our income tax expense was$8.1 million and$16.3 million for the three and six months endedSeptember 30, 2022 , respectively. Our income tax (benefit) expense was$(0.1) million and$0.8 million for the three and six months endedSeptember 30, 2021 , respectively. Our effective tax rate for the three and six months endedSeptember 30, 2022 was (21.63)% and (32.18)%, respectively, and for the three and six months endedSeptember 30, 2021 was 0.69% and (0.92)%, respectively. Our tax expense currently relates principally to profits earned in theU.S. Key determinative factors of our effective tax rate include the allocation of our earnings by jurisdiction and a valuation allowance that currently eliminates all of our net deferred tax assets. The increase in our effective tax rate for the three and six months endedSeptember 30, 2022 , compared to the corresponding prior year periods, was driven principally by the changed requirement under Internal Revenue Code Section 174, effective for years beginning afterDecember 31, 2021 , to capitalize and subsequently amortize R&D expenditures, pursuant to changes enacted in the Tax Cuts and Jobs Act of 2017. For periods beginning prior toDecember 31, 2021 , R&D expenses were allowed to be expensed as incurred. See Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
Liquidity and Capital Resources
We have incurred losses since our inception and have an accumulated deficit of
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 have received from our collaboration and commercialization partners, as well as net revenues generated from sales of ORGOVYX and MYFEMBREE in theU.S. As ofSeptember 30, 2022 , we had cash, cash equivalents, marketable securities, and amounts available to us under the Sumitomo Pharma Loan Agreement of$412.6 million , consisting of$371.3 million of cash, cash equivalents, and marketable securities and$41.3 million of borrowing capacity available to us under the Sumitomo Pharma Loan Agreement. Cash, cash equivalents, marketable securities, and amounts available to us under the Sumitomo Pharma Loan Agreement as ofMarch 31, 2022 was$475.5 million , consisting of$434.2 million of cash, cash equivalents, and marketable securities and$41.3 million of borrowing capacity available to us under the Sumitomo Pharma Loan Agreement. Additional funds under the Sumitomo 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.
As of
•up to$3.5 billion of tiered sales milestones from Pfizer 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 arising in respect of the Co-Promotion Territory; •up to$122.2 million of milestone payments from Richter, including regulatory milestones of up to$14.7 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; and •up to$90.5 million of commercial launch, sales-based, and other milestones and tiered royalties from the high-teens to mid-twenties on net sales of ORGOVYX in Accord's territories. Funding 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
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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 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. Additionally, we are subject to a variety of specified liquidity and capitalization restrictions under the Merger Agreement. Unless we obtain Sumitovant's prior written consent (which consent may not be unreasonably withheld, delayed or conditioned) and except (i) as required or expressly contemplated by the Merger Agreement, (ii) as required by applicable laws or terms of contracts in effect as ofOctober 23, 2022 or (iii) as set forth in the confidential disclosure schedule we delivered to Sumitovant, we may not, among other things and subject to certain exceptions and aggregate limitations, incur additional indebtedness, issue additional shares of our common shares, repurchase shares of our common stock, pay dividends, acquire or dispose of material assets or property, amend, modify or enter into material contracts or make certain additional capital expenditures. See Note 5(A) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. We do not believe that these restrictions will prevent us from meeting our ongoing costs of operations, working capital needs, or capital expenditure requirements. 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 theU.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 product 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, commercial launch milestones, sales milestones, or other milestones, and/or royalties that we are eligible to earn pursuant to our collaboration or commercialization agreements; •the timing, shared costs, and level of investment in our and our collaboration and commercialization 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;
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•economic factors over which we have no control, including changes in inflation, interest rates, foreign currency rates, and the potential effect of such factors on revenues and expenses;
•costs to operate as a public company; and
•costs that may arise due to the Merger Agreement (see Note 5(A) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report).
Until such time, if ever, as we can generate positive cash flows as a result of increased 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 Pharma Loan Agreement, subject to the consent of our board of directors, as well as potential payments we are eligible to receive from Pfizer, Richter, and Accord 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
Six Months Ended
2022 2021
Net cash used in operating activities$ (66,885) $ (76,578) Net cash used in investing activities $ (2,233)$ (87,774) Net cash provided by financing activities $ 5,142$ 15,135 Operating Activities Net cash used in operating activities was$66.9 million for the six months endedSeptember 30, 2022 and consisted of our net loss of$66.9 million (see "Results of Operations" above) and changes in operating assets and liabilities of$23.6 million , (see below), offset by adjustments for non-cash operating items of$23.6 million . The non-cash operating items included share-based compensation of$21.4 million , amortization of operating lease right of use asset of$0.9 million , depreciation expense of$0.7 million , and accretion of the implied financing component of the cost share advance from Pfizer of$0.6 million .
The changes in operating assets and liabilities included the following:
•$34.4 million decrease in cost share advance from Pfizer due to the application of shared Allowable Expenses (see Note 8(A) and Note 8(D) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report); •$20.3 million net increase in deferred revenue due to a$100.0 million regulatory milestone payment from Pfizer, partially offset by the recognition of$79.7 million of Pfizer collaboration revenue (see Note 8 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report); •$15.5 million increase in accrued expenses and other current liabilities, primarily driven by increases in accrued discounts, rebates, and allowances, and royalties payable to Takeda due to an increase in product revenue, net, accrued professional fees, and accrued income tax payable (see Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report), partially offset by a decrease in accrued compensation-related expenses as a result of the payment of annual corporate bonuses inApril 2022 . •$15.0 million increase in inventories, due to an increase in raw materials and work in process inventories, partially offset by a decrease in finished goods inventories;
•$10.5 million increase in accounts receivable, net as a result of an increase
in net product revenues related to sales of ORGOVYX and MYFEMBREE in the
•$6.4 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(A) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report);
•$4.1 million decrease in accounts payable, primarily driven by the timing of vendor invoice payments; and
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•$1.8 million net change in other operating assets and liabilities.
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 and changes in operating assets and liabilities of$19.2 million , partially offset by adjustments for non-cash operating items of$25.9 million . The non-cash operating items included share-based compensation of$23.1 million , accretion of the implied financing component of the cost share advance from Pfizer of$1.2 million , amortization of operating lease right of use asset of$0.8 million , and depreciation expense of$0.7 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(A) and Note 8(D) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report);
•$28.7 million net increase in deferred revenue due to a
•$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(A) to our unaudited condensed consolidated financial statement 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 the
•$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 FDA approval of ORGOVYX (onDecember 18, 2020 ) and MYFEMBREE (onMay 26, 2021 ); and
•$3.7 million net change in other operating assets and liabilities.
Investing Activities
For the six months ended
For the six months ended
Financing Activities
For the six months ended
For the six months ended
Contractual Obligations and Other Cash Needs
During the six months endedSeptember 30, 2022 , there have been no material changes outside the ordinary course of business to our contractual obligations and other cash needs as described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report for the year endedMarch 31, 2022 .
Critical Accounting Policies and Significant Judgments and Estimates
The preparation of our unaudited condensed consolidated financial statements and
related notes requires us to make estimates, judgments and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses, and
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 there are
material differences between these estimates and actual results, our financial
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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. 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 for the fiscal year endedMarch 31, 2022 , filed with theSEC onMay 11, 2022 . We believe there have been no material changes to our critical accounting policies and use of estimates as disclosed in our Annual Report.
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.
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