Equity Method Investments

3 Months Ended

Jun. 30, 2023

Equity Method Investments [Abstract]

Equity Method Investments

Note 3—Equity Method Investments

The Company maintains equity method investments in certain entities. The most significant of these were our investments in Arbutus and Datavant, which are accounted for using the fair value option.

Investment in Arbutus

The Company holds an investment in Arbutus in the form of 38,847,462 common shares of Arbutus. The Company accounts for its investment in Arbutus as an equity method investment accounted for using the fair value option. Due to the Company’s significant influence over operating and financial policies, Arbutus is considered a related party of the Company. At June 30, 2023, RSL held approximately 23% of issued and outstanding shares of Arbutus.

At June 30, 2023 and March 31, 2023, the aggregate fair value of the Company’s investment in Arbutus was $89.3 million and $117.7 million, respectively, with the Company recognizing unrealized losses on its investment in Arbutus of $28.4 million and $10.5 million in the accompanying condensed consolidated statements of operations for the three months ended June 30, 2023 and 2022, respectively. The fair value of the Company’s investment was determined using the closing price of Arbutus’s common stock on June 30, 2023 and March 31, 2023 of $2.30 and $3.03, respectively.

Investment in Datavant

In April 2020, following an equity raise completed by Datavant Holdings, Inc. (“Datavant”) along with a restructuring of Datavant’s equity classes, it was determined that RSL no longer controlled Datavant. As such, the Company deconsolidated Datavant as of April 2020. Due to the Company’s significant influence over operating and financial policies, Datavant is considered a related party of the Company.

In June 2021, Datavant and Heracles Parent, L.L.C. (referred to herein as “Ciox Parent” and, after the closing of the Datavant Merger (as defined below), “Datavant”), a provider of healthcare information services and technology solutions to hospitals, health systems, physician practices and authorized recipients of protected health records in the United States, primarily through its wholly owned subsidiary CIOX Health, LLC, entered into a definitive agreement to merge Datavant with and into a newly formed wholly owned subsidiary of Ciox Parent (the “Datavant Merger”). The merger closed on July 27, 2021. At closing, the Company received approximately $320 million in cash and a minority equity stake in Ciox Parent. As of June 30, 2023, the Company’s minority equity interest represented approximately 17% of the outstanding Class A units in Ciox Parent. Ciox Parent’s capital structure includes several classes of preferred units that, among other features, have liquidation preferences and conversion features. Upon conversion of such preferred units into Class A units, the Company’s ownership interest would be diluted.

Following the completion of the Datavant Merger, the Company’s minority equity interest became subject to the equity method of accounting. At such time, the fair value option was elected to continuously remeasure the investment to fair value each reporting period with changes in fair value reflected in earnings. As of June 30, 2023 and March 31, 2023, the fair value of the Company’s investment was $199.4 million and $178.6 million, respectively, with the Company recognizing an unrealized gain of $20.9 million and an unrealized loss of $7.0 million on its investment in Datavant in the accompanying condensed consolidated statements of operations for the three months ended June 30, 2023 and 2022, respectively. The fair value of the Company’s investment was determined using valuation models that incorporate significant unobservable inputs and is classified as a Level 3 measurement within the fair value hierarchy. Refer to Note 12, “Fair Value Measurements” for more information.