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Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
  
FORM 10-Q
 
 
(Mark One)
   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
 or
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                
For the transition period from _______ to _______           
Commission file number 001-37929
 
Myovant Sciences Ltd.
(Exact name of registrant as specified in its charter)
 
Bermuda
 
98-1343578
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
Suite 1, 3rd Floor
 
 
11-12 St. James’s Square
 
 
London
 
 
SW1Y 4LB
 
 
United Kingdom
 
Not Applicable
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: +44 207 400 3347
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class
 
Trading Symbol
 
Name of each exchange on which registered
Common Shares, $0.000017727 par value per share
 
MYOV
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ý  No  o 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ý   No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act
Large accelerated filer
ý
Accelerated filer
Non-accelerated filer
o 
Smaller reporting company
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  ý
The number of shares outstanding of the Registrant’s common shares, $0.000017727 par value per share, on July 30, 2019, was 89,622,626.



Table of Contents

MYOVANT SCIENCES LTD.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2019
 
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 


2

Table of Contents

PART I.                                                  FINANCIAL INFORMATION
Item 1.                                                         Financial Statements
MYOVANT SCIENCES LTD.
Condensed Consolidated Balance Sheets
(unaudited; in thousands, except share and per share data)
 
June 30, 2019
 
March 31, 2019
Assets
 


 

Current assets:
 


 

Cash and cash equivalents
$
226,734


$
156,074

Prepaid expenses and other current assets
8,693


10,194

Income tax receivable
331


524

Total current assets
235,758


166,792

Property and equipment, net
2,057


2,071

Operating lease right-of-use asset
9,181

 

Other assets
3,877


4,114

Total assets
$
250,873


$
172,977

Liabilities and shareholders’ equity
 


 

Current liabilities:
 


 

Accounts payable
$
10,004


$
11,019

Interest payable
758

 
1,077

Accrued expenses
46,258


53,614

Operating lease liability
813

 

Due to Roivant Sciences Ltd. (RSL), Roivant Sciences, Inc. (RSI) and Roivant Sciences GmbH (RSG)
196


121

Current maturities of long-term debt
10,867

 
6,142

Total current liabilities
68,896


71,973

Deferred rent


1,157

Deferred interest payable
3,790


2,273

Long-term operating lease liability
9,550

 

Long-term debt, less current maturities
89,070

 
93,240

Total liabilities
171,306


168,643

Commitments and contingencies (Note 11)


 


Shareholders’ equity:
 

 
 

Common shares, par value $0.000017727 per share, 564,111,242 shares authorized, 89,622,626 and 72,057,490 issued and outstanding at June 30, 2019 and March 31, 2019, respectively
2

 
1

Additional paid-in capital
649,806

 
505,851

Accumulated other comprehensive (loss) income
(312
)
 
507

Accumulated deficit
(569,929
)
 
(502,025
)
Total shareholders’ equity
79,567


4,334

Total liabilities and shareholders’ equity
$
250,873


$
172,977


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

Table of Contents

MYOVANT SCIENCES LTD.
Condensed Consolidated Statements of Operations
(unaudited; in thousands, except share and per share data)
 
Three Months Ended June 30,
 
2019
 
2018
Operating expenses:



 

Research and development (1)
$
51,117


$
51,341

General and administrative (2)
14,152


8,742

Total operating expenses
65,269


60,083

Interest expense
3,793

 
1,617

Interest income
(766
)
 

Other (income) expense, net
(705
)

289

Loss before income taxes
(67,591
)

(61,989
)
Income tax expense
313


145

Net loss
$
(67,904
)

$
(62,134
)
Net loss per common share — basic and diluted
$
(0.89
)

$
(0.98
)
Weighted average common shares outstanding — basic and diluted
76,468,347


63,310,177

(1) Includes $25 and $2,188 of costs allocated from RSL, RSI, and RSG during the three months ended June 30, 2019 and 2018, respectively. Also includes share-based compensation expense (see Note 9).
(2) Includes $198 and $1,225 of costs allocated from RSL, RSI, and RSG during the three months ended June 30, 2019 and 2018, respectively. Also includes share-based compensation expense (see Note 9).

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

Table of Contents

MYOVANT SCIENCES LTD.
Condensed Consolidated Statements of Comprehensive Loss
(unaudited; in thousands)
 
Three Months Ended June 30,
 
2019
 
2018
Net loss
$
(67,904
)
 
$
(62,134
)
Other comprehensive (loss) income:
 
 
 
Foreign currency translation adjustment
(819
)
 
425

Total other comprehensive (loss) income
(819
)
 
425

Comprehensive loss
$
(68,723
)
 
$
(61,709
)


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


5

Table of Contents

MYOVANT SCIENCES LTD.
Condensed Consolidated Statements of Shareholders’ Equity
(unaudited; in thousands, except share data)
 
Common Shares
 
Additional Paid
in Capital
 
Accumulated Other
Comprehensive Income (Loss)
 
Accumulated
Deficit
 
Total
Shareholders’
Equity
 
Shares
 
Amount
 
 
 
 
Balance at March 31, 2019
72,057,490

 
$
1

 
$
505,851

 
$
507

 
$
(502,025
)
 
$
4,334

Issuance of shares in connection with “at-the-market” equity offering, net of commissions of $79
106,494

 

 
2,546

 

 

 
2,546

Issuance of shares in connection with public equity offering, net of commissions and offering costs of $9,229
17,424,243

 
1

 
134,537

 

 

 
134,538

Share-based compensation expense

 

 
6,410

 

 

 
6,410

Capital contribution — share-based compensation

 

 
42

 

 

 
42

Capital contribution from RSI and RSG

 

 
106

 

 

 
106

Foreign currency translation adjustment

 

 

 
(819
)
 

 
(819
)
Issuance of shares upon exercise of stock options and vesting of RSUs
34,399

 

 
314

 

 

 
314

Net loss

 

 

 

 
(67,904
)
 
(67,904
)
Balance at June 30, 2019
89,622,626

 
$
2

 
$
649,806

 
$
(312
)
 
$
(569,929
)
 
$
79,567

 

 
Common Shares
 
Additional Paid
in Capital
 
Accumulated Other
Comprehensive Income
 
Accumulated
Deficit
 
Total
Shareholders’
Equity
 
Shares
 
Amount
 
 
 
 
Balance at March 31, 2018
60,997,856

 
$
1

 
$
266,178

 
$
24

 
$
(228,474
)
 
$
37,729

Issuance of shares in connection with “at-the-market” equity offering, net of commissions and offering costs of $2,110
2,767,129

 

 
57,315

 

 

 
57,315

Issuance of shares in connection with Private Placement with RSL
1,110,015

 

 
22,500

 

 

 
22,500

Share-based compensation expense

 

 
4,053

 

 

 
4,053

Capital contribution — share-based compensation

 

 
191

 

 

 
191

Foreign currency translation adjustment

 

 

 
425

 

 
425

Issuance of shares upon exercise of stock options
16,218

 

 
76

 

 

 
76

Net loss

 

 

 

 
(62,134
)
 
(62,134
)
Balance at June 30, 2018
64,891,218

 
$
1

 
$
350,313

 
$
449

 
$
(290,608
)
 
$
60,155


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

Table of Contents

MYOVANT SCIENCES LTD.
Condensed Consolidated Statements of Cash Flows
(unaudited; in thousands)
 
Three Months Ended June 30,
 
2019
 
2018
Cash flows from operating activities:
 

 
 
Net loss
$
(67,904
)
 
$
(62,134
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
 
Share-based compensation
6,452

 
4,244

Depreciation and amortization (1)
356

 
91

Amortization of debt discount and issuance costs
555

 
507

Other items
(713
)
 
425

Changes in operating assets and liabilities:
 

 
 
Prepaid expenses and other current assets
1,501

 
(563
)
Income tax receivable
193

 
145

Other assets
237

 
288

Accounts payable
(1,015
)
 
389

Interest payable
(319
)
 
90

Accrued expenses
(7,568
)
 
8,040

Operating lease liabilities
(178
)
 

Due to RSL, RSI and RSG
75

 
3,247

Deferred rent

 
324

Deferred interest payable
1,517

 
152

Net cash used in operating activities
(66,811
)
 
(44,755
)
Cash flows from investing activities:
 

 
 
Purchase of property and equipment
(139
)
 
(197
)
Net cash used in investing activities
(139
)
 
(197
)
Cash flows from financing activities:
 

 
 
Proceeds from issuance of common shares in “at-the-market” equity offering, net of issuance costs paid
2,546

 
57,387

Proceeds from issuance of common shares in public equity offering, net of issuance costs paid
134,750

 

Proceeds from issuance of common shares in Private Placement with RSL

 
22,500

Proceeds from stock option exercises
314

 
76

Net cash provided by financing activities
137,610

 
79,963

Net change in cash, cash equivalents and restricted cash
70,660

 
35,011

Cash, cash equivalents and restricted cash, beginning of period
157,199

 
108,624

Cash, cash equivalents and restricted cash, end of period
$
227,859

 
$
143,635

Non-cash financing activities:
 

 
 
Deferred offering costs included in accounts payable and accrued expenses
$
212

 
$
72

(1) Includes amortization of operating lease right-of-use asset.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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MYOVANT SCIENCES LTD.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1—Description of Business
Myovant Sciences Ltd. (or together with its wholly-owned subsidiaries, the Company) is a clinical-stage healthcare company focused on developing and commercializing innovative therapies for women’s health and prostate cancer. The Company is developing relugolix 40 mg in combination with low-dose estradiol and a progestin for the treatment of heavy menstrual bleeding associated with uterine fibroids and for pain associated with endometriosis, relugolix 120 mg as a monotherapy for advanced prostate cancer, and an additional product candidate, MVT-602, an oligopeptide kisspeptin-1 receptor agonist, for the treatment of female infertility as part of assisted reproduction. Both relugolix and MVT-602 were licensed to the Company by Takeda Pharmaceuticals International AG, or Takeda, on April 29, 2016.
The Company is an exempted company limited by shares incorporated under the laws of Bermuda in February 2016 under the name Roivant Endocrinology Ltd. The Company changed its name to Myovant Sciences Ltd. in May 2016. Since its inception, the Company has devoted substantially all of its efforts to identifying and in-licensing its product candidates, organizing and staffing the Company, raising capital, preparing for and advancing the clinical development of its product candidates, and preparing for potential future regulatory approvals and commercialization of relugolix.
The Company has incurred, and expects to continue to incur, significant operating losses and negative operating cash flows as it continues to develop its product candidates and prepares for potential future regulatory approvals and commercialization of relugolix. To date, the Company has not generated any revenue, and it does not expect to generate revenue unless and until it successfully completes development and obtains regulatory approval for at least one of its product candidates. See Note 2(C), Summary of Significant Accounting Policies—Going Concern and Management’s Plans.
Note 2—Summary of Significant Accounting Policies
(A) Basis of Presentation
The Company’s fiscal year ends on March 31, and its first three fiscal quarters end on June 30, September 30 and December 31. The Company has determined that it has one operating and reporting segment as it allocates resources and assesses financial performance on a consolidated basis.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States, or U.S., generally accepted accounting principles, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019, filed with the U.S. Securities and Exchange Commission, or the SEC, on May 24, 2019. The unaudited consolidated balance sheet at March 31, 2019 has been derived from the audited consolidated financial statements at that date. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented have been included. Operating results for the three months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2020, for any other interim period or for any other future year.
Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP included in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, issued by the Financial Accounting Standards Board, or FASB. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company has no unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
There have been no significant changes in the Company’s accounting policies from those disclosed in its Annual Report on Form 10-K for the fiscal year ended March 31, 2019, filed with the SEC on May 24, 2019, except for the adoption of ASU 2016-02, Leases (Topic 842), on April 1, 2019. See Note 2(G).

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(B) Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in certain circumstances that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. The Company regularly evaluates estimates and assumptions related to assets, liabilities, costs, and expenses, including the evaluation of the Company’s ability to continue as a going concern, share-based compensation expenses, research and development, or R&D, expenses and accruals, and income taxes. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses incurred during the reporting period, that are not readily apparent from other sources. Actual results could differ from those estimates.
(C) Going Concern and Management’s Plans
The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the unaudited condensed consolidated financial statements are issued. During the three months ended June 30, 2019, the Company incurred net losses of $67.9 million and used $66.8 million of cash and cash equivalents in operations. The Company expects to continue to incur significant and increasing operating losses and negative operating cash flows as it continues to develop its product candidates and prepares for potential future regulatory approvals and commercialization of relugolix. The Company has not generated any revenue to date and does not expect to generate product revenue unless and until it successfully completes development and obtains regulatory approval for at least one of its product candidates. Based on its current operating plan, the Company expects that its existing cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements at least through the end of fiscal year 2019. This estimate is based on the Company’s current assumptions, including assumptions relating to its ability to manage its spend, that might prove to be wrong, and it could use its available capital resources sooner than it currently expects. These funds will not be sufficient to enable the Company to complete all necessary development activities and commercially launch relugolix. The Company anticipates that it will continue to incur net losses for the foreseeable future.
To continue as a going concern, the Company will need, among other things, additional capital resources. The Company continually assesses multiple options to obtain additional funding to support its operations, including through financing activities in public or private capital markets, financing arrangements with Roivant Sciences, structured transactions such as royalty financings, collaborations, license or development agreements, or other collaborations and cost containment measures. Management can provide no assurances that any sources of a sufficient amount of financing will be available to the Company on favorable terms, if at all. Although the Company believes that it will continue to raise capital to fund its operations as it has in the past, ASC 240-40, Going Concern, does not allow the Company to consider future financing activities that are not probable of being implemented in its assessment of the Company’s future cash burn for the purpose of its liquidity assessment.
Due to these uncertainties, there is substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements and footnotes have been prepared on the basis that the Company will continue as a going concern, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

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(D) Net Loss per Common Share
Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted-average number of common shares outstanding during the period, reduced, where applicable, for outstanding yet unvested shares of restricted common stock. The computation of diluted net loss per common share is based on the weighted-average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options, restricted stock units, restricted stock awards, and warrants. In periods in which the Company reports a net loss, all common share equivalents are deemed anti-dilutive such that basic net loss per common share and diluted net loss per common share are equal. Potentially dilutive common shares have been excluded from the diluted net loss per common share computations in all periods presented because such securities have an anti-dilutive effect on net loss per common share due to the Company’s net loss. There are no reconciling items used to calculate the weighted-average number of total common shares outstanding for basic and diluted net loss per common share.
As of June 30, 2019 and 2018, potentially dilutive securities were as follows:
 
June 30,
 
2019
 
2018
Stock options
7,085,337

 
4,779,727

Restricted stock awards (unvested)
846,165

 
1,128,221

Restricted stock units (unvested)
38,449

 
15,000

Warrants
73,310

 
73,710

Total
8,043,261

 
5,996,658


(E) Cash, Cash Equivalents, and Restricted Cash
Cash and cash equivalents include cash deposits in banks and all highly liquid investments that are readily convertible to cash. The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. As of June 30, 2019, cash and cash equivalent balances are diversified between three financial institutions. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash and the issuers of its money market funds and commercial paper. The Company maintains its cash deposits and cash equivalents in highly-rated, federally-insured financial institutions in excess of federally insured limits. The Company has established guidelines relative to diversification and maturities to maintain safety and liquidity. The Company has not experienced any credit losses related to these financial instruments and does not believe that it is exposed to any significant credit risk related to these instruments. Interest income consists of interest earned on money market funds and the accretion of discounts to maturity for commercial paper.
Restricted cash consists of non-interest bearing legally restricted deposits held as compensating balances against the Company’s corporate credit card program and an irrevocable standby letter of credit provided as security for the Company’s office lease.
Cash as reported in the unaudited condensed consolidated statements of cash flows includes the aggregate amounts of cash, cash equivalents, and restricted cash and consists of the following (in thousands):
 
June 30,
 
2019
 
2018
Cash and cash equivalents
$
226,734

 
$
143,035

Restricted cash (1)
1,125

 
600

Total cash, cash equivalents and restricted cash
$
227,859

 
$
143,635

(1) Included in other assets on the unaudited condensed consolidated balance sheets.

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(F) Fair Value Measurements
The Company utilizes fair value measurement guidance prescribed by accounting standards to value its financial instruments. The guidance establishes a fair value hierarchy for financial instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances.
Fair value is defined as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a three-tier fair value hierarchy that distinguishes among the following:
Level 1-Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2-Valuations are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.
Level 3-Valuations are based on inputs that are unobservable (supported by little or no market activity) and significant to the overall fair value measurement.
To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company’s financial instruments include cash, cash equivalents consisting of commercial paper and money market funds, accounts payable and debt. Cash, cash equivalents, and accounts payable are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature. The carrying value of the Company’s debt approximates fair value based on current interest rates for similar types of borrowings and is included in Level 2 of the fair value hierarchy.
(G) Recently Adopted Accounting Standards
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is a comprehensive new lease standard that amends various aspects of existing accounting guidance for leases. The core principle of Topic 842 requires lessees to recognize on the consolidated balance sheets a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases with lease terms greater than twelve months. The lease liability is measured at the present value of the unpaid lease payments and the right-of-use asset is derived from the calculation of the lease liability. Topic 842 also requires lessees to disclose key information about leasing arrangements. Topic 842 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted.
A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application (“Transition Date”). An entity may choose to use either (i) its effective date or (ii) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company adopted the new standard on April 1, 2019 and used the effective date as its date of initial application.
The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients,” which permitted it to not reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. As a result, the Company has continued to account for existing leases - i.e. leases for which the commencement date is before April 1, 2019 - in accordance with Topic 840 throughout the entire lease term, including periods after the effective date, with the exception that the Company applied the new balance sheet recognition guidance for operating leases and applied Topic 842 for remeasurements and modifications after the Transition Date.
The most significant impact of the adoption of Topic 842 on the Company’s condensed consolidated financial statements was the recognition of a $9.4 million operating lease right-of-use asset, a $0.8 million current operating lease liability, and a $9.8 million long-term operating lease liability on the Company’s condensed consolidated balance sheet related to its existing facility operating lease. In addition, the Company reclassified the $1.2 million deferred rent liability for its existing facility lease to the related operating lease right-of-use asset. There was no material impact to the Company’s condensed consolidated statement of operations, and no cumulative-effect adjustment to accumulated deficit. See Note 10 for additional information related to the Company’s facility lease.

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In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, or ASU 2018-02. ASU 2018-02 allows companies to reclassify stranded tax effects resulting from the newly enacted federal corporate income tax rate under the Tax Cuts and Jobs Act, from accumulated other comprehensive (loss) income to retained earnings. ASU 2018-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 and early adoption is permitted. The Company adopted the new standard on April 1, 2019. The adoption of ASU 2018-02 did not have an impact on the Company’s condensed consolidated financial statements and related disclosures.
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, or ASU 2018-07. ASU 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. ASU 2018-07 is effective for interim and annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The Company adopted the new standard on April 1, 2019. The adoption of ASU 2018-07 did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
In July 2018, the FASB issued ASU 2018-09, Codification Improvements, to make changes to a variety of topics to clarify, correct errors in, or make minor improvements to the ASC. Certain items in the amendments in ASU 2018-09 will be effective for the Company in annual periods beginning after December 15, 2018. The adoption of ASU 2018-09 on April 1, 2019 did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
Other recent accounting pronouncements issued by the FASB, (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by the Company to, have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
(H) Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses on available-for-sale debt securities to be recorded through an allowance for credit losses instead of as a reduction in the amortized cost basis of the securities. ASU 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. The Company does not expect that the adoption of this new standard will have a material impact on its condensed consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13. ASU 2018-13 amends the disclosure requirements in Topic 820 to promote the exercise of discretion by entities when considering fair value measurement disclosures and clarifies that materiality is an appropriate consideration when evaluating fair value measurement disclosure requirements. Certain required disclosures were added, modified, or removed, including removing the required disclosure of the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2018-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. The Company does not expect that the adoption of this new standard will have a material impact on its condensed consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, or ASU 2018-15, which amends ASC 350-40, Internal-Use Software, to include in its scope implementation costs of a cloud computing arrangement that is a service contract. Consequently, the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement is aligned with the guidance on capitalizing costs associated with developing or obtaining internal-use software. ASU 2018-15 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. The Company is currently assessing the impact the adoption of this standard will have on its condensed consolidated financial statements and related disclosures.

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Note 3—Fair Value Measurements
As of June 30, 2019, and March 31, 2019, assets measured at fair value on a recurring basis consisted of money market funds and commercial paper, which are included in cash and cash equivalents in the unaudited condensed consolidated balance sheets.
The following table summarizes these assets as of June 30, 2019 (in thousands):
 
June 30, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total Fair Value
Assets:
 
 
 

 
 
 
 
Money market funds
$
41

 
$

 
$

 
$
41

Commercial paper

 
121,787

 

 
121,787

Total assets
$
41

 
$
121,787

 
$

 
$
121,828


The following table summarizes these assets as of March 31, 2019 (in thousands):
 
March 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total Fair Value
Assets:
 
 
 

 
 
 
 
Money market funds
$
83

 
$

 
$

 
$
83

Commercial paper

 
126,050

 

 
126,050

Total assets
$
83

 
$
126,050

 
$

 
$
126,133


Money market funds are included in Level 1 of the fair value hierarchy and are valued at the closing price reported by an actively traded exchange. Commercial paper is included in Level 2 of the fair value hierarchy and is valued using third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly.
There were no liabilities measured at fair value on a recurring basis as of June 30, 2019 or March 31, 2019. There were no transfers of assets or liabilities between the fair value hierarchy levels that occurred during the three months ended June 30, 2019.
Note 4—Accrued Expenses
As of June 30, 2019, and March 31, 2019, accrued expenses consisted of the following (in thousands):
 
June 30, 2019
 
March 31, 2019
Accrued R&D expenses
$
41,554

 
$
46,947

Accrued compensation-related expenses
1,632

 
5,024

Accrued professional service fees
971

 
370

Accrued other expenses
2,101

 
1,273

Total accrued expenses
$
46,258

 
$
53,614


Note 5—Financing Arrangements
(A) NovaQuest
In October 2017, the Company, its subsidiaries, as guarantors, and NovaQuest Capital Management, or NovaQuest, entered into (i) a Securities Purchase Agreement, or the NovaQuest Securities Purchase Agreement, and (ii) an Equity Purchase Agreement, or the NovaQuest Equity Purchase Agreement. Pursuant to the NovaQuest Securities Purchase Agreement, the Company had the option, at its discretion, to issue up to $60.0 million aggregate principal amount of notes to NovaQuest and concurrent with each purchase of notes, NovaQuest was obligated to purchase up to $20.0 million of the Company’s common shares on a pro rata basis, subject to certain terms and conditions, through December 31, 2018. The equity purchase price for each such purchase was equal to 105% of the average of the volume-weighted average price for the five consecutive trading days immediately prior to the relevant purchase date. The Company committed that it would issue at least $30.0 million aggregate principal amount of notes through December 31, 2018, subject to certain terms and conditions. The Company issued $6.0 million aggregate principal amount in October 2017 and $54.0 million aggregate principal amount in December 2018. With the issuance of $6.0 million aggregate principal amount of notes in October 2017, NovaQuest purchased 138,361 common shares for $2.0 million, and with the issuance of $54.0 million aggregate principal amount of notes in December 2018, NovaQuest purchased 1,082,977 common shares for $18.0 million.

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The notes bear interest at a rate of 15% per annum, of which 5% is payable quarterly, and 10% is payable on a deferred basis on the earlier of the Amortization Date (as defined below) and the repayment in full of the notes. The notes mature on October 16, 2023. The Company will be required to amortize the principal amount of the notes in equal quarterly installments commencing on November 1, 2020, subject to extension at the Company’s option to November 1, 2021, or the Amortization Date, provided certain terms and conditions are met. Early redemption of the notes is subject to a redemption charge. The Company’s obligations under the NovaQuest Securities Purchase Agreement are secured by a second-lien security interest in substantially all of the Company’s and its subsidiaries’ respective assets (other than intellectual property). The NovaQuest Securities Purchase Agreement includes customary affirmative and restrictive covenants and representations and warranties, including a minimum cash covenant that applies commencing on the Amortization Date, and also includes customary events of default. Upon the occurrence of an event of default, a default interest rate of an additional 5% may be applied to the outstanding note balance and NovaQuest may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the NovaQuest Securities Purchase Agreement.
Pursuant to the NovaQuest Equity Purchase Agreement, NovaQuest committed to purchase up to an additional $20.0 million of the Company’s common shares from time to time at the Company’s discretion through December 31, 2018, with an option to extend the commitment through December 31, 2019, subject to certain terms and conditions. The Company committed that it would exercise its option to sell and issue a minimum of $10.0 million of its common shares under the NovaQuest Equity Purchase Agreement through December 31, 2018, subject to certain terms and conditions. In December 2018, the Company exercised this option and issued and sold 1,203,307 common shares for $20.0 million. The purchase price for the common shares issued was equal to 105% of the average of the volume-weighted average price for the five consecutive trading days immediately prior to the relevant purchase date.
The Company incurred financing costs related to the NovaQuest Securities Purchase Agreement of $1.0 million. During each of the three-month periods ended June 30, 2019 and 2018, interest expense included $0.1 million of amortized deferred financing costs related to the NovaQuest notes.
Outstanding debt obligations to NovaQuest are as follows (in thousands):
 
June 30, 2019
 
March 31, 2019
Principal amount
$
60,000

 
$
60,000

Less: unamortized debt issuance costs
(645
)
 
(756
)
Loan payables less unamortized debt issuance costs
59,355

 
59,244

Less: current maturities

 

Long-term debt, net of current maturities and unamortized debt issuance costs
$
59,355

 
$
59,244


(B) Hercules
In October 2017, the Company, its subsidiaries, as guarantors, and Hercules Capital, Inc., or Hercules, entered into a Loan Agreement, or the Hercules Loan Agreement, which provided up to $40.0 million principal amount of term loans, or the Term Loans. A first tranche of $25.0 million principal amount was funded upon execution of the Hercules Loan Agreement in October 2017 and the remaining $15.0 million principal amount was funded in March 2018. The Term Loans bear interest at a variable per annum rate at the greater of (i) the prime rate plus 4.00% and (ii) 8.25%. The interest rate on the Term Loans was 9.50% as of June 30, 2019. Pursuant to the terms of the Hercules Loan Agreement, the Term Loan Maturity Date has been extended from May 1, 2021 to November 1, 2021 as a result of the achievement of a financing milestone in July 2018. The Company is obligated to make monthly interest payments during the Interest-only Period, subject to certain terms and conditions, followed by monthly installments of principal and interest through the maturity date. The Interest-only Period has been extended from June 1, 2019 to December 1, 2019 as a result of the achievement of a financing milestone during July 2018 and may be further extended until June 1, 2020 if a certain clinical milestone is met, as specified in the Hercules Loan Agreement. Prepayment of the Term Loan is subject to a prepayment charge. The Company is also obligated to pay an end of term charge of 6.55% of the principal amount of the Term Loans funded under the Hercules Loan Agreement, on the earlier of the maturity date or the date that the Term Loans otherwise become due and payable. The Company’s obligations under the Hercules Loan Agreement are secured by a first lien security interest in substantially all of the Company’s and its subsidiaries’ respective assets (other than intellectual property). The Hercules Loan Agreement includes customary affirmative and restrictive covenants and representations and warranties, including a minimum cash covenant that ceases to apply if the Company achieves both the clinical development and financing milestones as set forth in the Hercules Loan Agreement. In July 2019, the clinical milestone was met and as a result, the Interest-only Period has been extended to June 1, 2020 and the minimum cash covenant ceases to apply.

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Concurrent with each funding of the Term Loans, the Company was required to issue to Hercules a warrant, or the Warrants, to purchase a number of its common shares equal to 3.00% of the principal amount of the relevant Term Loan funded divided by the exercise price, which is based on the lowest three-day volume-weighted average price for the three consecutive trading days prior to the funding date for such Term Loan. The Warrants may be exercised on a cashless basis, and are immediately exercisable through the seventh anniversary of the applicable funding date. In connection with the first tranche funded under the Hercules Loan Agreement, the Company issued a Warrant to Hercules exercisable for an aggregate of 49,800 of its common shares at an exercise price of $15.06 per common share. Concurrent with the funding of the second tranche, the Company issued a Warrant to Hercules exercisable for an aggregate of 23,910 of its common shares at an exercise price of $18.82 per common share. The Company accounted for the Warrants as equity instruments since they were indexed to the Company’s common shares and met the criteria for classification in shareholders’ equity (deficit). The relative fair value of the Warrants related to the first and second tranche funding were approximately $0.5 million and $0.3 million, respectively, and were treated as a discount to the Term Loans. This amount is being amortized to interest expense using the effective interest method over the life of the Term Loans.
The Company estimated the fair value of the Warrants using the Black-Scholes model based on the following key assumptions:
 
Tranche 1
 
Tranche 2
Exercise price
$15.06
 
$18.82
Common share price on date of issuance
$14.39
 
$18.96
Volatility
73.2%
 
72.3%
Risk-free interest rate
2.15%
 
2.78%
Expected dividend yield
%
 
%
Contractual term (in years)
7.00
 
7.00

The Company issued the first tranche of the Term Loans at a discount of $2.1 million, including the relative fair value of the related Warrant, and incurred financing costs of $1.3 million. The second tranche of the Term Loans was issued at a discount of $1.3 million, including the relative fair value of the related Warrant. During each of the three-month periods ended June 30, 2019 and 2018, interest expense included $0.4 million of amortized debt discount and issuance costs related to the Term Loans.
Outstanding debt obligations to Hercules are as follows (in thousands):
 
June 30, 2019
 
March 31, 2019
Principal amount
$
40,000

 
$
40,000

End of term charge
2,620

 
2,620

Less: unamortized debt discount and issuance costs
(2,038
)
 
(2,482
)
Loan payables less unamortized debt discount and issuance costs
40,582

 
40,138

Less: current maturities
(10,867
)
 
(6,142
)
Long-term debt, net of current maturities and unamortized debt discount and issuance costs
$
29,715

 
$
33,996


Note 6—Related Party Transactions
(A) Services Agreements
In July 2016, the Company entered into a services agreement with RSI, effective April 29, 2016, under which RSI agreed to provide certain administrative and R&D services to the Company. Under this services agreement, the Company pays or reimburses RSI for expenses it, or third parties acting on its behalf, incurs for the Company. For any general and administrative, or G&A, and R&D activities performed by RSI employees, RSI charges the Company based upon the relative percentage of time utilized on Company matters by the respective employee. All other third-party pass-through costs are billed to the Company at cost. The unaudited condensed consolidated financial statements include third-party expenses incurred on behalf of the Company that have been paid by RSI and RSL.
In February 2017, the Company and MSI amended and restated the services agreement, effective as of November 11, 2016, to include Myovant Sciences GmbH, or MSG, as a services recipient. In addition, in February 2017, MSG entered into a separate services agreement with RSG, effective as of November 11, 2016, for the provisioning of services by RSG to MSG in relation to services related to clinical development, administrative and finance and accounting activities. The Company refers to the amended and restated services agreement with RSI and the services agreement with RSG, collectively, as the Services Agreements.

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Under the Services Agreements, for the three months ended June 30, 2019 and 2018, the Company incurred expenses (inclusive of third party pass-through costs billed to the Company) of $0.2 million and $3.2 million, respectively, inclusive of the mark-up. The Company has replaced substantially all of the services previously provided by RSI and RSG with its own internally developed capabilities or external professional service providers.
(B) Share-Based Compensation Expense Allocated to the Company by RSL
Share-based compensation expense has been and will continue to be allocated to the Company by RSL over the requisite service period over which RSL common share awards and RSL options are expected to vest and based upon the relative percentage of time utilized by RSL, RSI and RSG employees on Company matters.
In relation to the RSL common share awards and options issued by RSL to RSL, RSI, RSG, and the Company’s employees, the Company recorded share-based compensation expense of less than $0.1 million and $0.2 million, respectively, for the three months ended June 30, 2019 and 2018.
(C) Private Placement with RSL
See Note 8(B) for information regarding the Private Placement with RSL.
(D) Underwritten Public Equity Offering of Common Shares
As discussed in Note 8(A), the Company completed an underwritten public equity offering of its common shares on June 4, 2019. RSL purchased 2,424,242 common shares in this offering at the same price offered to the public of $8.25 per common share, for a total purchase price of $20.0 million.
(E) Information Sharing and Cooperation Agreement with RSL
In July 2016, the Company entered into an information sharing and cooperation agreement, or the Cooperation Agreement, with RSL. The Cooperation Agreement, among other things: (1) obligates the Company to deliver periodic financial statements and other financial information to RSL and to comply with other specified financial reporting requirements; and (2) requires the Company to supply certain material information to RSL to assist it in preparing any future SEC filings. On May 24, 2019, the Company entered into Amendment No. 1 to the Cooperation Agreement, pursuant to which RSL has agreed, in connection with each of the Company’s next three public offerings of its common shares, that RSL will (1) provide to the Company and the underwriter(s) engaged by the Company in connection with such public offering an indication of interest for RSL to participate as a purchaser in such public offerings, and (2) enter into a customary lock-up agreement with the underwriters in connection with such public offerings.
Subject to specified exceptions, the Cooperation Agreement will terminate upon the earlier of the mutual written consent of the parties or when RSL is no longer required by U.S. GAAP to consolidate the Company’s results of operations and financial position, account for its investment in the Company under the equity method of accounting or, by any rule of the SEC, include the Company’s separate financial statements in any filings it may make with the SEC.
(F) Fourth Amended and Restated Bye-Laws
On May 23, 2019, the Company’s board of directors approved, and the holder of a majority of the Company’s issued and outstanding common shares approved by written consent, an amendment and restatement of the Company’s bye-laws, to be the Company’s Fourth Amended and Restated Bye-Laws, which amends the Company’s bye-laws (1) to establish procedures for the appointment of a majority of the directors on the Company’s board by RSL at any time that RSL holds less than 50.0% but more than or equal to 35.0% of the aggregate voting rights attached to the Company’s issued and outstanding common shares, and (2) to remove the procedures and requirements of voting rights of such shares that are treated as controlled shares of a U.S. Person whose controlled shares constitute nine and one-half percent (9.5%) or more of the voting power of all of the Company’s issued common shares. The Fourth Amended and Restated Bye-Laws became effective on June 26, 2019.
Note 7—Income Taxes
The Company is not subject to taxation under the laws of Bermuda since it was organized as a Bermuda Exempted Limited Company, for which there is no current tax regime. The Company’s income tax expense is primarily based on income taxes in the U.S. for federal, state and local taxes. The Company’s effective tax rate for the three months ended June 30, 2019 and 2018 was (0.46)% and (0.23)%, respectively, and is driven by the Company’s jurisdictional earnings by location and a valuation allowance that eliminates the Company’s global net deferred tax assets.
The Company assesses the realizability of the deferred tax assets at each balance sheet date based on available positive and negative evidence in order to determine the amount which is more likely than not to be realized and records a valuation allowance as necessary.

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Note 8—Shareholders’ Equity
(A) Underwritten Public Equity Offering of Common Shares
On June 4, 2019, the Company completed an underwritten public equity offering of 17,424,243 of its common shares (including 2,272,727 common shares sold pursuant to the underwriters’ exercise in full of their option to purchase additional common shares) at a public offering price of $8.25 per common share. After deducting the underwriting discounts and commissions and estimated offering costs payable by the Company, the net proceeds to the Company in connection with the underwritten public equity offering, including from the exercise of the over-allotment option, were approximately $134.5 million.
(B) Private Placement with RSL
In April 2018, the Company entered into a share purchase agreement, or the Purchase Agreement, with RSL, its controlling shareholder, pursuant to which the Company sold to RSL 1,110,015 of its common shares at a purchase price of $20.27 per common share, for gross proceeds of $22.5 million, in a private placement, or the Private Placement.
(C) At-the-Market Equity Offering Program
In April 2018, the Company entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, to sell its common shares having an aggregate offering price of up to $100.0 million from time to time through an “at-the-market” equity offering program under which Cowen acts as the Company’s agent. During the three months ended June 30, 2019 and 2018, the Company issued and sold 106,494 and 2,767,129, respectively, of its common shares under the Sales Agreement. The common shares were sold at a weighted-average price of $24.65 and $21.47 per common share, respectively, for aggregate net proceeds to the Company of approximately $2.5 million and $57.3 million, respectively, after deducting underwriting commissions and offering costs paid by the Company. As of June 30, 2019, the Company had approximately $10.4 million of capacity available to it under its “at-the-market” equity offering program.
Note 9—Share-Based Compensation
(A) Myovant 2016 Equity Incentive Plan
In June 2016, the Company adopted its 2016 Equity Incentive Plan, or as amended, the 2016 Plan, under which 4.5 million common shares were originally reserved for issuance. Pursuant to the “evergreen” provision contained in the 2016 Plan, the number of common shares reserved for issuance under the 2016 Plan automatically increases on April 1 of each year, commencing on (and including) April 1, 2017 and ending on (and including) April 1, 2026, in an amount equal to 4% of the total number of shares of capital stock outstanding on March 31 of the preceding fiscal year, or a lesser number of shares as determined by the Company’s board of directors. On April 1, 2019, the number of common shares authorized for issuance increased automatically by 2.9 million shares in accordance with the evergreen provision of the 2016 Plan. As of June 30, 2019, a total of 3.2 million common shares were available for future issuance under the 2016 Plan.
The Company’s employees, directors, officers and consultants are eligible to receive non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other share awards under the 2016 Plan.
(B) Stock Options
A summary of stock option activity under the Company’s 2016 Plan is as follows:
 
Number of Options
Options outstanding at March 31, 2019
5,396,465

Granted
1,849,560

Exercised
(33,461
)
Forfeited
(127,227
)
Options outstanding at June 30, 2019
7,085,337

Options vested and expected to vest at June 30, 2019
7,085,337

Options exercisable at June 30, 2019
2,013,917



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(C) Restricted Stock Awards and Restricted Stock Units
A summary of restricted stock award and restricted stock unit activity under the Company’s 2016 Plan is as follows:
 
Number of Shares
Unvested balance at March 31, 2019
956,066

Granted

Vested
(71,452
)
Unvested balance at June 30, 2019
884,614


(D) Share-Based Compensation Expense
Share-based compensation expense was as follows (in thousands):
 
Three Months Ended June 30,
 
2019
 
2018
Share-based compensation expense recognized as:
 
 
 
R&D expenses
$
2,548

 
$
1,561

G&A expenses
3,904

 
2,683

Total
$
6,452

 
$
4,244


Share-based compensation expense is included in R&D and G&A expenses in the accompanying unaudited condensed consolidated statements of operations consistent with the grantee’s salary. Share-based compensation expense presented in the table above includes share-based compensation expense allocated to the Company by RSL of less than $0.1 million and $0.2 million for the three months ended June 30, 2019 and 2018, respectively. Total unrecognized share-based compensation expense was approximately $65.2 million as of June 30, 2019 and is expected to be recognized over a weighted-average period of approximately 3.09 years.
(E) RSL RSUs
The Company’s Principal Executive Officer was granted 66,845 RSL RSUs during the fiscal year ended March 31, 2017. These RSUs will vest to the extent certain RSL performance criteria are achieved and certain RSL liquidity conditions are satisfied within specified years of the grant date, provided that the Company’s Principal Executive Officer has provided continued service to RSL or its subsidiaries through such date. As of June 30, 2019, the performance conditions had not been met and were deemed not probable of being met. For the three months ended June 30, 2019 and 2018, the Company recorded no share-based compensation expense related to these RSL RSUs. As of June 30, 2019, there was $0.9 million of unrecognized compensation expense related to unvested RSL RSUs. The Company will recognize this share-based compensation expense upon achievement of the performance and market conditions through the requisite service period.
Note 10—Leases
The Company leases 40,232 square feet of office space located in Brisbane, California pursuant to an operating lease agreement, as amended, that expires in May of 2026. The Company has the option to extend the lease term for an additional seven years but is not reasonably certain that it will exercise the option and has therefore excluded it from the lease term. The lease agreement, as amended, required the Company to deliver an irrevocable standby letter of credit for the duration of the lease in the amount of $0.5 million to the landlord, the amount of which is subject to reduction of approximately $0.2 million if certain conditions are met. The Company currently has no other significant operating, financing, or short-term leases.
The components of operating lease expense for the Company’s Brisbane, California office space were as follows (in thousands):
 
Three Months Ended
June 30, 2019
Operating lease cost
$
519

Variable lease cost (1)
9

Total operating lease cost
$
528

(1) Variable lease cost includes common area maintenance and utilities costs which are not included in operating lease liabilities and which are expensed as incurred.

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Information related to the Company’s operating lease right-of-use asset and operating lease liabilities for its Brisbane, California office space was as follows (in thousands, except periods and percentages):
 
June 30, 2019
Cash paid for operating lease liabilities
$
496

Operating lease right-of-use asset obtained in exchange for operating lease liabilities
9,181

Weighted average remaining lease term (in years)
6.9

Weighted average discount rate
12.28
%

As of June 30, 2019, maturities of operating lease liabilities for the Company’s Brisbane, California office space were as follows (in thousands):
Years Ended March 31,
 
2020 (remainder of year)
$
1,510

2021
2,065

2022
2,128

2023
2,200

2024
2,339

Thereafter
5,307

Total lease payments
15,549

Less imputed interest (1)
(5,186
)
Present value of future minimum lease payments
10,363

Less operating lease liability, current portion
(813
)
Operating lease liability, long-term portion
$
9,550


(1) The Companys lease contracts do not provide an implicit rate. The imputed interest was determined using the Company’s incremental borrowing rate, which represents an estimated rate of interest that it would have to pay to borrow equivalent funds on a collateralized basis over a similar term at the lease inception date.
Note 11—Commitments and Contingencies
(A) Legal Contingencies
The Company may be, from time to time, a party to various disputes and claims arising from normal business activities. The Company accrues for loss contingencies when available information indicates that it is probable that a liability has been incurred and the amount of such liability can be reasonably estimated. In the cases where the Company believes that a reasonably possible loss exists, the Company discloses the facts and circumstances of the loss contingency, including an estimable range, if possible. The Company is currently not involved in any material legal proceedings.
(B) Contract Service Providers
In the normal course of business, the Company enters into agreements with contract service provides to assist in the performance of its R&D activities. Expenditures to contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, represent significant costs in the Company’s clinical development of its product candidates. Subject to required notice periods and the Company’s obligations under binding purchase orders, the Company can elect to discontinue the work under these agreements at any time. The Company expects to enter into additional collaborative research, contract research, manufacturing, and supplier agreements in the future, which may require upfront payments and long-term commitments of capital resources.

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(C) Indemnification Agreements
The Company has agreed to indemnify its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director was serving at the Company’s request in such capacity. The maximum amount of potential future indemnification liability is unlimited; however, the Company holds directors’ and officers’ liability insurance which limits the Company’s exposure and may enable it to recover a portion of any future amounts paid. In the normal course of business, the Company also enters into contracts and agreements with service providers and other parties with which it conducts business that contain indemnification provisions pursuant to which the Company has agreed to indemnify the party against certain types of third-party claims. The Company has not experienced any material losses related to these indemnification obligations, and no material claims with respect thereto were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.
(D) Takeda Agreements
Under the Takeda License Agreement, the Company will pay Takeda a fixed, high single-digit royalty on net sales of relugolix and MVT-602 products in the Company’s territory, subject to certain agreed reductions. Takeda will pay the Company a royalty at the same rate on net sales of relugolix products for prostate cancer in the Takeda Territory, subject to certain agreed reductions. Royalties are required to be paid, on a product-by-product and country-by-country basis, until the latest to occur of the expiration of the last to expire valid claim of a licensed patent covering such product in such country, the expiration of regulatory exclusivity for such product in such country, or 10 years after the first commercial sale of such product in such country. Under the Takeda License Agreement, there was no upfront payment and there are no payments upon the achievement of clinical development or marketing approval milestones. As the amount and timing of any potential future payments under the Takeda License Agreement are not probable and estimable, no such potential commitments have been included in the condensed consolidated balance sheet.
In May 2018, the Company entered into a Commercial Manufacturing and Supply Agreement with Takeda, or the Takeda Commercial Supply Agreement. Pursuant to the Takeda Commercial Supply Agreement, Takeda has agreed to supply the Company and the Company has agreed to obtain from Takeda certain quantities of relugolix drug substance according to agreed-upon quality specifications and in order to commercialize relugolix in accordance with the Takeda Agreement. Under the Takeda Commercial Supply Agreement, the Company will pay Takeda a fixed price per kilogram of relugolix drug substance through December 31, 2019. The Company has made and Takeda has accepted an initial firm order to supply relugolix drug substance to the Company through December 31, 2019. For relugolix drug substance manufactured or delivered on or after such date, the Company will pay Takeda a price per kilogram of relugolix drug substance to be agreed upon between the parties at the beginning of each fiscal year.
The initial term of the Takeda Commercial Supply Agreement began on May 30, 2018 and will continue for five years. At the end of the initial term, the Takeda Commercial Supply Agreement will automatically renew for successive one-year terms, unless either party gives notice of termination to the other at least 12 months prior to the end of the then-current term. The Takeda Commercial Supply Agreement may be terminated by either party upon 90 days’ notice of an uncured material breach of its terms by the other party, or immediately upon notice to the other party of a party’s bankruptcy. Each party will also have the right to terminate the Takeda Commercial Supply Agreement, in whole or in part, for any reason upon 180 days’ prior written notice to the other party, provided that any then-open purchase orders, including the initial firm order for relugolix drug substance through December 31, 2019, will remain in effect and be binding on both parties. The Takeda Commercial Supply Agreement, including any then-open purchase order thereunder, will terminate immediately upon the termination of the Takeda Agreement in accordance with its terms.
The Takeda Commercial Supply Agreement also includes customary provisions relating to, among others, delivery, inspection procedures, warranties, quality management, storage, handling and transport, intellectual property, confidentiality and indemnification.
(E) Financing Arrangements
The Company has entered into financing arrangements with NovaQuest and Hercules. See Note 5.

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Item 2.                                                         Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with (1) the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended March 31, 2019 included in our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission, or the SEC, on May 24, 2019. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Myovant,” the “Company,” “we,” “us,” and “our” refer to Myovant Sciences Ltd. and its wholly-owned subsidiaries.
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or 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 on Form 10-Q include, but are not limited to, statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things:
the success and anticipated timing of our clinical trials for relugolix 40 mg in combination with low-dose estradiol and a progestin, relugolix 120 mg as a monotherapy and MVT-602;
the anticipated start dates, durations and completion dates of our ongoing and future nonclinical studies and clinical trials;
the anticipated designs of our future clinical trials;
the anticipated future regulatory submissions and the timing of, and our ability to, obtain and maintain regulatory approvals for relugolix 40 mg in combination with low-dose estradiol and a progestin, including in a single tablet, relugolix 120 mg as a monotherapy, MVT-602 and any future product candidates;
our plans to commercialize relugolix, if approved;
our ability to achieve commercial sales of any approved products, whether alone or in collaboration with others;
our ability to obtain coverage and adequate reimbursement 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;
our ability to quickly and efficiently identify and develop product candidates;
our ability to hire and retain our key scientific or management personnel;
our ability to obtain, maintain and enforce intellectual property rights for our 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 and cash equivalents currently on hand;
our ability to raise additional capital;
industry trends;
developments and projections relating to our competitors or our industry; and
the success of competing drugs that are or may become available.

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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 on Form 10-Q, and in our other filings with the United States, or U.S., Securities and Exchange Commission, or 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 on Form 10-Q, 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.
All brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Myovant,” the “Company,” “we,” “us,” and “our” refer to Myovant Sciences Ltd. and its wholly-owned subsidiaries.
Business Overview
We are a clinical-stage healthcare company focused on developing and commercializing innovative therapies for women’s health and prostate cancer. Our lead product candidate is relugolix, an oral once-daily small molecule that acts as a gonadotropin-releasing hormone, or GnRH, receptor antagonist that is currently being evaluated in multiple Phase 3 clinical trials across three distinct indications. We are advancing relugolix 40 mg in combination with low-dose estradiol and a progestin for the treatment of heavy menstrual bleeding associated with uterine fibroids and for pain associated with endometriosis, and relugolix 120 mg as a monotherapy for advanced prostate cancer. In addition, we are developing MVT-602, an oligopeptide kisspeptin-1 receptor agonist, for the treatment of female infertility as a part of assisted reproduction. Both relugolix and MVT-602 were licensed to us by Takeda Pharmaceuticals International AG, or Takeda, on April 29, 2016.
Since our inception, we have devoted substantially all of our efforts to identifying and in-licensing our product candidates, organizing and staffing our company, raising capital, preparing for and advancing the clinical development of our product candidates and preparing for potential future regulatory approvals and commercialization of relugolix.
On May 14, 2019, we announced that LIBERTY 1, the first of two Phase 3 studies evaluating once-daily relugolix combination therapy (relugolix 40 mg plus estradiol 1.0 mg and norethindrone acetate 0.5 mg) in women with uterine fibroids and heavy menstrual bleeding, met its primary efficacy endpoint and six key secondary endpoints, and on July 23, 2019, we announced that LIBERTY 2, the second of two Phase 3 studies evaluating relugolix combination therapy in women with uterine fibroids and heavy menstrual bleeding, met its primary efficacy endpoint and the same six key secondary endpoints. On July 23, 2019, we also announced that a separate clinical study of single-tablet relugolix combination therapy met all required and pre-specified U.S. Food and Drug Administration, or FDA, criteria for bioequivalence. The single-tablet regimen is the formulation intended to be offered to women should relugolix combination therapy receive FDA approval. Based on the positive top-line results for LIBERTY 1 and LIBERTY 2, we currently plan to submit a New Drug Application, or NDA, to the FDA in the fourth quarter of calendar year 2019 and the Marketing Authorisation Application to the European Medicines Agency in the first quarter of calendar year 2020. We further expect to announce top-line results from three additional Phase 3 studies of relugolix over the next four quarters.
First Fiscal Quarter Ended June 30, 2019 and Recent Clinical and Corporate Highlights
The following summarizes our first fiscal quarter ended June 30, 2019 and recent clinical and corporate highlights:
Relugolix Phase 3 Clinical Programs
On May 14, 2019, we announced that LIBERTY 1, the first of two Phase 3 studies evaluating once-daily relugolix combination therapy in women with uterine fibroids and heavy menstrual bleeding, met its primary efficacy endpoint and six key secondary endpoints. In the primary endpoint analysis, 73.4% of women receiving once-daily oral relugolix combination therapy achieved the responder criteria compared with 18.9% of women receiving placebo (p < 0.0001). The 24-week study achieved six key secondary endpoints with statistical significance compared to placebo including mean change in menstrual blood loss from baseline to week 24, reduction in pain in women with pain at baseline, improvement in quality of life, amenorrhea (defined as no or negligible blood loss), improvement in anemia in those women with anemia at baseline, and reduction in uterine volume. The seventh key secondary endpoint, reduction in uterine fibroid volume, did not achieve statistical significance.

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On July 23, 2019, we announced that LIBERTY 2, the second of two Phase 3 studies evaluating once-daily relugolix combination therapy in women with uterine fibroids and heavy menstrual bleeding, met its primary efficacy endpoint and six key secondary endpoints. In the primary endpoint analysis, 71.2% of women receiving once-daily relugolix combination therapy achieved the responder criteria compared with 14.7% of women receiving placebo (p < 0.0001). The 24-week study achieved the same six key secondary endpoints with statistical significance compared to placebo as those in LIBERTY 1 including mean change in menstrual blood loss from baseline to week 24, reduction in pain in women with pain at baseline, improvement in quality of life, amenorrhea (defined as no or negligible blood loss), improvement in anemia in those women with anemia at baseline, and reduction in uterine volume. The seventh key secondary endpoint, reduction in uterine fibroid volume, did not achieve statistical significance.
On July 23, 2019, we also announced that a separate clinical study of single-tablet relugolix combination therapy met all required and pre-specified FDA criteria for bioequivalence, providing data necessary to include the once-daily, single-tablet regimen of relugolix combination therapy in the NDA submission for approval of the treatment for uterine fibroids.
Based upon the positive top-line results for LIBERTY 1 and LIBERTY 2, we currently plan to submit an NDA to the FDA in the fourth quarter of calendar year 2019 and the Marketing Authorisation Application to the European Medicines Agency in the first quarter of calendar year 2020. We also expect to submit data from LIBERTY 1 and LIBERTY 2 for presentation and publication in 2019.
We expect top-line data from the HERO Phase 3 trial evaluating the safety and efficacy of relugolix 120 mg in 934 men with advanced prostate cancer in the fourth quarter of calendar year 2019, and assuming positive data, we currently plan to submit an NDA to the FDA in early calendar year 2020. Enrollment of approximately 130 additional men with metastatic prostate cancer in the Phase 3 HERO study was completed in July, 2019. The objective of enrolling these men was to assess the secondary objective of demonstrating that relugolix can delay the time to progression of the lethal state of the disease, castration-resistant prostate cancer, as compared to leuprolide.
We continue to enroll patients in the two replicate SPIRIT 1 and SPIRIT 2 Phase 3 trials evaluating the safety and efficacy of relugolix combination therapy in women with pain associated with endometriosis. We expect to complete enrollment in the SPIRIT 1 and SPIRIT 2 Phase 3 trials later this calendar year, with top-line data for SPIRIT 2 expected in the first quarter of calendar year 2020 and top-line data for SPIRIT 1 expected in the second quarter of calendar year 2020.
MVT-602 Clinical Program
We presented top-line results from a successful dose-finding pharmacokinetic/pharmacodynamic Phase 2a study of MVT-602, a kisspeptin-1 receptor agonist, in healthy women undergoing a minimal controlled ovarian stimulation protocol at the European Society of Human Reproduction in Vienna, Austria in June, 2019. The study demonstrated that MVT-602 was generally well-tolerated and produced the desired luteinizing hormone surge associated with high and dose-dependent rates of ovulation in healthy women following a minimal controlled ovarian stimulation protocol.
Corporate
On June 4, 2019, we completed an underwritten public equity offering of 17,424,243 of our common shares (including 2,272,727 common shares sold pursuant to the underwriters’ exercise in full of their option to purchase additional common shares) at a public offering price of $8.25 per common share. After deducting the underwriting discounts and commissions and estimated offering costs payable by us, the net proceeds to us in connection with the underwritten public equity offering, including from the exercise of the over-allotment option, were approximately $134.5 million.
During the three months ended June 30, 2019, we issued and sold 106,494 of our common shares for aggregate net proceeds to us of approximately $2.5 million, pursuant to our “at-the-market” equity offering program. We currently have approximately $10.4 million of capacity available to us under our “at-the-market” equity offering program.
Financial History
We have incurred, and expect to continue to incur, significant operating losses and negative operating cash flows as we continue to develop our product candidates and prepare for the potential future regulatory approvals and commercialization of relugolix. To date, we have not generated any revenue, and we do not expect to generate revenue unless and until we successfully complete development and obtain regulatory approval for one of our product candidates.
We have funded our operations primarily from the issuance and sale of our common shares, from the issuance of notes to NovaQuest Capital Management, or NovaQuest, and from the Term Loans we have with Hercules Capital, Inc., or Hercules.
As of June 30, 2019, and March 31, 2019, we had an accumulated deficit of $569.9 million and $502.0 million, respectively. We had net losses of $67.9 million and $62.1 million for the three months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, we had $226.7 million of cash and cash equivalents available to us, as compared to $156.1 million of cash and cash equivalents available to us as of March 31, 2019.

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Our Product Candidates
Relugolix
We are currently developing relugolix in three target indications: heavy menstrual bleeding associated with uterine fibroids; pain associated with endometriosis; and advanced prostate cancer. Relugolix is an oral, once-daily, small molecule that acts as a GnRH receptor antagonist that binds to and inhibits GnRH receptors in the anterior pituitary gland. Inhibition of GnRH receptors decreases the release of gonadotropins (luteinizing hormone and follicle-stimulating hormone), thereby decreasing the downstream production of estrogen and progesterone by the ovaries in women and testosterone by the testes in men.
As a GnRH receptor antagonist, relugolix has a clinically-validated mechanism of action in each of our three target indications. Lowering estrogen and progesterone levels has previously been demonstrated to effectively decrease heavy menstrual bleeding in women with uterine fibroids and to reduce the pelvic pain associated with endometriosis. We are developing relugolix, 40 mg in combination with estradiol (1.0 mg) and a progestin (norethindrone acetate, 0.5 mg) administered orally once a day, with the goal of optimizing estradiol levels to maximize the benefit of relugolix on symptoms of uterine fibroids and endometriosis, while maintaining bone health and mitigating side effects from a low-estrogen state such as vasomotor symptoms. We expect to launch in our women’s health indications with a single-tablet regimen of relugolix 40 mg, estradiol 1.0 mg and norethindrone acetate 0.5 mg administered orally once-daily. We have recently conducted a bioequivalence study to demonstrate the bioequivalence of the single-tablet relugolix combination therapy with the co-administered regimen used in the LIBERTY clinical program (one relugolix 40-mg tablet and one tablet containing estradiol 1.0 mg and norethindrone acetate 0.5 mg). The single tablet met FDA bioequivalence criteria. Twelve-month stability studies will be required for FDA approval and these studies are ongoing. We believe our combination approach with relugolix has the potential to have a better safety and tolerability profile than the currently approved GnRH agonist therapies and has the potential to be used longer-term. The goal of this longer-term treatment is to provide women with uterine fibroids and endometriosis a medical alternative to hysterectomy and other invasive procedures often recommended to treat these conditions. If we are unsuccessful in our attempts to formulate a fixed-dose combination in time for the initial application for marketing authorization in the United States, or U.S., we expect to seek approval for relugolix tablets co-packaged with a commercially available tablet containing both the low-dose estradiol and norethindrone acetate.
Decreasing testosterone slows the growth and progression of advanced prostate cancer, such as when the disease recurs or the prostate-specific antigen, or PSA, is rising following prostatectomy or radiation therapy. Relugolix monotherapy is in Phase 3 clinical evaluation as a once-daily oral treatment to lower testosterone. It is being evaluated at a three-times higher dose in men with advanced prostate cancer than the women’s health indications (120 mg orally once-daily following a single 360-mg loading dose compared to 40 mg once daily). We are developing our women’s health relugolix combination and our advanced prostate cancer relugolix monotherapy treatments with the potential of bringing to market two distinct branded products.
Myovant Sciences GmbH, our wholly-owned subsidiary, holds global commercial rights to relugolix, excluding Japan, China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan, Thailand, and Vietnam, including the territories and possessions of each of the foregoing. In May 2018, Takeda announced that it had entered into a licensing agreement granting ASKA Pharmaceutical Co., Ltd. exclusive commercialization rights to relugolix for uterine fibroids and exclusive development and commercialization rights to relugolix for endometriosis, in each indication in Japan, and in January 2019 Takeda and ASKA Pharmaceutical Co., Ltd. announced that Takeda obtained marketing authorization in Japan for Relumina® Tablets 40 mg (generic name: relugolix) for the improvement of symptoms of uterine fibroids including heavy menstrual bleeding, lower abdominal pain, lower back pain, and anemia.
Our Phase 3 Program for the Treatment of Heavy Menstrual Bleeding Associated with Uterine Fibroids
We initiated a Phase 3 clinical program in January 2017, evaluating relugolix combination therapy in women with heavy menstrual bleeding associated with uterine fibroids. The program consisted of two multinational, replicate pivotal clinical studies (LIBERTY 1 and LIBERTY 2) of relugolix combination therapy (relugolix 40 mg plus estradiol 1.0 mg and norethindrone acetate 0.5 mg) in women with uterine fibroids and heavy menstrual bleeding. Women in the LIBERTY 1 and LIBERTY 2 studies underwent a screening period requiring up to two menstrual cycles to document heavy menstrual bleeding and were randomized in a 1:1:1 ratio to one of three groups. Women received treatment either with relugolix combination therapy for 24 weeks, relugolix 40 mg once-daily monotherapy for 12 weeks followed by relugolix combination therapy once-daily for an additional 12 weeks, or placebo once-daily for 24 weeks.
We enrolled 388 women in LIBERTY 1 and 382 women in LIBERTY 2. To be enrolled, women must have had a monthly menstrual blood loss volume of at least 80 mL in two consecutive cycles or 160 mL in one cycle, measured by the alkaline hematin method, a quantitative measure of menstrual blood loss from an assessment of collected menstrual products.

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Eligible women who completed the LIBERTY 1 or LIBERTY 2 studies were offered the opportunity to enroll in an active treatment extension study in which all women receive relugolix combination therapy for an additional 28-week period for a total treatment period of 52 weeks, designed to evaluate the safety and sustained efficacy of longer-term treatment. Upon completion of this 52-week total treatment period, eligible women can elect to participate in a second 52-week randomized withdrawal study designed to provide two-year safety and efficacy data on relugolix combination therapy, to evaluate the need for maintenance therapy. We are also conducting a one-year observational study of bone mineral density in women with uterine fibroids or endometriosis to provide additional context for our phase 3 clinical programs.
The primary efficacy endpoint for LIBERTY 1 and LIBERTY 2 was the proportion of all women enrolled who achieved a menstrual blood loss volume of less than 80 mL and at least a 50% reduction in menstrual blood loss volume from baseline during the last 35 days of the 24-week treatment period as measured by the alkaline hematin method, a quantitative measurement of menstrual blood loss. The secondary endpoints included the proportion of women who achieved amenorrhea during the last 35 days of treatment, reduction in pelvic pain, reduction in fibroid volume, reduction in uterine volume, percent change from baseline to week 24 in menstrual blood loss, increase in hemoglobin, and an assessment of the impact of therapy on quality-of-life. Safety, including bone mineral density changes as measured by dual-energy x-ray absorptiometry (DXA), was also assessed.
On May 14, 2019 and July 23, 2019, we announced top-line results for the LIBERTY 1 and LIBERTY 2 studies, respectively. In addition, on July 23, 2019, we announced that a separate clinical study of single-tablet relugolix combination therapy met all required and pre-specified FDA criteria for bioequivalence, providing data necessary to include the once-daily, single-tablet regimen in the NDA submission for approval of the treatment for uterine fibroids. Further review of the underlying data by Myovant is ongoing and may result in additional observations with respect to these studies. Based upon the positive top-line results for LIBERTY 1 and LIBERTY 2, we currently plan to submit an NDA to the FDA in the fourth quarter of calendar year 2019 and the Marketing Authorisation Application to the European Medicines Agency in the first quarter of calendar year 2020. We also expect to submit data from LIBERTY 1 and LIBERTY 2 for presentation and publication in calendar year 2019.
LIBERTY 1
On May 14, 2019, we announced that LIBERTY 1, the first of two Phase 3 studies evaluating once-daily relugolix combination therapy in women with uterine fibroids and heavy menstrual bleeding, met its primary efficacy endpoint and six key secondary endpoints. Relugolix combination therapy maintained bone mineral density at levels comparable to placebo over 24 weeks and was generally well tolerated.
In the primary endpoint analysis, 73.4% of women receiving once-daily oral relugolix combination therapy (relugolix 40 mg plus estradiol 1.0 mg and norethindrone acetate 0.5 mg) achieved the responder criteria compared with 18.9% of women receiving placebo (p < 0.0001). A response was defined as a menstrual blood loss volume of less than 80 mL and a 50 percent or greater reduction from baseline in menstrual blood loss volume during the last 35 days of the 24-week treatment period measured using the alkaline hematin method. On average, women receiving relugolix combination therapy experienced an 84.3% reduction in menstrual blood loss from baseline, a clinically relevant secondary endpoint.
Bone mineral density was comparable between the relugolix combination and placebo groups. The distribution of the change in bone mineral density, including outliers, was similar for the relugolix combination therapy and placebo groups at 24 weeks, as assessed by dual energy x-ray absorptiometry (DXA).
The 24-week study achieved six key secondary endpoints with statistical significance compared to placebo including mean change in menstrual blood loss from baseline to week 24, reduction in pain in women with pain at baseline, improvement in quality of life, amenorrhea (defined as no or negligible blood loss), improvement in anemia in those women with anemia at baseline, and reduction in uterine volume. The seventh key secondary endpoint, reduction in uterine fibroid volume, did not achieve statistical significance.
The overall incidence of adverse events in the relugolix combination and placebo groups was comparable (62% vs. 66%). In the relugolix combination therapy group 5% of women discontinued treatment early due to adverse events compared with 4% in the placebo group. The only adverse event in the relugolix combination arm occurring in at least 10% of women and more frequently than in the placebo arm was hot flush (11% versus 8%). There were no pregnancies in the relugolix combination group and one in the placebo group. There were two serious adverse events related to study drug: one fibroid expulsion and one for pelvic pain.

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LIBERTY 2
On July 23, 2019, we announced that LIBERTY 2, the second of two Phase 3 studies evaluating once-daily relugolix combination therapy in women with uterine fibroids and heavy menstrual bleeding, met its primary efficacy endpoint and the same six key secondary endpoints as were achieved in LIBERTY 1. In addition, relugolix combination therapy maintained bone mineral density at levels comparable to placebo over 24 weeks and was generally well tolerated.
In the primary endpoint analysis, 71.2% of women receiving once-daily relugolix combination therapy achieved the responder criteria compared with 14.7% of women receiving placebo (p < 0.0001). A response was defined as a menstrual blood loss volume of less than 80 mL and a 50% or greater reduction from baseline in menstrual blood loss volume during the last 35 days of treatment measured using the alkaline hematin method. On average, women receiving relugolix combination therapy experienced a highly significant 84.3% reduction in menstrual blood loss from baseline to Week 24 (p < 0.0001). In addition, a significantly greater proportion of women suffering from moderate-to-severe pain from uterine fibroids at baseline experienced no pain or minimal pain during the last 35 days of treatment with relugolix combination therapy compared with women on placebo (p < 0.0001).
Changes in bone mineral density were comparable between the relugolix combination and placebo groups at the end of treatment. The distribution of the change in bone mineral density, including outliers, was similar for the relugolix combination therapy and placebo groups at 24 weeks, as assessed by dual energy x-ray absorptiometry (DXA).
The 24-week study achieved six key secondary endpoints with statistical significance compared to placebo including mean change in menstrual blood loss from baseline to week 24, reduction in pain in women with pain at baseline, improvement in quality of life, amenorrhea (defined as no or negligible blood loss), improvement in anemia in those women with anemia at baseline, and a reduction in uterine volume. The seventh key secondary endpoint, reduction in uterine fibroid volume, did not achieve statistical significance.
The overall incidence of adverse events in the relugolix combination and placebo groups was comparable (60.3% vs. 58.9%). In the relugolix combination therapy group, 1.6% of women discontinued treatment early due to adverse events compared with 4.7% in the placebo group. There were no adverse events in the relugolix combination group reported by at least 10% of women and more frequently than in the placebo group. The incidence of hot flashes in the relugolix combination group was similar to placebo (5.6% versus 3.9%). There were no pregnancies in the relugolix combination group and one in the placebo group.
Our Phase 3 Program for the Treatment of Pain Associated with Endometriosis
We initiated a Phase 3 clinical program in June 2017, evaluating relugolix in women with pain associated with endometriosis. The program consists of two multinational replicate pivotal clinical trials, which we refer to as SPIRIT 1 and SPIRIT 2. Each trial randomizes women 1:1:1 to one of three treatment arms: relugolix 40 mg once-daily co-administered in combination with commercially available low-dose hormonal therapy for 24 weeks (1.0 mg estradiol and 0.5 mg norethindrone acetate); relugolix 40 mg once-daily monotherapy for 12 weeks followed by relugolix 40 mg once-daily co-administered with low-dose hormonal therapy for an additional 12 weeks; or placebo once-daily for a period of 24 weeks. We expect to enroll approximately 600 women in each of the two replicate SPIRIT 1 and SPIRIT 2 trials. Eligible women completing the initial 24-week period are offered an active treatment extension with relugolix 40 mg once-daily co-administered in combination with low-dose hormonal therapy for an additional 80-week period, or a total treatment period of 104 weeks, to evaluate the safety of longer-term treatment.
The co-primary efficacy endpoints for the SPIRIT 1 and SPIRIT 2 trials are the proportion of all women enrolled with reductions in both dysmenorrhea, or menstrual pelvic pain, and nonmenstrual pelvic pain, as assessed by an endometriosis-specific patient questionnaire administered daily, with no increase in background pain medication. Secondary endpoints will include additional questionnaires assessing functional changes associated with endometriosis-specific pain and quality of life, and the use of pain medications to treat endometriosis. Safety, including bone mineral density changes as measured by dual-energy x-ray absorptiometry, will be assessed.
We expect to complete enrollment in the SPIRIT 1 and SPIRIT 2 Phase 3 trials later this calendar year, with top-line data for SPIRIT 2 expected in the first quarter of calendar year 2020 and top-line data for SPIRIT 1 expected in the second quarter of calendar year 2020.
Our Phase 3 Program for the Treatment of Advanced Prostate Cancer
We initiated a Phase 3 clinical trial in March of 2017, evaluating the safety and efficacy of relugolix in men with advanced prostate cancer, which we refer to as the HERO trial. We believe the HERO trial, if successful, will be sufficient to support the submission of an NDA based on an End-of-Phase 2 meeting held with the FDA. The European Scientific Advice procedure and an End-of-Phase 2 meeting with the Japanese health authority have also been completed supporting the design of the HERO trial for approval in those regions should it be successful.

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The HERO trial has completed enrollment after randomizing 934 men with advanced prostate cancer who require androgen deprivation therapy, or ADT, in a 2:1 ratio to treatment with either oral relugolix 120 mg once-daily (after a single oral loading dose of 360 mg) or a depot injection of leuprolide (per national or regional product label) for a period of at least 48 weeks. Based on FDA discussions, we believe that we will be required to conduct only one Phase 3 trial with a single relugolix arm to gain approval for relugolix in men with advanced prostate cancer in the U.S. Nonetheless, we have designed the trial to include a second arm with leuprolide to demonstrate that treatment with relugolix is noninferior to leuprolide in achieving sustained suppression of testosterone to castrate levels over 48 weeks, an outcome expected to be required for approval in other major markets such as Europe and Japan.
The primary efficacy endpoint accepted by the FDA is testosterone suppression (≤ 50 ng/dL) from week 5, day 1 through week 48, day 7. Relugolix must demonstrate that the lower bound of the 2-sided 95% confidence interval for the percent of patients achieving testosterone suppression through 48 weeks is at least 90%. The secondary efficacy endpoint is PSA reduction as a percentage change from baseline. Testosterone suppression is an approvable endpoint in the U.S. and several hormonal therapies have been approved based on this endpoint. If the results of this trial are favorable, we intend to submit an NDA to the FDA. We may conduct additional clinical trials to further support the commercial potential of relugolix in prostate cancer in the U.S. and other major markets. We currently expect to present top-line results from the HERO trial in the fourth quarter of calendar year 2019 and to submit an NDA to the FDA in early calendar year 2020.
In addition, we filed an amendment to the Phase 3 HERO study protocol to enroll approximately 130 additional men with metastatic prostate cancer to assess the secondary objective of demonstrating that relugolix can delay the time to progression to the lethal state of the disease, castration-resistant prostate cancer, as compared to leuprolide. We believe that relugolix, a direct GnRH receptor antagonist, has the potential to delay the time to castration-resistant disease as compared with leuprolide, a GnRH agonist, because relugolix more rapidly suppresses testosterone and PSA and more fully suppresses follicle-stimulating hormone than leuprolide. We completed enrollment of this additional cohort of men with metastatic prostate cancer in July, 2019.
MVT-602
As part of our license agreement with Takeda, or the Takeda License Agreement, we acquired the worldwide rights to MVT-602, our second product candidate, which previously has been evaluated in over 150 men. MVT-602 is an oligopeptide kisspeptin-1 receptor agonist. Kisspeptin, the ligand, is a naturally-occurring peptide that stimulates GnRH release and is required for puberty and maintenance of normal reproductive function, including production of sperm, follicular maturation and ovulation, and production of estrogen and progesterone in women and testosterone in men.  MVT-602 is being developed as a potential treatment for female infertility in women as part of assisted reproduction, such as in vitro fertilization, or IVF. Approximately 1.5 million assisted reproduction cycles are performed each year worldwide. Further, approximately 25% of women suffering from infertility have problems achieving ovulation, including the inability to produce fully-matured eggs or the failure to ovulate, most commonly resulting from hormonal dysfunction in the GnRH-luteinizing hormone/follicle-stimulating hormone axis. We believe MVT-602 has the potential to be a safer alternative to human chorionic gonadotropin as a part of assisted reproduction for the treatment of female infertility.
We believe that MVT-602, an analog of the naturally-occurring kisspeptin peptide in humans, may mimic natural physiology by inducing a luteinizing hormone surge during IVF and other assisted reproductive technologies, enhancing the likelihood of successful egg maturation and ovulation at the right time without the serious side effect of ovarian hyperstimulation syndrome, or OHSS. While assisted reproductive technologies are effective, typically resulting in pregnancy in 20% to 35% of patients, the standard procedure has remained largely unchanged since inception and has potentially serious side effects. The most serious side effect of assisted reproduction is OHSS. Severe OHSS has been reported to occur in up to 2% of the general assisted reproduction population, and in up to 20% of patients at high-risk for developing OHSS. OHSS is thought to occur as a result of the nonphysiologic elevations in luteinizing hormone that occur as a result of egg maturation triggered with human chorionic gonadotropin and to a lesser extent the GnRH receptor agonists.
By acting upstream in the GnRH-axis to promote the release of physiologically normal levels of key hormones in the assisted reproduction cycle such as luteinizing hormone, kisspeptin agonists, such as MVT-602, may have the potential to trigger egg maturation without causing OHSS. A recently published investigator-sponsored trial where a native kisspeptin peptide (specifically, kisspeptin 54) was used in place of human chorionic gonadotropin as the egg-maturation trigger in the assisted reproduction cycle showed that none of the 60 high-risk patients developed moderate-to-severe OHSS and resulted in a live birth rate of up to 65.1% at the maximally efficacious dose tested. These results validate the potential use of kisspeptin analogs as an alternative to the standard egg maturation trigger in assisted reproduction protocols. To our knowledge, MVT-602 is the only kisspeptin-1 receptor agonist in clinical development and thus has the potential to become a safe alternative egg-maturation trigger in this space.

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In October 2018, we presented data from a Phase 1 trial of MVT-602 at the American Society of Reproductive Medicine (ASRM) Annual Congress. Results of the study showed that administration of MVT-602 in healthy premenopausal women in the follicular phase produced a dose-related increase in luteinizing hormone concentrations and expected effects on follicle-stimulating hormone and estradiol. A total of 24 women were randomized to one of three MVT-602 dose groups (0.3 µg, 1 µg or 3 µg) and then subsequently randomized within the assigned group to receive a single subcutaneous dose of MVT-602 or placebo in a 3:1 ratio. Results showed that administration of single subcutaneous doses of MVT-602 demonstrated dose-related increases in luteinizing hormone concentrations and expected post-dose increases in follicle-stimulating hormone and estradiol concentrations, with little effect observed on progesterone as expected. No serious adverse events were reported, and no subject discontinued from the study due to an adverse event. Adverse events were similar between the placebo and MVT-602 groups with no apparent dose-related effects.
Further assessment of the exposure-response profile of MVT-602 was conducted in a Phase 2a study during the pre-ovulatory phase in 75 fertile women following a minimal controlled ovarian stimulation protocol. After ovarian stimulation, women were randomized to one of four MVT-602 dose groups (0.1 µg, 0.3 µg, 1 µg or 3 µg), to triptorelin, 0.2 mg, or to placebo. Top-line results from this Phase 2a study were presented at the European Society of Human Reproduction in Vienna, Austria in June, 2019. The study demonstrated that MVT-602 was generally well-tolerated and produced the desired luteinizing hormone surge associated with high and dose-dependent rates of ovulation in healthy women following a minimal controlled ovarian stimulation protocol. This study is intended to provide information for dose selection for a future study of MVT-602 in infertile women seeking pregnancy.
Financial Operations Overview
Revenue
To date, we have not generated any revenue, and we do not expect to generate any revenue, from the sale of any products unless and until we obtain regulatory approval of and commercialize relugolix, MVT-602, or a potential future product candidate.
Research and Development Expenses
Since our inception, our operations have primarily been limited to the in-licensing of the rights to relugolix and MVT-602, the expansion of our team, and the initiation and ongoing activities of our clinical programs. Our research and development, or R&D, expenses include program-specific costs, as well as unallocated costs.
Program-specific costs primarily include third-party costs, which include expenses incurred under agreements with contract research organizations, or CROs, and contract manufacturing organizations, or 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 studies and clinical trials, and other third-party expenses directly attributable to the development of our product candidates.
Unallocated costs primarily include employee-related expenses, such as salaries, share-based compensation, benefits and travel for employees engaged in R&D activities, and the cost of consultants who assist with R&D activities not specific to a program.
R&D activities have been central to our business model. We expect our overall R&D expenses to gradually decrease over the next few quarters as we expect to complete several of our Phase 3 studies. However, we also expect the decreases in clinical trial expenses will be partially offset by increases in other R&D spending as we prepare to seek regulatory approval for our product candidates and establish a medical affairs function. Product candidates in later stages of clinical development, such as relugolix, generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.
We cannot determine with certainty the duration and costs of the current or future clinical trials of our product candidates. The duration, costs and timing of clinical trials and development of relugolix, MVT-602 and any other product candidates will depend on a variety of factors that include, but are not limited to:
the number of trials required for approval;
the per patient trial costs;
the number of patients who participate in the trials;
the number of sites included in the trials;
the countries in which the trials 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 drugs that patients receive;

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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 trial material; and
the efficacy and safety profile of the product candidate.
In addition, the probability of success for relugolix, MVT-602 and any other product candidates will depend on numerous factors, including competition, manufacturing capability and commercial viability. As a result, we are unable to determine with certainty the duration and completion costs of our clinical programs or when and to what extent we will generate revenue from commercialization and sale of any of our product candidates. Our R&D activities may be subject to change from time to time as we evaluate our priorities and available resources.
General and Administrative Expenses
General and administrative, or G&A, expenses consist primarily of personnel costs, including salaries, benefits, share-based compensation and travel expenses for our executive, finance, human resources, legal, commercial operations and other administrative functions. G&A expenses also include expenses incurred under agreements with third parties relating to legal, accounting, auditing and tax services, rent and facilities costs, information technology costs, general overhead, costs billed to us under the Services Agreements and other costs allocated to us from RSL.
We anticipate that our G&A expenses will increase in future periods as we expand our operations. These increases will likely include costs related to the hiring of additional personnel, costs to implement and upgrade certain information technology systems, professional services fees and additional rent and other facilities related costs. In particular, we expect to incur increased costs associated with establishing sales, marketing, and commercialization functions in advance of potential future regulatory approvals and commercialization of our product candidates. If relugolix or MVT-602 obtains regulatory approval for marketing, we expect sales, marketing, and commercialization costs to be significant.
Interest Expense
Interest expense consists of interest payments related to our outstanding debt as well as the associated non-cash amortization of debt discounts and issuance costs.
Interest Income
Interest income consists of interest earned on money market funds and the accretion of discounts to maturity for commercial paper.

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Results of Operations
The following table summarizes our results of operations for the three months ended June 30, 2019 and 2018 (in thousands):
 
Three Months Ended June 30,
 
2019
 
2018
Operating expenses:
 
 
 
Research and development
$
51,117

 
$
51,341

General and administrative
14,152

 
8,742

Total operating expenses
65,269

 
60,083

Interest expense
3,793

 
1,617

Interest income
(766
)
 

Other (income) expense, net
(705
)
 
289

Loss before income taxes
(67,591
)
 
(61,989
)
Income tax expense
313

 
145

Net loss
$
(67,904
)
 
$
(62,134
)
Research and Development Expenses
For the three months ended June 30, 2019 and 2018, our R&D expenses consisted of the following (in thousands):
 
Three Months Ended June 30,
 
 
 
2019
 
2018
 
Change
Program-specific costs:
 
 
 
 
 
Relugolix
$
39,106

 
$
42,839

 
$
(3,733
)
MVT-602
820

 
674

 
146

Unallocated costs:
 
 
 
 
 
Share-based compensation
2,548

 
1,561

 
987

Personnel expense
7,279

 
4,781

 
2,498

Services Agreements

 
457

 
(457
)
Other expense
1,364

 
1,029

 
335

Total R&D expenses
$
51,117

 
$
51,341

 
$
(224
)
R&D expenses decreased by $0.2 million, to $51.1 million, in the three months ended June 30, 2019 compared to $51.3 million in the three months ended June 30, 2018. The composition of our R&D expenses in both periods is similar, and primarily includes expenses related to our Phase 3 clinical studies as well as personnel-related expenses for employees engaged in R&D activities. R&D expenses for the three months ended June 30, 2018 reflected a ramp up in relugolix Phase 3 study costs primarily related to study enrollment, whereas R&D expenses for the three months ended June 30, 2019 reflect lower relugolix Phase 3 study costs as certain studies are in the process of winding down. The decrease in relugolix Phase 3 study costs were partially offset by increases in other R&D spending related to our preparations to seek regulatory approval for our product candidates.
R&D expenses were $51.1 million in the three months ended June 30, 2019, and consisted primarily of CRO, clinical drug supply and other study and manufacturing related costs of $40.5 million, personnel expenses of $7.3 million, and share-based compensation expense of $2.5 million.
R&D expenses were $51.3 million in the three months ended June 30, 2018, and consisted primarily of CRO, clinical drug supply and other study-related costs of $41.9 million, personnel expenses of $4.8 million, share-based compensation expense of $1.6 million$0.1 million of which was allocated to us by RSL, and costs billed to us under the Services Agreements (see Note 6 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q) of $2.1 million, including unallocated personnel expenses and third-party pass-through costs associated with our ongoing clinical and other research programs.

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General and Administrative Expenses
G&A expenses increased by $5.4 million, to $14.2 million, in the three months ended June 30, 2019 compared to $8.7 million in the three months ended June 30, 2018, primarily due to an increase in personnel-related expenses, share-based compensation, professional service fees, other general overhead and administrative expenses to support our headcount growth and expanding operations and the assumption of activities previously provided by RSI and RSG under the Services Agreements, partially offset by a reduction of costs billed to us under the Services Agreements due to a decrease in the level of support provided by RSI and RSG as we have decentralized substantially all of our activities from RSL.
G&A expenses in the three months ended June 30, 2019 were $14.2 million, and consisted primarily of personnel-related and general overhead expenses of $8.2 million, share-based compensation expense of $3.9 million, legal and professional fees of $1.4 million, and rent and other facilities related costs of $0.5 million.
G&A expenses in the three months ended June 30, 2018 were $8.7 million, and consisted primarily of personnel-related and general overhead expenses of $4.0 million, share-based compensation expense of $2.7 million, including $0.1 million of which was allocated to us by RSL, legal and professional fees of $0.9 million, and costs of $1.1 million billed to us under the Services Agreements, including personnel expenses, overhead allocations and third-party pass-through costs.
Interest Expense
Interest expense was $3.8 million and $1.6 million for the three months ended June 30, 2019 and 2018, respectively. The increase was primarily the result of higher outstanding debt balances under our financing arrangements during the three months ended June 30, 2019 as compared to the prior year period.
Interest Income
Interest income was $0.8 million in the three months ended June 30, 2019. There was no interest income in the three months ended June 30, 2018. During the three months ended June 30, 2019, we invested a portion of our cash in a combination of money market funds and commercial paper. There were no such investments in the comparable prior year period.
Other (Income) Expense, net
Other (income) expense, net consists of the impact of changes in foreign currency exchange rates on our foreign exchange denominated payables. The impact of foreign 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 payables. For the three months ended June 30, 2019, we recorded a foreign exchange gain of $0.7 million, and for the three months ended June 30, 2018, we recorded a foreign exchange loss of $0.3 million. These amounts are included in other (income) expense, net on the unaudited condensed consolidated statements of operations.
Income Tax Expense
Our income tax expense was $0.3 million and $0.1 million for the three months ended June 30, 2019 and 2018, respectively. Our effective tax rate for the three months ended June 30, 2019 and 2018 was (0.46)% and (0.23)%, respectively, and is driven by our jurisdictional earnings by location and a valuation allowance that eliminates our global net deferred tax assets.
Liquidity and Capital Resources
Sources of Liquidity
We have funded our operations primarily from the issuance and sale of our common shares, from the issuance of notes to NovaQuest and the funds received from our Term Loans with Hercules.
As of June 30, 2019, we had $226.7 million of cash and cash equivalents available to us, as compared to $156.1 million of cash and cash equivalents available to us as of March 31, 2019. As of June 30, 2019, we had approximately $10.4 million of capacity available to us under our “at-the-market” equity offering program that we established in April 2018.
Capital Requirements
For the three months ended June 30, 2019 and 2018, we had net losses of $67.9 million and $62.1 million, respectively. As of June 30, 2019, we had an accumulated deficit of $569.9 million.
We have incurred, and expect to continue to incur, significant operating losses and negative operating cash flows as we continue to develop our product candidates and prepare for the potential future regulatory approvals and commercialization of relugolix. We have not generated any revenue to date and do not expect to generate product revenue unless and until we successfully complete development and obtain regulatory approval for one of our product candidates. Our operating losses and negative operating cash flows may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our planned clinical trials, anticipated regulatory filings, and our expenditures on other R&D and G&A activities.

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We anticipate that our capital requirements will be significant as we:
advance our Phase 3 programs of relugolix 40 mg in combination with low-dose estradiol and a progestin for the treatment of heavy menstrual bleeding associated with uterine fibroids and for pain associated with endometriosis and relugolix 120 mg as a monotherapy for advanced prostate cancer;
expand our chemistry, manufacturing, and control and other manufacturing related activities;
seek to identify, acquire, develop, and commercialize additional product candidates;
integrate acquired technologies into a comprehensive regulatory and product development strategy;
maintain, expand, and protect our intellectual property portfolio;
hire scientific, clinical, regulatory, quality, and administrative personnel;
add operational, accounting, finance, quality, commercial, and management information systems and personnel;
seek regulatory approvals for any product candidates that successfully complete clinical trials;
establish a medical affairs group with a medical scientific liaison team;
establish a sales, marketing, and distribution infrastructure and increase the scale of our external manufacturing capabilities to commercialize any product candidates for which we may obtain regulatory approval;
service debt obligations and payment of interest associated with the NovaQuest Securities Purchase Agreement and the Hercules Loan Agreement; and
operate as a public company.
Our primary use of cash has been to fund the development of relugolix and MVT-602. We expect our operating expenses to continue to increase over the near term as we expand our operations to continue to develop our product candidates and prepare for potential future regulatory approvals and commercialization of relugolix. Based on our current operating plan, we expect that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements at least through the end of fiscal year 2019. This estimate is based on our current assumptions, including assumptions relating to our ability to manage our spend, that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. These funds will not be sufficient to enable us to complete all necessary development activities and commercially launch relugolix. We anticipate that we will continue to incur net losses for the foreseeable future. To continue as a going concern, we will need, among other things, additional capital resources. We continually assess multiple options to obtain additional funding to support our operations, including through financing activities in public or private capital markets, financing arrangements with Roivant Sciences, potential business development activities and cost containment measures. We can provide no assurances that any sources of a sufficient amount of financing will be available to us on favorable terms, if at all. Although we believe that we will continue to raise capital to fund our operations as we have in the past, ASC 240-40, Going Concern, does not allow us to consider future financing activities that are not probable of being implemented in our assessment of our future cash burn for the purpose of our liquidity assessment. Due to these uncertainties, there is substantial doubt about our ability to continue as a going concern. If we are unable to raise capital in sufficient amounts and on terms acceptable to us, we may have to significantly delay, scale back, or discontinue operations.
Until such time, if ever, as we can generate substantial product revenue from sales of relugolix, MVT-602, or any future product candidate, we expect to finance our operations through a combination of cash and cash equivalents on hand, equity offerings, debt financings, structured transactions such as royalty financings, collaboration, license or development agreements, or other collaborations. 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. Our existing agreements with NovaQuest and Hercules involve, 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, making capital expenditures or declaring dividends.
In addition, if we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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Cash Flows
The following table sets forth a summary of our cash flows for the three months ended June 30, 2019 and 2018 (in thousands):
 
Three Months Ended June 30,
 
2019
 
2018
Net cash used in operating activities
$
(66,811
)
 
$
(44,755
)
Net cash used in investing activities
$
(139
)
 
$
(197
)
Net cash provided by financing activities
$
137,610

 
$
79,963

Operating Activities
For the three months ended June 30, 2019, we used $66.8 million in operating activities primarily due to our ongoing development and clinical trials for relugolix and MVT-602 and the expansion of our company. This was primarily attributable to a net loss for the period of $67.9 million and decreases of $7.6 million in accrued expenses resulting primarily from a decrease in accrued R&D expenses and accrued compensation-related expenses and $1.0 million in accounts payable due to the timing of vendor invoice payments. These amounts were partially offset by a $1.5 million decrease in prepaid expenses and other current assets, an increase of $1.5 million in deferred interest payable related to our outstanding debt with NovaQuest which is paid on a deferred basis pursuant to the terms of the NovaQuest Securities Purchase Agreement, $6.5 million of non-cash share-based compensation expense as a result of an increase in headcount, and $0.9 million of total depreciation and amortization expense.
For the three months ended June 30, 2018, we used $44.8 million in operating activities primarily due to our ongoing development and clinical trials for relugolix. This was primarily attributable to a net loss for the period of $62.1 million along with an increase of $0.6 million in prepaid expenses and other current assets. These amounts were partially offset by increases of $8.0 million in accrued expenses which was primarily due to the progress of our ongoing Phase 3 clinical trials of relugolix, $4.2 million of non-cash share-based compensation expense as a result of an increase in headcount, an increase of $3.2 million in amounts due to RSL, RSI and RSG, and $0.6 million of total depreciation and amortization expense.
Investing Activities
For the three months ended June 30, 2019 and 2018, $0.1 million and $0.2 million, respectively, was used in investing activities, all for the purchase of property and equipment.
Financing Activities
For the three months ended June 30, 2019, $137.6 million was provided by financing activities. This was primarily due to the net proceeds of $134.8 million we received from the issuance and sale of 17,424,243 common shares in our underwritten public equity offering (including the exercise of the underwriters’ over-allotment option) and the net proceeds of $2.5 million we received from the sale of 106,494 common shares through our “at-the-market” equity offering program. In addition, we received cash proceeds of $0.3 million from the exercise of stock options under our 2016 Equity Incentive Plan.
For the three months ended June 30, 2018, $80.0 million was provided by financing activities. This was primarily due to the net proceeds of $57.3 million we received from the sale of 2,767,129 common shares through our “at-the-market” equity offering program, and proceeds of $22.5 million we received from the sale of 1,110,015 common shares to RSL in a private placement.
Contractual Obligations
During the three months ended June 30, 2019, 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 ended March 31, 2019.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

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Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the unaudited condensed consolidated financial statements and the reported amounts of expenses incurred during the reporting periods. We base our estimates on historical experience and on various other information available to us at the time we make the estimates and judgments that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience.
We define our critical accounting policies as those under U.S. GAAP that require us to make subjective estimates and judgments about matters that are inherently uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles.
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. 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 for the fiscal year ended March 31, 2019, filed with the SEC on May 24, 2019, other than to leases upon the adoption of ASU 2016-02, Leases (Topic 842), as discussed below.
Leases
Prior to April 1, 2019, we recognized our leases in accordance with ASC 840, Leases, and all of our leases were classified as operating leases. Rent expense was recognized on a straight-line basis over the terms of the leases and, accordingly, we recorded the cumulative difference between cash rent payments and the recognition of rent expense as a deferred rent liability. When an operating lease included lease incentives, such as rent abatements or leasehold improvement allowances, or required fixed escalations of the minimum lease payments, the aggregate rental expense, including such incentives or increases, was recognized on a straight-line basis over the term of the lease.
Effective April 1, 2019, we adopted ASU 2016-02, Leases (Topic 842), under which all of our outstanding leases continue to be classified as operating leases. Rent expense is recognized on a straight-line basis. When an operating lease includes rent abatements or requires fixed escalations of the minimum lease payments, the aggregate rental expense is recognized on a straight-line basis over the term of the lease. When an operating lease includes lease incentives such as leasehold improvement allowances, the lease incentive is included in the right-of-use asset. Operating lease right-of-use assets and operating lease liabilities are recognized at the commencement date based on the present value of the future minimum lease payments over the lease term. As our leases do not provide an implicit rate, in determining the net present value of lease payments, management used judgment in order to estimate the appropriate incremental borrowing rate, which is the rate incurred to borrow equivalent funds on a collateralized basis over a similar term in a similar economic environment.
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 2, “Summary of Significant Accounting Policies,” to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Item 3.                                                         Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from adverse changes in market rates and market prices such as interest rates, foreign currency exchange rates, and changes in the market value of equity instruments.
Our investment policy establishes guidelines for the investment of cash in a conservative and diversified investment portfolio which seeks to provide adequate liquidity for our operations while minimizing the loss of any principal. The securities permitted under our investment policy may be subject to market risk related to changes in interest rates and other market factors. We manage our sensitivity to these risks by investing in short-term, investment grade marketable securities. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, we do not believe that a hypothetical 10% change in market rates would have a material impact on the realized value of our investments. As of June 30, 2019 and March 31, 2019, we had cash and cash equivalents of $226.7 million and $156.1 million, respectively, consisting of commercial paper, money market funds, and non-interest-bearing cash deposits denominated in the U.S. dollar and Swiss franc.
We also have certain debt that bears interest at a prime-based variable rate. A hypothetical 10% change in this interest rate would have an approximate $0.4 million impact on our annual interest expense. We do not believe we are currently exposed to any material market risk. 
We do not believe that we have any material exposures to foreign currency rate fluctuations. Although we conduct some R&D activities with vendors outside of the U.S., most of our transactions are denominated in U.S. dollars. For the three months ended June 30, 2019, we recorded a foreign exchange gain of $0.7 million, and for the three months ended June 30, 2018, we recorded a foreign exchange loss of $0.3 million. These amounts are included in other (income) expense, net on the unaudited condensed consolidated statements of operations.
Item 4.                                                         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 on Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective at the reasonable assurance level. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act 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.
Changes in Internal Control over Financial Reporting
We continually seek to improve the efficiency and effectiveness of our internal control over financial reporting. Effective April 1, 2019, we adopted Accounting Standards Codification 842, Leases (Topic 842). As a result, we have made changes to certain internal controls over financial reporting to address risks associated with the lease accounting and disclosure requirements. This includes the enhancement of our lease evaluation processes and the implementation of controls to address risks associated with the calculation of right-of-use assets and corresponding lease liabilities. 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 ended June 30, 2019 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, within Myovant Sciences Ltd. have been detected.

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PART II. OTHER INFORMATION
Item 1.                                                         Legal Proceedings
From time to time, we may become involved in legal proceedings related to claims arising from the ordinary course of business. We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceedings against us that we believe could have a material adverse effect on our business, operating results, or financial condition.
Item 1A. Risk Factors
You should carefully consider the following risk factors, in addition to the other information contained in this Quarterly Report on Form 10-Q, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited condensed consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the events described in the following risk factors and the risks described elsewhere in this Quarterly Report on Form 10-Q occurs, our business, operating results and financial condition could be seriously harmed and the trading price of our common shares could decline and you could lose all or part of your investment in our common shares.
Risks Related to Our Business, Financial Position and Capital Requirements
We believe our current cash and cash equivalents will be sufficient to fund our business only for a limited amount of time, and if we are not able to raise additional funds, we may be unable to continue as a going concern.
As of June 30, 2019, we had approximately $226.7 million of cash and cash equivalents. Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements at least through the end of fiscal year 2019. This estimate is based on our current assumptions, including assumptions relating to our ability to manage our spend, that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. These funds will not be sufficient to enable us to complete all necessary development activities and commercially launch relugolix. We anticipate that we will continue to incur net losses for the foreseeable future. These factors raise substantial doubt about our ability to continue as a going concern for the one-year period following the filing of this Quarterly Report on Form 10-Q. We may be forced to delay or reduce the scope of our development programs and/or limit or cease our operations if we are unable to obtain additional funding to support our current operating plan. Management’s plans in this regard are described in Note 2 of the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. In the event that these plans cannot be effectively realized, there can be no assurance that we will be able to continue as a going concern.
We will require substantial additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development of, seek regulatory approval for, and commercialize relugolix or MVT-602.
We expect to spend substantial amounts to complete the development of, seek regulatory approvals for and commercialize relugolix and MVT-602. These expenditures will include costs associated with the Takeda License Agreement, pursuant to which we are obligated to cover substantial development costs of relugolix and MVT-602 and make royalty payments in connection with the net sales of resulting products, if any. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:
the initiation, progress, timing, costs and results of our planned and ongoing clinical trials for relugolix and MVT-602;
the outcome, timing and cost of meeting regulatory requirements established by the U.S. Food and Drug Administration, or the FDA, and comparable foreign regulatory authorities;
the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us or our products or any future product candidates;
the effect of competing technological and market developments;
the cost and timing of completion of commercial-scale manufacturing activities;
the cost of establishing sales, marketing and distribution capabilities for our products in regions where we choose to commercialize our products on our own; and
the initiation, progress, timing and results of our commercialization of our product candidates, if approved for commercial sale.

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Our current funds will not be sufficient for us to complete all necessary development activities and commercially launch relugolix. Accordingly, we will need to obtain substantial further funding through other public or private offerings of our capital shares, debt financings, collaboration or licensing arrangements, or other sources. We cannot be certain that additional capital will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, when needed, we may have to significantly delay, scale back, or discontinue the development or commercialization of our product candidates or potentially discontinue operations. In addition, attempting to secure additional capital may divert the time and attention of our management from day-to-day activities and harm our product candidate development efforts. Because of the numerous risks and uncertainties associated with the development and potential commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays, operating expenditures and capital requirements associated with our current and anticipated product development programs.
Raising additional funds by issuing equity securities may cause dilution to existing shareholders; raising additional funds through debt financings may involve additional restrictive covenants, and raising funds through collaboration or licensing arrangements may restrict our operations or require us to relinquish proprietary rights.
Until such time, if ever, that we can generate substantial product revenue, we expect to finance our operations through a combination of cash and cash equivalents on hand, equity offerings, debt financings, structured transactions such as royalty financings, collaboration or license and development agreements or other collaborations. To the extent that we raise additional capital by issuing equity securities, our existing shareholders’ ownership may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of a common shareholder. Our existing agreements with NovaQuest and Hercules involve, 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, making capital expenditures, or declaring dividends.
In addition, if we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us or grant rights to develop and market product candidates that we would otherwise develop and market ourselves.
We have a limited operating history and no history of commercializing products, which may make it difficult to evaluate our business and prospects.
We are a clinical-stage biopharmaceutical company with a limited operating history. We were formed in February 2016, and our operations to date have been limited to identifying and in-licensing our product candidates, organizing and staffing our company, raising capital, preparing for and advancing the clinical development of our product candidates, conducting global clinical trials, and preparing for potential future regulatory approvals and commercialization of relugolix. Many of our Phase 3 clinical trials are still ongoing and we have not yet demonstrated an ability to obtain marketing approval, manufacture a commercial scale product, or conduct sales and marketing activities necessary for successful product commercialization. We may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown difficulties in achieving our business objectives. If our product candidates are approved by the FDA, we will need to expand our capabilities to support commercial activities and we may not be successful in adding such capabilities. Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.
We have incurred significant operating losses and negative operating cash flows since our inception and expect to continue to incur significant operating losses and negative operating cash flows; and we have not generated any revenue from any commercial products and may never achieve or maintain profitability.
Investment in pharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to gain regulatory approval or fail to become commercially viable. Since inception, we have focused most of our efforts on research and development with the goal of achieving regulatory approval and have incurred significant operating losses. Our net loss was $67.9 million and $62.1 million for the three months ended June 30, 2019 and 2018, respectively, and, as of June 30, 2019, we had an accumulated deficit of $569.9 million.
We expect to continue to incur significant operating losses and negative operating cash flows as we continue to develop our product candidates and prepare for potential future regulatory approvals and commercialization of relugolix. Past operating losses, combined with expected future operating losses, have had and will continue to have an adverse effect on our results of operations, financial position and working capital. If we obtain regulatory approval for relugolix or MVT-602, we expect to incur increased sales, marketing and manufacturing expenses.

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We have not obtained marketing approval for relugolix or MVT-602 anywhere in the world, and we may never receive such approval. As a result, we have never generated any product revenue. We are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain it. Our ability to generate product revenue and achieve profitability is dependent on our ability to complete the development of relugolix and MVT-602, obtain necessary regulatory approvals, and have relugolix and MVT-602 manufactured and successfully marketed. We cannot assure you that we will be profitable even if we successfully commercialize relugolix or MVT-602. Even if we successfully obtain regulatory approvals to market relugolix or MVT-602, our revenue will be dependent upon, in part and among other things, the size of the markets in the territories for which we gain regulatory approval, the number of competitors in such markets, the accepted price for relugolix and MVT-602 and whether we own the commercial rights for those territories. For example, ORILISSA™ (elagolix), an oral GnRH receptor antagonist for the management of moderate to severe pain associated with endometriosis, has been approved as monotherapy (150 mg once a day or 200 mg twice a day) by the FDA and launched by AbbVie in August 2018. The launch and commercialization of ORILISSA™ or other competing drugs may limit the revenue from relugolix. If the indication or label approved by regulatory authorities is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, or if we are unable to obtain a favorable price for relugolix or MVT-602, we may not generate significant revenue from sales of relugolix or MVT-602, even if approved. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Failure to become and remain profitable may adversely affect the market price of our common shares and our ability to raise capital and continue operations.
We are heavily dependent on the success of relugolix in combination with low-dose estradiol and a progestin for our women’s health indications of uterine fibroids and endometriosis, relugolix monotherapy for men with advanced prostate cancer, and MVT-602, which are still under clinical development. If either relugolix or MVT-602 does not receive regulatory approval or is not successfully commercialized, our business will be harmed.
We are a clinical-stage biopharmaceutical company with no products approved for commercial sale. We have invested and expect to continue to invest a substantial portion of our efforts and expenditures in the development and advancement of our product candidates, relugolix in combination with low-dose estradiol and a progestin, relugolix monotherapy, and MVT-602. Our business and our ability to generate revenue depends heavily on the successful clinical development, regulatory approval and commercialization of these product candidates, which may never occur. We currently generate no revenue from sales of any product. We may never receive regulatory approval for any indication for relugolix or MVT-602 and may never be able to develop or commercialize a marketable product. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of products are and will remain subject to extensive regulation by the FDA and other regulatory authorities in the U.S. and other countries. We are not permitted to market relugolix or MVT-602 in the U.S. until we receive approval of New Drug Applications, or NDAs, or in any foreign country until we receive the requisite approvals from the appropriate regulatory authorities in such countries.
Obtaining approval of an NDA or similar regulatory approval is an extensive, lengthy, expensive and inherently uncertain process, and the FDA or other foreign regulatory authority may delay, limit or deny approval of relugolix or MVT-602. See the Risk Factor titled “The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming, and inherently unpredictable, and even if we obtain approval for a product candidate in one country or jurisdiction, we may never obtain approval for or commercialize it in any other jurisdiction which would limit our ability to realize our product candidates’ full market potential.” We have not submitted an NDA to the FDA, or any comparable application to any other regulatory authority.
Even if we receive regulatory approval for one or both formulations of relugolix or MVT-602, our ability to generate revenues from relugolix or MVT-602 will depend on our ability to:
set an acceptable price for relugolix or MVT-602 and obtain coverage and adequate reimbursement from third-party payors;
establish effective sales, marketing, and distribution systems in jurisdictions around the world for relugolix (excluding Japan and certain other Asian countries) or MVT-602;
initiate and continue relationships with Takeda and/or other third-party manufacturers and have adequate commercial quantities of relugolix or MVT-602 manufactured at acceptable cost and quality levels;
attract and retain experienced management and advisory teams;
achieve broad market acceptance of our products in the medical community and with third-party payors and consumers;
launch commercial sales of our products, whether alone or in collaboration with others;
establish the safety and efficacy of relugolix and MVT-602 in comparison to competing products; and
maintain, expand, and protect our intellectual property rights.
If we cannot successfully execute any one of the foregoing, our business may not succeed and your investment in us may be adversely affected.

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If we are unable to formulate a single-tablet fixed-dose combination version of relugolix with low-dose estradiol and a progestin for our womens health indications, its potential commercial opportunity and competitive advantage could be limited.
GnRH receptor antagonists, like relugolix, may cause loss of bone mineral density due to the induced hypoestrogenic state that may limit duration of use. This risk, and a related risk of hot flush or vasomotor symptoms, may be mitigated by the co-administration of relugolix in combination with low-dose estradiol and a progestin. A key part of our relugolix clinical development strategy is to formulate a single-tablet fixed-dose combination of relugolix with low-dose estradiol and a progestin to maintain bone health and mitigate side effects of a low-estrogen state such as vasomotor symptoms, and to facilitate patient convenience and compliance. We have recently conducted a bioequivalence study to demonstrate the bioequivalence of the single-tablet relugolix combination therapy with the co-administered regimen used in the LIBERTY clinical program (one relugolix 40-mg tablet and one tablet containing estradiol 1.0 mg and norethindrone acetate 0.5 mg). The single tablet met FDA bioequivalence criteria. Twelve-month stability studies will be required for FDA approval and these studies are ongoing. If we are unsuccessful in our attempts to formulate a single-tablet fixed-dose combination version of relugolix in time for the initial application for market authorization in the U.S., we expect to seek approval for relugolix tablets co-packaged with a commercially available tablet containing both the low-dose estradiol and norethindrone acetate. This would potentially decrease our advantages relative to our competition by requiring patients to take two pills once-daily instead of one pill once-daily until the fixed-dose combination can be developed and approved. If our competitors develop a fixed-dose combination with hormonal therapy before we do, or if we are unable to do so, then we would be at a competitive disadvantage and this could limit our commercial opportunity. We are not aware of any barriers preventing competitors from developing or achieving regulatory approval of a fixed-dose combination.
In addition, in order to support the bridging between the U.S. and European Union, or EU, sourced commercially available tablets of the low-dose estradiol and norethindrone acetate that were used in our clinical trials, we need to demonstrate the comparability of the drug product obtained from the different sources. If the information provided is insufficient to support approval of either formulation, we may be required to conduct further studies, we could face delays and increased expenses associated with our development programs and our commercial opportunity could be limited.
The terms of the NovaQuest Securities Purchase Agreement and the Hercules Loan Agreement place restrictions on our operating and financial flexibility.
In October 2017, we and our subsidiaries entered into the Hercules Loan Agreement and the NovaQuest Securities Purchase Agreement. Our obligations under the Hercules Loan Agreement are secured by a first lien security interest in substantially all of our and our subsidiaries’ respective assets, other than intellectual property, and our obligations under the notes issued pursuant to the NovaQuest Securities Purchase Agreement are secured by a second lien security interest in substantially all of our and our subsidiaries’ respective assets, other than intellectual property.
Each of these agreements include customary affirmative and restrictive covenants and representations and warranties. For example, under the NovaQuest Securities Purchase Agreement, a minimum cash covenant applies commencing on November 1, 2020 (or November 1, 2021 if extended pursuant to the terms of the NovaQuest Securities Purchase Agreement). Other restrictive covenants include limitations on additional indebtedness, liens (including a negative pledge on intellectual property and other assets), investments, distributions (including dividends), transfers, mergers or acquisitions, taxes, corporate changes and deposit accounts. Compliance with these covenants may limit our flexibility in operating our business and our ability to take actions that might be advantageous to us and our shareholders.
Additionally, the NovaQuest Securities Purchase Agreement and the Hercules Loan Agreement each also includes customary events of default, including payment defaults, breaches of covenants following any applicable cure period, cross acceleration to certain debt, certain events relating to bankruptcy or insolvency and certain events relating to U.K. or Irish pension plans. Upon the occurrence of an event of default under the NovaQuest Securities Purchase Agreement, a default interest rate of an additional 5.0% will apply to the outstanding obligations under the NovaQuest Securities Purchase Agreement, and NovaQuest, as the agent for the holders of the notes, may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the NovaQuest Securities Purchase Agreement. Upon the occurrence of an event of default under the Hercules Loan Agreement, a default interest rate of an additional 5.0% may be applied to the outstanding obligations under the Hercules Loan Agreement, and Hercules may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Hercules Loan Agreement. In addition, upon the occurrence of certain bankruptcy and insolvency events, our obligations under the notes issued pursuant to the NovaQuest Securities Purchase Agreement and our obligations under the Hercules Loan Agreement would automatically become due and payable. We may not have enough available cash or be able to raise additional funds through equity or debt financings to repay these outstanding obligations at the time any event of default occurs. In that case, we may be required to delay, limit, reduce or terminate our clinical development efforts or grant to others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. NovaQuest and Hercules could also exercise their rights to take possession and dispose of the collateral securing our obligations, which collateral includes all of our and our subsidiaries’ respective assets other than intellectual property. Our business, financial condition and results of operations could be substantially harmed as a result of any of these events.

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We may not be successful in our efforts to identify and acquire or in-license additional product candidates.
Part of our strategy involves diversifying our product development risk by identifying and acquiring or in-licensing novel product candidates. We may fail to identify and acquire or in-license product candidates, including for reasons discussed in these risk factors and also:
the process by which we identify and decide to acquire product candidates may not be successful;
the competition to acquire or in-license promising product candidates is fierce and many of our competitors are large, multinational pharmaceutical, biotechnology and medical device companies with considerably more financial, development and commercialization resources and experience than we have;
potential product candidates may, upon further study during the acquisition process, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval or achieve market acceptance; and
potential product candidates may not be effective in treating their targeted diseases.
In addition, we may choose to focus our efforts and resources on potential product candidates that ultimately prove to be unsuccessful. Further, time and resources spent searching for, identifying, acquiring, and developing potential product candidates may distract management’s attention from our primary business. If we are unable to identify and acquire or in-license suitable product candidates, we will be unable to diversify our product risk. We believe that any such failure could have a significant negative impact on our prospects because the risk of failure of any particular development program in the pharmaceutical field is high.
We rely on agreements with Takeda to provide rights to the core intellectual property relating to our existing product candidates and to supply us with clinical and commercial trial material to support development and potential commercialization of relugolix. Any termination or loss of significant rights under those agreements would adversely affect our development or commercialization of relugolix.
In June 2016, we and one of Takeda’s affiliates, Takeda Pharmaceutical Company Limited, or Takeda Limited, entered into an agreement for the manufacture and clinical supply of relugolix. Under this agreement, Takeda Limited is supplying us, and we are obtaining from Takeda Limited, all of our requirements for relugolix drug substance and drug product to be used under our development plans for all indications. On May 30, 2018, we entered into a Commercial Manufacturing and Supply Agreement with Takeda, or the Takeda Commercial Supply Agreement, pursuant to which Takeda will manufacture and supply us with relugolix drug substance to support the commercial launch of relugolix, if marketing authorization is granted. If Takeda fails to fulfill its obligations to manufacture and supply clinical and/or commercial quantities of relugolix, our development plans and commercialization of relugolix, if approved, could be significantly delayed or otherwise adversely affected.
We currently rely in part on services provided by Roivant Sciences, Inc. and Roivant Sciences GmbH.
We previously entered into Services Agreements with Roivant Sciences, Inc., or RSI, and Roivant Sciences GmbH, or RSG, wholly owned subsidiaries of Roivant Sciences Ltd., or RSL, pursuant to which RSI and RSG provide certain services to us. The RSI or RSG personnel and support staff who provide services to us under these Services Agreements are not required to treat management and administration of our business as their primary responsibility or act exclusively for us, and we do not expect them to do so. Under the Services Agreements, RSI and RSG have the discretion to determine who, among their employees, will perform services for us. RSI and RSG have limited resources. If either RSI or RSG fails to perform its obligations in accordance with the terms of the Services Agreements or to effectively manage services provided to us, the operations of our business may be adversely affected. During the past year, we have replaced most of the services previously provided by RSI and RSG with our own internally developed capabilities or external professional service providers. Consequently, the level of support we receive from RSI and RSG has decreased substantially. If we are unable to fully integrate the internal capabilities or further develop capabilities to replace the services currently provided by RSI or RSG, or fail to do so in a timely and effective manner, the operations of our business would be adversely affected.
Our future success depends on our ability to attract and retain key personnel.
We expect to hire additional employees for our managerial team and other teams supporting G&A, commercial, clinical, medical affairs, operations and other functions. The market for talent in our industry is very competitive. Many of the other pharmaceutical companies we compete against for qualified personnel and consultants have greater financial and other resources, more favorable risk profiles and a longer operating history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these opportunities may be more appealing to high-quality candidates and consultants than what we have to offer. Due to these reasons, we may not be able to attract or retain qualified personnel.

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In addition, our industry has experienced a high rate of turnover of management personnel in recent years. We are highly dependent on the skills and leadership of our management team and key employees. Our senior management and key employees may terminate their positions with us at any time. In addition, we do not maintain “key person” insurance for any of our executives or other employees. If we lose one or more members of our senior management team or key employees, our ability to successfully implement our business strategies could be seriously harmed. Replacing these individuals may be difficult, cause disruption, and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory approval of, and commercialize products successfully. If we are not able to attract and retain necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raise additional capital, our ability to commercialize relugolix or MVT-602 if we obtain regulatory approvals, and our ability to implement our business strategies.
We plan to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.
We expect to expand our organization and hire additional employees. Our management is expected to have increasing responsibilities to identify, recruit, maintain, motivate, and integrate additional employees, consultants and contractors which may divert a disproportionate amount of its time and attention away from our day-to-day activities. The expected growth may also require significant capital expenditures and divert financial resources from other projects. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate or grow revenue could be adversely affected, and we may not be able to implement our business strategy. As a result, our future financial performance and our ability to complete clinical development, obtain regulatory approval, and commercialize relugolix, MVT-602 or any potential future product candidate may be adversely affected.
Our employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers, and other vendors, or those of our affiliates, may engage in misconduct or other improper activities, including noncompliance with regulatory or legal standards and requirements, which could have an adverse effect on our results of operations.
We are exposed to the risk that our employees, contractors, advisers, including principal investigators, consultants, commercial collaborators, service providers, and other vendors, or those of our affiliates, may engage in fraudulent, illegal activity, or other misconduct. Misconduct by these parties could include intentional, reckless or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA or other regulatory bodies, including: those laws that require the reporting of true, complete, and accurate information to such regulatory bodies; laws that require manufacturing by current Good Manufacturing Practice, or cGMP, standards; federal, state and foreign healthcare fraud and abuse laws and data privacy laws; or laws and regulations that require the true, complete, and accurate reporting of financial information or data. In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive regulations intended to prevent fraud, kickbacks, self-dealing, bribery, corruption, antitrust violations, and other abusive practices. See the Risk Factors titled “Our current and future relationships with investigators, healthcare professionals, consultants, third-party payors, and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties,” “International expansion of our business exposes us to business, legal, regulatory, political, operational, financial, economic, and other risks associated with conducting business outside of the U.S.,” and “If we obtain approval to market any products outside of the U.S., a variety of risks associated with international operations could materially adversely affect our business.” These laws may restrict or prohibit a wide range of business activities, including research, manufacturing, distribution, pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent data in our nonclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and serious harm to our reputation. We have a Code of Business Conduct and Ethics and other corporate compliance policies, but it is not always possible to identify and deter employee or third-party misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person or government agency could allege such fraud or other misconduct, even if none occurred. If our employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers or other vendors, or those of our affiliates, are found to be in violation of any such regulatory or legal standards or requirements, it could have a significant impact on our business and financial results, including the imposition of significant civil, criminal, and administrative penalties, damages, monetary fines, suspension or delay in our clinical trials, possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, FDA debarment, contractual damages, reputational harm, diminished future earnings and profits, additional reporting requirements, and regulatory oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

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International expansion of our business exposes us to business, legal, regulatory, political, operational, financial, economic, and other risks associated with conducting business outside of the U.S.
Part of our business strategy involves international expansion, including establishing and maintaining operations outside of the U.S. and establishing and maintaining relationships with health care providers, payors, government officials, distributors and manufacturers globally. Conducting business internationally involves a number of risks, including:
multiple conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, privacy and cybersecurity laws, anti-bribery and anti-corruption laws, regulatory requirements and other governmental approvals, permits and licenses;
possible failure by us or our distributors to obtain appropriate licenses or regulatory approvals for the sale or use of our product candidates, if approved, in various countries;
difficulties in managing foreign operations;
complexities associated with managing multiple payor-reimbursement regimes or self-pay systems;
financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable, and exposure to foreign currency exchange rate fluctuations;
reduced protection for intellectual property rights;
business interruptions resulting from geopolitical actions, economic instability, or natural disasters, including, but not limited to, wars and terrorism, political unrest, outbreak of disease, earthquakes, boycotts, curtailment of trade, and other business restrictions;
failure to comply with foreign laws, regulations, standards and regulatory guidance governing the collection, use, disclosure, retention, security and transfer of personal data, including the European Union General Data Protection Regulation, or the GDPR, which introduced strict requirements for processing personal data of individuals within the EU; and
failure to comply with the Foreign Corrupt Practices Act, including its books and records provisions and its anti-bribery provisions, the United Kingdom Bribery Act 2010, and similar antibribery and anticorruption laws in other jurisdictions, for example by failing to maintain accurate information and control over sales or distributors’ activities.
Any of these risks, if encountered, could significantly harm our future international expansion and operations and, consequently, negatively impact our financial condition, results of operations, and cash flows.
Our internal computer systems, as well as those of RSI and RSG, and our third-party collaborators, consultants or contractors, may fail or suffer cybersecurity breaches and data leakage, which could result in a material disruption of our business and operations or liabilities that adversely affect our financial performance.
Our computer systems, as well as those of RSI, RSG and our contract research organizations, or CROs, contract manufacturing organizations, or CMOs, and other contractors, consultants, and law and accounting firms, may sustain damage or data leakage from computer viruses, unauthorized access or disclosure, data breaches, cybercriminals, natural disasters (including hurricanes and earthquakes), terrorism, war, and telecommunication and electrical failures. A significant breakdown, invasion, corruption, destruction or interruption of critical information technology systems or infrastructure, by our workforce, others with authorized access to our information systems or unauthorized persons, could cause interruptions in our operations and result in a material disruption of our drug development programs. For example, the loss of nonclinical or clinical trial data from completed, ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability, suffer reputational damage, and the further development of relugolix or MVT-602 or any future product candidate could be delayed.
The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional dissemination or intentional destruction of personal and confidential information stored in our or our third-party providers’ systems, portable media or storage devises. We could also experience a business interruption, theft of or unauthorized access to personal or confidential information, intellectual property or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise our information system infrastructure or lead to data leakage, either internally or at our third-party providers, and could result in liabilities that adversely affect our financial performance. While we have invested in the protection of data and information technology, there can be no assurance that our efforts will prevent services interruptions or security breaches.

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The results of the United Kingdom’s referendum on withdrawal from the EU may have a negative effect on global economic conditions, financial markets and our business.
In June 2016, the United Kingdom, or U.K., held a referendum in which voters approved an exit from the EU, commonly referred to as “Brexit.” This referendum has created political and economic uncertainty, particularly in the U.K. and the EU, and this uncertainty may persist for years. A withdrawal could, among other outcomes, disrupt the free movement of goods, services and people between the U.K. and the EU, and result in increased legal and regulatory complexities, as well as potential higher costs of conducting business in Europe. This is particularly the case if the U.K. and the EU do not reach agreement on how the U.K. will exit the EU, commonly referred to as a “hard Brexit.” The U.K.’s vote to exit the EU could also result in similar referendums or votes in other European countries in which we do business. Given the lack of comparable precedent, it is unclear what financial, trade and legal implications the withdrawal of the U.K. from the EU would have and how such withdrawal would affect us.
For example, Brexit could result in the U.K. or the EU significantly altering its regulations affecting the clearance or approval of our product candidates that are developed in the U.K. Brexit could also affect the clearance or timing of the release of our clinical trial materials into the U.K. or the EU. Any such delays could result in our clinical study sites having insufficient clinical trial materials and could adversely affect the timing and completion of our clinical trials. Any new regulations could add time and expense to the conduct of our business, as well as the process by which our products receive regulatory approval in the U.K., the EU and elsewhere. In addition, the announcement of Brexit and the withdrawal of the U.K. from the EU have had and may continue to have, particularly in the case of a hard Brexit, a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these effects of Brexit, among others, could adversely affect our business, our results of operations, liquidity and financial condition.
If we fail to comply with applicable U.S. and foreign privacy and data protection laws and regulations, we may be subject to liabilities that adversely affect our business, operations and financial performance.
We are subject to federal and state laws and regulations requiring that we take measures to protect the privacy and security of certain information we gather and use in our business. For example, federal and state security breach notification laws, state health information privacy laws and federal and state consumer protection laws impose requirements regarding the collection, use, disclosure and storage of personal information. In addition, in June 2018, California enacted the California Consumer Privacy Act, or CCPA, which takes effect on January 1, 2020. The CCPA gives California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation. Although the CCPA includes exemptions for certain clinical trials data, and HIPAA protected health information, the law may increase our compliance costs and potential liability with respect to other personal information we collect about California residents. The CCPA has prompted a number of proposals for new federal and state privacy legislation that, if passed, could increase our potential liability, increase our compliance costs and adversely affect our business.

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We may also be subject to or affected by foreign laws and regulations, including regulatory guidance, governing the collection, use, disclosure, security, transfer and storage of personal data, such as information that we collect about patients and healthcare providers in connection with clinical trials and our other operations in the U.S. and abroad. The global legislative and regulatory landscape for privacy and data protection continues to evolve, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. This evolution may create uncertainty in our business, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. For example, the EU has adopted the GDPR, which introduces strict requirements for processing personal data. The GDPR increases our compliance burden with respect to data protection, including by mandating potentially burdensome documentation requirements and granting certain rights to individuals to control how we collect, use, disclose, retain and leverage information about them. The processing of sensitive personal data, such as information about health conditions, entails heightened compliance burdens under the GDPR and is a topic of active interest among foreign regulators. In addition, the GDPR provides for breach reporting requirements, more robust regulatory enforcement and fines of up to the greater of 20 million euros or 4% of annual global revenue. While companies are afforded some flexibility in determining how to comply with the GDPR’s various requirements, significant effort and expense are required to ensure continuing compliance with the GDPR. Moreover, the requirements under the GDPR and guidance issued by different EU member states may change periodically or may be modified, and such changes or modifications could have an adverse effect on our business operations if compliance becomes substantially costlier than under current requirements. It is also possible that each of these privacy laws may be interpreted and applied in a manner that is inconsistent with our practices. Further, Brexit has created uncertainty with regard to data protection regulation in the U.K. In particular, it is unclear whether, post Brexit, the U.K. will enact data protection legislation equivalent to the GDPR and how data transfers to and from the U.K. will be regulated. Any failure or perceived failure by us to comply with federal, state, or foreign laws or self-regulatory standards could result in negative publicity, diversion of management time and effort and proceedings against us by governmental entities or others. In many jurisdictions, enforcement actions and consequences for noncompliance are rising. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.
Use of social media platforms presents new risks.
We believe that our potential patient population is active on social media. Social media practices in the pharmaceutical and biotechnology industries are evolving, which creates uncertainty and risk of noncompliance with regulations applicable to our business. For example, patients may use social media platforms to comment on the effectiveness of, or adverse experiences with, a product candidate, which could result in reporting obligations. In addition, there is a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or comments about us or our product candidates on any social networking website. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face restrictive regulatory actions or incur other harm to our business.
The failure to successfully implement an enterprise resource planning system could adversely impact our business and results of operations.
We are implementing a company-wide enterprise resource planning, or ERP, system to upgrade certain existing business, operational, and finance processes, upon which we rely. ERP implementations are complex and time-consuming projects that require transformations of business and finance processes to reap the benefits of the ERP system. Any such transformation involves risk inherent in the conversion to a new system, including loss of information and potential disruption to normal operations. Additionally, if the ERP system is not effectively implemented as planned, or the system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess those controls adequately could be delayed. Significant delays in documenting, reviewing and testing our internal control over financial reporting could cause us to fail to comply with the U.S. Securities and Exchange Commission, or the SEC, reporting obligations related to our management’s assessment of our internal control over financial reporting, or result in the issuance of an adverse opinion on the effectiveness of internal control over financial reporting by our independent registered public accounting firm. In addition, if we experience interruptions in service or operational difficulties and are unable to effectively manage our business during or following the implementation of the ERP system, our business and results of operations could be harmed.

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Potential product liability lawsuits against us could cause us to incur substantial liabilities and could impact ongoing and planned clinical trials as well as limit commercialization of any products that we may develop.
The use of relugolix, relugolix combination therapy and MVT-602 in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by regulatory or governmental agencies, consumers, health care providers, other pharmaceutical companies or others taking or otherwise coming into contact with our products. On occasion, large monetary judgments have been awarded in class action lawsuits where drugs have had unanticipated adverse effects. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:
impairment of our business reputation and significant negative media attention;
withdrawal of participants from our clinical trials;
significant costs to defend related litigation;
distraction of management’s attention from our primary business;
substantial monetary awards to patients or other claimants;
inability to commercialize our products or any future product candidates;
product recalls, withdrawals or labeling, marketing or promotional restrictions;
decreased demand for our products or any future product candidate, if approved for commercial sale; and
loss of revenue.
The product liability and clinical trial insurance we currently carry, and any additional product liability and clinical trial insurance coverage we acquire in the future, may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for relugolix or MVT-602, we intend to acquire insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim or series of claims brought against us could cause our common share price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business, including preventing or limiting the commercialization of any product candidates we develop.
Legislation enacted in Bermuda in response to the European Union’s review of harmful tax competition could be harmful to our business.
During 2017, the European Union Economic and Financial Affairs Council, or ECOFIN, released a list of noncooperative jurisdictions for tax purposes. The stated aim of this list, and accompanying report, was to promote good governance worldwide in order to maximize efforts to prevent tax fraud and tax evasion. In an effort to remain off this list, Bermuda committed to address concerns relating to economic substance by December 31, 2018. In accordance with that commitment, Bermuda has enacted legislation that requires certain entities in Bermuda engaged in “relevant activities” to maintain a substantial economic presence in Bermuda and to satisfy economic substance requirements. The list of “relevant activities” includes carrying on as a business any one or more of: banking, insurance, fund management, financing, leasing, headquarters, shipping, distribution and service center, intellectual property and holding entities. As we are tax resident in the U.K., we believe that we are excluded from the requirement to satisfy substance requirements in Bermuda. If we were in future required to satisfy economic substance requirements in Bermuda but failed to do so, we could face automatic disclosure to competent authorities in the EU of the information filed by the entity with the Bermuda Registrar of Companies in connection with the economic substance requirements and may also face financial penalties, restriction or regulation of its business activities and/or may be struck off as a registered entity in Bermuda.

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Risks Related to Clinical Development, Regulatory Approval and Commercialization
Clinical trials are very expensive, time-consuming, difficult to design and implement, and involve uncertain outcomes. The results of previous clinical trials may not be predictive of future results, and interim or top-line data may be subject to change or qualification based the complete analysis of data.
Our product candidates are still in development and will require extensive clinical testing resulting in sufficiently positive outcomes before we are prepared to submit an NDA or other similar application for regulatory approval. We cannot predict with certainty if or when we might submit an NDA for regulatory approval for relugolix or MVT-602 in any indication or whether any such application will be approved by the relevant regulatory authorities. Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. For example, the FDA or other regulatory authorities may not agree with our proposed plans for any clinical trials of relugolix or MVT-602, which may delay the approval of an NDA or similar application. The clinical trial process is also very time-consuming.
Failures can occur at any stage of clinical trials, and we could encounter problems that cause us to abandon or repeat clinical trials. In addition, results from clinical trials may require further evaluation, delaying the next stage of clinical development or submission of an NDA. Further, product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through nonclinical studies and initial clinical trials. For example, Takeda’s Phase 2 trial for relugolix in men with advanced prostate cancer, C27002, did not meet the criteria for success for its primary endpoint specified in the statistical analysis plan, highlighting the importance of appropriate selection of the primary endpoint, statistical powering of a clinical study, and diligent oversight of the treatment compliance of those patients enrolled into the trial. A number of companies in the biopharmaceutical industry have suffered significant setbacks in or the discontinuation of advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Likewise, we may publicly disclose top-line or interim data from time to time, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. For example, on May 14, 2019 and July 23, 2019, we announced top-line data for the LIBERTY 1 and LIBERTY 2 trials, the two replicate Phase 3 studies of once-daily relugolix combination therapy in women with uterine fibroids and heavy menstrual bleeding. We make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. Positive results from any of our clinical trials of relugolix and MVT-602 may not be predictive of the results of any of our other ongoing and potential future clinical trials, and there can be no assurance that the results of studies conducted by third parties will be viewed favorably or are indicative of our own future study results. Product candidates in clinical trials, including Phase 3 clinical trials, often fail to show the desired safety and efficacy outcomes despite having progressed successfully through prior stages of preclinical and clinical testing. Even where we achieve positive results in clinical trials, subsequent clinical trials may fail, even if those subsequent trials are designed similarly to their predecessors.