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Related Party Transactions
 9 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
Related Party Transactions Related Party Transactions
(A) Sumitomo Dainippon Pharma Co., Ltd.
On October 31, 2019, the Company’s former majority shareholder, Roivant, and Sumitovant, a subsidiary of DSP, entered into a Transaction Agreement (the “DSP-Roivant Agreement”), which among other things, provided for DSP to acquire all of the Company’s outstanding common shares held by Roivant. In addition, on October 31, 2019, the Company and DSP entered into a letter agreement pursuant to which, among other things, the Company and DSP would enter into an investor rights agreement and loan agreement upon the closing of the transactions contemplated by the DSP-Roivant Agreement (the “Closing”).
On December 27, 2019, the Closing occurred and, as a result, all of the Company’s outstanding common shares held directly or indirectly by Roivant and not already held by Sumitovant were transferred to Sumitovant, and Roivant transferred all of the outstanding equity of Sumitovant to DSP, resulting in Sumitovant directly, and DSP indirectly, owning 45,008,604 of the Company’s outstanding common shares, representing approximately 50.2% of the Company’s common shares outstanding on December 27, 2019. As a result of the transfer of these common shares, Roivant no longer beneficially owns any common shares of the Company.
DSP Loan Agreement
On December 27, 2019, the Company and its subsidiary, Myovant Sciences GmbH (“MSG”), entered into a Loan Agreement with DSP (the “DSP Loan Agreement”). Pursuant to the DSP Loan Agreement, DSP agreed to make revolving loans to the Company in an aggregate principal amount of up to $400.0 million. On December 30, 2019, the Company borrowed $113.7 million under the DSP Loan Agreement, the proceeds of which were used to repay all outstanding obligations of the Company to Hercules and NovaQuest (See Note 6) and to satisfy certain other fees and expenses. Additional funds may be drawn down by the Company no more than once any calendar quarter, subject to certain terms and conditions, including consent of the Company’s board of directors. If DSP fails to own at least a majority of the Company’s common shares, the Company would not be able to continue to borrow additional amounts under the DSP Loan Agreement. Interest is due and payable quarterly, and the outstanding principal amounts are due and payable in full on the five-year anniversary of the closing date of the DSP Loan Agreement. Loans under the DSP Loan Agreement are prepayable at any time without premium or penalty upon 10 business days’ prior written notice.
Loans under the DSP Loan Agreement bear interest at a rate per annum equal to 3-month London Interbank Offered Rate (“LIBOR”) plus a margin of 3% payable on the last day of each calendar quarter. The interest rate under the DSP Loan Agreement was 4.96% as of December 31, 2019. The Company’s obligations under the DSP Loan Agreement are fully and unconditionally guaranteed by the Company and its subsidiaries. The loans and other obligations are senior unsecured obligations of the Company, MSG, and subsidiary guarantees. The DSP Loan Agreement includes customary representations and warranties and affirmative and negative covenants.
The DSP Loan Agreement also includes customary events of default, including payment defaults, breaches of representations and warranties, breaches of covenants following any applicable cure period, cross acceleration to certain other debt, failure to pay certain final judgments, certain events relating to bankruptcy or insolvency, failure of material provisions of the loan documents to remain in full force and effect or any contest thereto by the Company or any of its subsidiaries and certain breaches by the Company under the Investor Rights Agreement. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% will apply to the outstanding principal amount of the loans, DSP may terminate its obligations to make loans to the Company and declare the principal amount of loans to become immediately due and payable, and DSP may take such other actions as set forth in the DSP Loan Agreement. Upon the occurrence of certain bankruptcy and insolvency events, the obligations of DSP to make loans to the Company would automatically terminate and the principal amount of the loans would automatically become due and payable. In addition, if it becomes unlawful for DSP to maintain the loans under the DSP Loan Agreement or within 30 days of a change of control with respect to the Company, the Company would be required to repay the outstanding principal amount of the Loans.
As of December 31, 2019, the outstanding loan balance of $113.7 million is classified as a long-term liability on the Company’s unaudited condensed consolidated balance sheets under the caption long-term debt, less current maturities (related party). As of December 31, 2019, approximately $286.3 million of borrowing capacity remains available to the Company, subject to the terms of the DSP Loan Agreement. Interest expense under the DSP Loan Agreement was less than $0.1 million for the three and nine months ended December 31, 2019 and is included in interest expense (related party) in the Company’s unaudited condensed consolidated statements of operations.
Investor Rights Agreement
On December 27, 2019, the Company entered into an Investor Rights Agreement with DSP and Sumitovant (the “Investor Rights Agreement”). Pursuant to the Investor Rights Agreement, among other things, the Company agreed, at the request of Sumitovant, to register for sale, under the Securities Act of 1933, common shares beneficially owned by Sumitovant, subject to specified conditions and limitations. In addition, the Company agreed to periodically provide Sumitovant (i) certain financial statements, projections, capitalization summaries and other information and (ii) access to the Company’s books, records, facilities and employees during the Company’s normal business hours as Sumitovant may reasonably request.
The Investor Rights Agreement also contains certain protections for the Company’s minority shareholders for so long as DSP or certain of its affiliates beneficially owns more than 50% of the Company’s common shares. These protections include: (i) a requirement that Sumitovant vote its shares for the election of independent directors in accordance with the recommendation of the Company’s board of directors (the “board”) or in the same proportion as the shareholders not affiliated with Sumitovant vote their shares; (ii) a requirement that the audit committee of the Company’s board be composed solely of three independent directors; (iii) a requirement that any transaction proposed by DSP or certain of its affiliates that would increase DSP’s beneficial ownership to over 60% of the outstanding voting power of the Company must be approved by the Company’s audit committee (if occurring prior to December 27, 2022), and be conditioned on the approval of shareholders not affiliated with Sumitovant approving the transaction by a majority of the common shares held by such shareholders; and a requirement that any related person transactions between DSP or certain of its affiliates and the Company must be approved by the Company’s audit committee.
Pursuant to the Investor Rights Agreement, the Company also agreed that at all times that DSP beneficially owns more than 50% of the Company’s common shares, DSP, by purchasing common shares in the open market or from the Company in certain specified circumstances, will have the right to maintain its percentage ownership in the Company’s common shares in the event of a financing event or acquisition event conducted by the Company, or specified other events, subject to specific conditions.
(B) Roivant Sciences Ltd.
As a result of the closing of the DSP-Roivant Agreement described above, on December 27, 2019 all of the Company’s outstanding common shares held directly or indirectly by Roivant and not already held by Sumitovant were transferred to Sumitovant, and Roivant transferred all of the outstanding equity of Sumitovant to DSP. As a result of the transfer of these common shares, Roivant no longer beneficially owns any common shares of the Company. On December 27, 2019, in connection with the closing of the DSP-Roivant Agreement, the then existing Information Sharing and Cooperation Agreement between the Company and Roivant, the then existing Services Agreements between the Company and certain of its subsidiaries and Roivant and certain of its subsidiaries, and the then existing Option Agreement between the Company and Roivant were terminated.
Under the Services Agreements, for the three months ended December 31, 2019 and 2018, the Company incurred expenses (inclusive of third-party pass-through costs billed to the Company) of $0.2 million and $0.4 million, respectively, inclusive of the mark-up. Under the Services Agreements, for the nine months ended December 31, 2019 and 2018, the Company incurred expenses (inclusive of third-party pass-through costs billed to the Company) of $0.6 million and $4.6 million, respectively, inclusive of the mark-up. In addition, Roivant previously allocated share-based compensation expense to the Company based upon the relative percentage of time spent by Roivant and its subsidiaries’ employees on the Company’s matters. The Company recorded share-based compensation expense allocated from Roivant of $0.1 million for each of the three months ended December 31, 2019 and 2018, respectively, and $0.3 million and $0.5 million for the nine months ended December 31, 2019 and 2018, respectively.
In April 2018, the Company sold to Roivant 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. In addition, Roivant purchased 2,424,242 of the Company’s common shares in the Company’s June 4, 2019 underwritten public equity offering at the same price offered to the public of $8.25 per common share, for a total purchase price of $20.0 million. See Note 9 for additional information.
(C) Amended and Restated Bye-Laws
On December 22, 2019, the Company’s board of directors approved, subject to the closing of the DSP-Roivant transaction and shareholder approval and certain other conditions, the adoption of the Company’s Fifth Amended and Restated Bye-Laws (the “New Bye-Laws”), which amended and restated the Company’s bye-laws to, among other things, (i) remove the procedures established in June 2019 providing RSL with the power, under certain circumstances, to appoint a majority of directors on the Company’s board and related powers, (ii) revises certain other aspects of the Company’s corporate governance and (iii) make other minor wording changes and additions, removal and revisions of defined terms. The New Bye-Laws became effective on January 23, 2020.