Share-Based Compensation

12 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

(A) Myovant 2016 Equity Incentive Plan

In June 2016, the Company adopted its 2016 Equity Incentive Plan, 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 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 March 31, 2020, a total of 1.5 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 Option Repricing

On August 26, 2019 (the “repricing date”), the Company’s board of directors approved a stock option repricing program (the “repricing”) whereby certain previously granted and still outstanding vested and unvested stock options held by current employees and certain executives were repriced on a one-for-one basis to $7.78 per share, which represented the closing market price of the Company’s common shares on the repricing date. To be eligible to participate in the stock option repricing program, 735,428 vested stock options to certain executives as of the repricing date are subject to a one-year exercise restriction period beginning from the repricing date. No other terms of the repriced stock options were modified, and the repriced stock options will continue to vest according to their original vesting schedules and will retain their original expiration dates. As a result of the repricing, 5,095,013 vested and unvested stock options outstanding with original exercise prices ranging from $8.82 to $24.44, and a median exercise price of $17.28 per share, were repriced under this program. The repricing resulted in one-time incremental stock-based compensation expense of $9.2 million, which will be recognized over the remaining term of the repriced stock options.

Each option will have an exercise price equal to the fair market value of the Company’s common shares on the date of grant. For grants of incentive stock options, if the grantee owns, or is deemed to own, 10% or more of the total voting power of the Company, then the exercise price shall be 110% of the fair market value of the Company’s common shares on the date of grant and the option will have a five-year contractual term. Options that are forfeited or expire are available for future grants.

Stock options granted under the 2016 Plan may provide option holders, if approved by the Company’s board of directors, the right to exercise their options prior to vesting. In the event that an option holder exercises the unvested portion of any option, such unvested portion will be subject to a repurchase option held by the Company at the lower of (1) the fair market value of its common shares on the date of repurchase and (2) the exercise price of the options. Any common shares underlying such unvested portion will continue to vest in accordance with the original vesting schedule of the option.

The Company estimated the fair value of each stock option on the date of grant using the Black-Scholes option-pricing model applying the weighted average assumptions in the following table:



	Years Ended March 31,
	2020		2019		2018
Expected common share price volatility	69.5	%	71.6	%	74.4	%
Expected risk free interest rate	2.05	%	2.78	%	2.04	%
Expected term, in years	6.17		6.23		6.22
Expected dividend yield	—	%	—	%	—	%

A summary of stock option activity and data under the Company’s 2016 Plan for the periods presented is as follows:



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Options outstanding at March 31, 2017	1,525,857		$	5.06	9.52	$	10,255
Granted	2,338,116		$	12.50
Exercised	(15,195	)	$	2.38
Forfeited	(299,373	)	$	6.64
Options outstanding at March 31, 2018	3,549,405		$	9.84	9.02	$	40,557
Granted	2,246,410		$	21.36
Exercised	(154,494	)	$	8.41
Forfeited	(244,856	)	$	14.59
Options outstanding at March 31, 2019	5,396,465		$	14.46	8.51	$	50,878
Granted	2,992,200		$	11.57
Exercised	(124,097	)	$	7.59
Forfeited	(541,266	)	$	17.60
Options outstanding at March 31, 2020	7,723,302		$	9.25	8.08	$	4,146
Options vested and expected to vest at March 31, 2020	7,723,302		$	9.25	8.08	$	4,146
Options exercisable at March 31, 2020	3,009,080		$	8.13	7.30	$	3,686

The weighted-average exercise price for granted, exercised, and forfeited options during the year ended March 31, 2020, as well as prior period amounts, have not been retroactively adjusted to reflect the impact of the stock option repricing described previously. As of March 31, 2020, 2019 and 2018, there were 3,009,080, 1,581,810 and 502,361 vested options, respectively. As a result of the change in control of the Company described in Note 7(A), the vesting of 849,212 stock options was accelerated on December 27, 2019, resulting in the recognition of $11.2 million of share-based compensation expense upon the change in control.

Additional information regarding options is set forth below (in thousands, except per share data).



	Years Ended March 31,
	2020		2019		2018
Intrinsic value of options exercised	$	1,036	$	2,167	$	181
Grant date fair value of options vested	$	2,112	$	11,409	$	5,831
Weighted-average grant date fair value per share of options granted	$	11.54	$	14.10	$	8.35

(D) Restricted Stock Awards and Restricted Stock Units

A summary of restricted stock award (“RSA”) and restricted stock unit (“RSU”) activity and data under the Company’s 2016 Plan for the periods presented is as follows:



	Number of shares		Weighted Average Grant Date Fair Value
Unvested balance at March 31, 2017	1,128,222		$	5.10
Granted	579,111		$	14.10
Vested	(493,598	)	$	5.10
Unvested balance at March 31, 2018	1,213,735		$	9.39
Granted	29,700		$	17.28
Vested	(287,369	)	$	5.21
Unvested balance at March 31, 2019	956,066		$	10.90
Granted	724,554		$	7.98
Vested	(295,090	)	$	5.56
Forfeited	(105,218	)	$	7.98
Unvested balance at March 31, 2020	1,280,312		$	10.71

The total fair value of RSAs vested during the years ended March 31, 2020, 2019 and 2018 was $1.4 million, $1.4 million and $2.5 million, respectively. The total fair value of RSUs vested during the years ended March 31, 2020 and 2019 was $0.2 million and $0.1 million, respectively. No RSUs vested during the year ended March 31, 2018.

(E) Performance Stock Units

On August 26, 2019, the Company’s board of directors granted performance stock units covering a total of 408,510 common shares, of which two-thirds of the shares (272,338 shares) subject to each performance stock unit vests based upon the passage of time, and the remaining one-third of the shares (136,172 shares) subject to each performance stock unit vests if the Company achieves certain clinical study and regulatory milestones. As of March 31, 2020, the performance conditions had not been met and were deemed not probable of being met. As a result of the change in control of the Company described in Note 7(A), the vesting of certain performance stock units covering a total of 108,640 common shares was accelerated on December 27, 2019, resulting in the recognition of $0.8 million of share-based compensation expense upon the change in control. As of March 31, 2020, performance stock units covering a total of 299,870 common shares are unvested.

(F) Share-Based Compensation Expense

Share-based compensation expense was as follows (in thousands):



	Years Ended March 31,
	2020		2019		2018
Share-based compensation expense recognized as:
R&D expenses	$	14,524	$	7,161	$	3,674
G&A expenses	25,727		11,535		7,909
Total	$	40,251	$	18,696	$	11,583

Share-based compensation expense is included in R&D and G&A expenses in the accompanying consolidated statements of operations consistent with the grantee’s salary. Share-based compensation expense included in R&D and G&A expenses for the year ended March 31, 2020 include $1.8 million and $10.2 million, respectively, related to the acceleration of vesting of certain share-based payment awards as a result of the change in control of the Company described previously. Share-based compensation expense presented in the table above includes share-based compensation expense allocated to the Company by its former majority

shareholder (See Note 7(B)). Total unrecognized share-based compensation expense was approximately $52.3 million as of March 31, 2020 and is expected to be recognized over a weighted-average period of approximately 2.70 years.