Commitments and Contingencies

9 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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. For cases in which 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 believes the outcome of currently pending claims or lawsuits will not likely have a material effect on its consolidated operations or financial position.

Litigation Related to the Merger

On December 11, 2022, a purported shareholder of Myovant filed a lawsuit against Myovant and each member of Myovant’s board of directors in the United States District Court for the Southern District of New York, captioned Martin Schiffenbauer v. Myovant Sciences Ltd., et al., Case No. 22-cv-10467. This complaint alleges that, among other things, the defendants violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 thereunder by omitting or misrepresenting certain allegedly material information in the proxy statement. This complaint seeks, among other things, (i) injunctive relief preventing the shareholder vote or consummation of the proposed transaction, (ii) rescissory damages or rescission of the Merger Agreement in the event the proposed transaction is consummated, (iii) damages suffered as a result of the alleged omissions or misrepresentations of certain allegedly material information and (iv) plaintiff’s attorneys’ fees and expenses. The defendants intend to vigorously defend against these claims and believe the claims asserted in this complaint are without merit.

On December 21, 2022, a purported shareholder of Myovant filed a lawsuit against Myovant and each member of Myovant’s board of directors in the United States District Court for the Southern District of New York, captioned Adrienne Halberstam v. Myovant Sciences Ltd., et al., Case No. 22-cv-10788. This complaint alleges that, among other things, the defendants violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 thereunder by omitting or misrepresenting certain allegedly material information in the proxy statement. This complaint seeks, among other things, (i) injunctive relief preventing the shareholder vote or consummation of the proposed transaction, (ii) rescissory damages or rescission of the Merger Agreement in the event the proposed transaction is consummated and (iii) plaintiff’s attorneys’ and experts’ fees. The defendants intend to vigorously defend against these claims and believe the claims asserted in this complaint are without merit.

On or about January 25, 2023, a purported shareholder of Myovant filed a lawsuit against Myovant, each member of Myovant’s board of directors, Myovant Sciences, Inc., Sumitovant Biopharma Ltd. and Sumitovant Biopharma, Inc. in the Superior Court of the State of California in and for the County of San Francisco, captioned Dean Drulias v. Myovant Sciences Ltd., et al. This complaint alleges that, among other things, Myovant and each member of Myovant’s board of directors violated California Corporations Code § 25401 and also makes claims against all defendants for intentional misrepresentation, fraud and

concealment and for negligent misrepresentation and concealment under California common law, in each case, by omitting or misrepresenting certain allegedly material information in the proxy statement. This complaint seeks, among other things, (i) injunctive relief preventing the shareholder vote, consummation of the proposed transaction and requiring disclosure of additional information in the proxy statement and (ii) interest, plaintiff’s attorneys’ and experts’ fees and other costs in an amount to be determined. The defendants intend to vigorously defend against these claims and believe the claims asserted in this complaint are without merit.

Other potential plaintiffs may also file additional lawsuits challenging the Merger. The outcome of the Schiffenbauer, Halberstam and Drulias actions and any additional future litigation is uncertain. Such litigation, if not resolved, could prevent or delay completion of the Merger and result in substantial costs to Myovant, including any costs associated with the indemnification of directors and officers. One of the conditions to the completion of the Merger is the absence of any law or order from a governmental entity (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits the consummation of the Merger. Therefore, if a plaintiff were successful in obtaining an injunction prohibiting the consummation of the Merger on the agreed-upon terms, then such injunction may prevent the Merger from being completed, or from being completed within the expected timeframe. The defense or settlement of any lawsuit or claim that remains unresolved at the time the Merger is completed may adversely affect Myovant’s business, financial condition, results of operations and cash flows.

(B) Contract Service Providers

In the normal course of business, the Company enters into agreements with contract service providers to assist in the performance of its R&D and clinical and commercial manufacturing activities. 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, clinical and commercial manufacturing, and supplier agreements in the future, which may require upfront payments and long-term commitments of capital resources.

(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 agreed to indemnify Sumitomo Pharma against certain losses, claims, liabilities and related expenses incurred by Sumitomo Pharma, subject to the terms of the Sumitomo Pharma Loan Agreement and the Investor Rights Agreement. The Company has also agreed to indemnify Sunovion against certain losses, claims, liabilities and related expenses incurred by Sunovion, subject to the terms of the Market Access Services Agreement, as amended. 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 accruals have been established.

(D) Takeda Agreements

On April 29, 2016, Takeda Pharmaceuticals International AG (“Takeda”), a subsidiary of Takeda Pharmaceutical Company Limited, the originator of relugolix, granted the Company a worldwide license to develop and commercialize relugolix (excluding Japan and certain other Asian countries) and an exclusive right to develop and commercialize MVT-602 in all countries worldwide. Pursuant to the license agreement (the “Takeda License Agreement”), Takeda granted to the Company an exclusive, royalty-bearing license under certain patents and other intellectual property controlled by Takeda to develop and commercialize relugolix and MVT-602, and products containing these compounds for all human diseases and conditions. Under the Takeda License Agreement, the Company will pay Takeda a fixed, high single-digit royalty on net sales of certain relugolix products, a low single-digit royalty on net sales of certain other relugolix products, and a high single-digit royalty on net sales of MVT-602 products in the Company’s territory, all subject to certain agreed reductions. The Company recorded royalty expense to Takeda of $4.4 million and $11.3 million for the three and nine months ended December 31, 2022, respectively, and $2.0 million and $4.5 million for the three and nine months ended December 31, 2021, respectively, and is included in cost of product revenue on the unaudited condensed consolidated statements of operations and comprehensive loss. As of December 31, 2022 and March 31, 2022, the Company recorded royalties payable to Takeda of $4.4 million and $2.5 million, respectively, which are included in accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheets. Takeda will pay the Company a high single-digit royalty 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.

If the Takeda License Agreement is terminated in its entirety or with respect to relugolix for prostate cancer, other than for safety reasons or by the Company for Takeda’s uncured material breach, prior to receipt of the first regulatory approval of relugolix for prostate cancer in Japan, then the Company must either reimburse Takeda for its out of pocket costs and expenses directly incurred in connection with Takeda’s completion of the relugolix development for prostate cancer, up to an agreed upon cap, or complete by itself the conduct of any clinical studies of relugolix for prostate cancer that are ongoing as of the effective date of such termination, at its cost and expense.

In May 2018, the Company entered into a Commercial Manufacturing and Supply Agreement with Takeda (the “Takeda Commercial Supply Agreement”) pursuant to which Takeda agreed to supply the Company and the Company agreed to obtain from Takeda certain quantities of relugolix drug substance according to agreed-upon quality specifications. 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 will remain in effect and be binding on both parties. The Takeda Commercial Supply Agreement, including any then-open purchase orders thereunder, will terminate immediately upon the termination of the Takeda License Agreement in accordance with its terms.