UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2023
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number: 001-40782
(Exact name of Registrant as specified in its Charter)
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Not Applicable
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(Address of principal executive offices)
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(Zip Code)
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+44 207 400 3347
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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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 ☒ No ☐
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 ☒
No ☐
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.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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☒
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Smaller reporting company
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Emerging growth company
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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. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 9, 2023, the registrant had 803,921,356 common shares, par
value $0.0000000341740141 per share, outstanding (the “Common Shares”).
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Page
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PART I—FINANCIAL INFORMATION
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Item 1.
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7
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| Condensed Consolidated Balance Sheets as of September 30, 2023 and March 31, 2023 |
7
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8
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9
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10
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12
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13
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Item 2.
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29 | ||
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Item 3.
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44
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Item 4.
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45
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PART II—OTHER INFORMATION
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Item 1.
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45
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Item 1A.
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45
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Item 2.
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106
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Item 3.
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106
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Item 4.
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106
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Item 5.
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106
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Item 6.
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107
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108
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Where You Can Find More Information
Investors and others should note that we may announce material business and financial information to our investors using our
investor relations website (https://investor.roivant.com), filings we make with the Securities and Exchange Commission (the “SEC”), our corporate twitter account (@Roivant), other social media platforms, webcasts, press releases and conference
calls. Similarly, our subsidiary Immunovant, Inc. may announce material business and financial information to its investors and others using its investor relations website (https://immunovant.com/investors), filings it makes with the SEC, social
media platforms, webcasts, press releases and conference calls. We and our public company subsidiaries use these mediums to communicate with our and our public company subsidiaries’ shareholders and the public about our company, our subsidiaries,
our product candidates and other matters. It is possible that the information that we make available in this manner may be deemed to be material information. We therefore encourage investors and others interested in our company and our public
company subsidiaries to review this information.
The above-referenced information is not incorporated by reference into this filing and the website addresses and Twitter
account name are provided only as inactive textual references.
Summary Risk Factors
You should consider carefully the risks described under “Risk Factors” in Part II, Item 1.A of this Quarterly Report on Form
10-Q. Unless the context otherwise requires, references in this section to “we,” “us,” “our,” “Roivant” and the “Company” refer to Roivant Sciences Ltd. and its consolidated subsidiaries, as the context requires. A summary of the risks that could
materially and adversely affect our business, financial condition, operating results and prospects include the following:
Risks Related to Our Business and Industry
| • |
Our limited operating history and the inherent uncertainties and risks involved in biopharmaceutical product development may make it difficult for us to
execute on our business model and for you to assess our future viability. We have not generated significant revenue from our operations since inception, and there is no guarantee that we will do so in the future.
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We may never achieve or maintain profitability.
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We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to successfully market our
products, acquire or in-license new products or product candidates, complete the development and commercialization of our products and product candidates and continue to pursue our drug discovery efforts.
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| • |
We have limited experience as a commercial company and the marketing and sale of VTAMA® (tapinarof) or any future products may be unsuccessful or less
successful than anticipated.
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We may not be successful in our efforts to acquire or in-license new product candidates.
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Our drug discovery efforts may not be successful in identifying new product candidates.
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We face risks associated with the allocation of capital and personnel across our businesses.
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We face risks associated with the Vant structure.
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We face risks associated with potential future payments related to our products and product candidates.
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We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.
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Clinical trials and preclinical studies are very expensive, time-consuming, difficult to design and implement and involve uncertain outcomes. We may encounter
substantial delays in clinical trials, or may not be able to conduct or complete clinical trials or preclinical studies on the expected timelines, if at all.
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Certain of our products and product candidates are novel, complex and difficult to manufacture. We could experience manufacturing problems that result in
delays in our development or commercialization programs or otherwise harm our business.
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We may encounter difficulties enrolling and retaining patients in clinical trials, and clinical development activities could thereby be delayed or otherwise
adversely affected.
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The results of our preclinical studies and clinical trials may not support our proposed claims for our products or product candidates, or regulatory approvals
on a timely basis or at all, and the results of earlier studies and trials may not be predictive of future trial results.
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Interim, top-line or preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available
and are subject to audit and verification procedures that could result in material changes in the final data.
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Obtaining approval of a new drug is an extensive, lengthy, expensive and inherently uncertain process, and the FDA or another regulator may delay, limit or
deny approval. If we are unable to obtain regulatory approval in one or more jurisdictions for any products or product candidates, our business will be substantially harmed.
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Our clinical trials may fail to demonstrate substantial evidence of the safety and efficacy of product candidates that we may identify and pursue for their
intended uses, which would prevent, delay or limit the scope of regulatory approval and commercialization.
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Our products and product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval, cause us to
suspend or discontinue clinical trials, abandon further development or limit the scope of any approved label or market acceptance.
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We depend on the knowledge and skills of our senior leaders and may not be able to manage our business effectively if we are unable to attract and retain key
personnel.
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We will need to expand our organization and may experience difficulties in managing this growth, which could disrupt operations.
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If we are unable to obtain and maintain patent and other intellectual property protection for our technology, products and product candidates or if the scope
of the intellectual property protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
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If the patent applications we hold or have in-licensed with respect to our products or product candidates fail to issue, if their breadth or strength of
protection is threatened, or if they fail to provide meaningful exclusivity for our current and future products or product candidates, it could dissuade companies from collaborating with us to develop product candidates, and threaten our
ability to commercialize our products. Any such outcome could have a materially adverse effect on our business. Our pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications
unless and until a patent issues from such applications.
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Patent terms and their scope may be inadequate to protect our competitive position on current and future products and product candidates for an adequate amount
of time.
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Risks Related to Our Securities, Our Jurisdiction of Incorporation and Certain Tax Matters
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If our performance does not meet market expectations, the price of our securities may decline.
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We have incurred and will continue to incur increased costs as a result of operating as a public company and our management has devoted and will continue to
devote a substantial amount of time to new compliance initiatives.
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Our failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act could have a material adverse
effect on our business.
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Anti-takeover provisions in our memorandum of association and bye-laws, as well as provisions of Bermuda law, could delay or prevent a change in control, limit
the price investors may be willing to pay in the future for our Common Shares and could entrench management.
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Our largest shareholders own a significant percentage of our Common Shares and are able to exert significant control over matters subject to shareholder
approval.
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Future sales, or the perception of future sales, of our Common Shares by us or our existing shareholders in the public market could cause the market price for
our Common Shares to decline and impact our ability to raise capital in the future.
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Forward-Looking Statements
This Quarterly Report on Form 10-Q contains statements, including matters discussed under Part I, Item 2. “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” Part II, Item 1. “Legal Proceedings,” Part II, Item 1A. “Risk Factors” and in other sections of this report, that are “forward-looking statements” within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies
regarding the future, and statements that are not historical facts. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are
forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and
beliefs concerning future developments and their potential effects on us taking into account information currently available to us. There can be no assurance that future developments affecting us will be those that we have anticipated. Should one
or more of these risks or uncertainties materialize, they could cause our actual results to differ materially from the forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to risk
associated with:
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our limited operating history and risks involved in biopharmaceutical product development;
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our limited experience as a commercial-stage company and ability to successfully commercialize VTAMA® (tapinarof);
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our ability to raise additional capital to fund our business on acceptable terms or at all;
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the fact that we will likely incur significant operating losses for the foreseeable future;
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our ability to acquire or in-license new product candidates;
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our ability to identify new product candidates through our discovery efforts;
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our Vant structure and the potential that we may fail to capitalize on certain development opportunities;
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our ability to consummate strategic transactions, including the Roche Transaction (as defined below);
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the impact of public health outbreaks, epidemics or pandemics (such as the COVID-19 pandemic) on our business (including our clinical trials and preclinical
studies), operations and financial condition and results;
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clinical trials and preclinical studies, which are very expensive, time-consuming, difficult to design and implement and involve uncertain outcomes;
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the novelty, complexity and difficulty of manufacturing certain of our products and product candidates, including any manufacturing problems that result in
delays in development or commercialization of our products and product candidates;
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difficulties we may face in enrolling and retaining patients in clinical trials and/or clinical development activities;
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the results of our clinical trials not supporting our proposed claims for a product candidate;
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interim, top-line and/or preliminary data from our clinical trials changing as more data becoming available or data being delayed due to audit and verification
processes;
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changes in product manufacturing or formulation that could lead to the incurrence of costs or delays;
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the failure of any third-party we contract with to conduct, supervise and monitor our clinical trials to perform in a satisfactory manner or to comply with
applicable requirements;
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the fact that obtaining approvals for new drugs is a lengthy, extensive, expensive and unpredictable process that may end with our inability to obtain
regulatory approval by the FDA or other regulatory agencies in other jurisdictions;
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the failure of our clinical trials to demonstrate substantial evidence of the safety and efficacy of our products and product candidates, including, but not
limited to, scenarios in which our products and product candidates may cause adverse effects that could delay regulatory approval, discontinue clinical trials, limit the scope of approval or generally result in negative media coverage of
us;
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our inability to obtain regulatory approval for a product or product candidate in certain jurisdictions, even if we are able to obtain approval in certain
other jurisdictions;
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our ability to effectively manage growth and to attract and retain key personnel;
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any business, legal, regulatory, political, operational, financial and economic risks associated with conducting business globally;
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our ability to obtain and maintain patent and other intellectual property protection for our technology, products and product candidates;
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the inadequacy of patent terms and their scope to protect our competitive position;
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the failure to issue (or the threatening of their breadth or strength of protection) or provide meaningful exclusivity for our current and future products and
product candidates of our patent applications that we hold or have in-licensed;
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the fact that we do not currently and may not in the future own or license any issued composition of matter patents covering certain of our products and
product candidates and our inability to be certain that any of our other issued patents will provide adequate protection for such products and product candidates;
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the fact that our largest shareholders own a significant percentage of our stock and will be able to exert significant control over matters subject to
shareholder approval;
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future sales of securities by us or our largest shareholders, or the perception of such sales, and the impact thereof on the price of our common shares;
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the outcome of any pending or potential litigation, including but not limited to our expectations regarding the outcome of any such litigation and costs and
expenses associated with such litigation;
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changes in applicable laws or regulations;
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the possibility that we may be adversely affected by other economic, business and/or competitive factors; and
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any other risks and uncertainties, including those described under Part II, Item 1A. “Risk Factors.”
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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.
PART I—FINANCIAL INFORMATION
ROIVANT SCIENCES LTD.
(unaudited, in thousands, except share and per share amounts)
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September 30, 2023
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March 31, 2023
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Assets
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||||||||
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Current assets:
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Cash and cash equivalents
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$
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$
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Other current assets
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||||||
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Total current assets
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Property and equipment, net
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Operating lease right-of-use assets
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Investments measured at fair value
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Intangible assets, net
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Other assets
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Total assets
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$
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$
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Liabilities and Shareholders’ Equity
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Current liabilities:
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||||||||
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Accounts payable
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$
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$
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Accrued expenses
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Operating lease liabilities
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Current portion of long-term debt (includes $
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Other current liabilities
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Total current liabilities
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Liability instruments measured at fair value
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Operating lease liabilities, noncurrent
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Long-term debt, net of current portion (includes $
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Other liabilities
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Total liabilities
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Commitments and contingencies (Note 11)
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Shareholders’ equity:
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Common shares, par value $
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Additional paid-in capital
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|||||||
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Accumulated deficit
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(
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)
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(
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)
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||||
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Accumulated other comprehensive loss
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(
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)
|
(
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)
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||||
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Shareholders’ equity attributable to Roivant Sciences Ltd.
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||||||
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Noncontrolling interests
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||||||
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Total shareholders’ equity
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||||||
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Total liabilities and shareholders’ equity
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$
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$
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ROIVANT SCIENCES LTD.
(unaudited, in thousands, except share and per share amounts)
|
Three Months Ended September 30,
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Six Months Ended September 30,
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|||||||||||||||
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2023
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2022
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2023 |
2022 |
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Revenues:
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Product revenue, net
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$ | $ | $ | $ | ||||||||||||
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License, milestone and other revenue
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||||||||||||||||
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Revenue, net
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Operating expenses:
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Cost of revenues
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Research and development (includes $
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Acquired in-process research and development
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Selling, general and administrative (includes $
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Total operating expenses
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Loss from operations
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(
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)
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(
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)
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( |
) | ( |
) | ||||||||
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Change in fair value of investments
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||||||||||||||
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Change in fair value of debt and liability instruments
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(
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)
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|||||||||||||
| Gain on deconsolidation of subsidiaries | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Interest income |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Interest expense |
||||||||||||||||
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Other expense, net
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|
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||||||||||||||
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Loss before income taxes
|
(
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)
|
(
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)
|
( |
) | ( |
) | ||||||||
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Income tax expense
|
|
|
||||||||||||||
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Net loss
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(
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)
|
(
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)
|
( |
) | ( |
) | ||||||||
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Net loss attributable to noncontrolling interests
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
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Net loss attributable to Roivant Sciences Ltd.
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
|
Net loss per common share—basic and diluted
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
|
Weighted average shares outstanding—basic and diluted
|
|
|
||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ROIVANT SCIENCES LTD.
(unaudited, in thousands)
|
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
|
2023
|
2022
|
2023 |
2022 |
|||||||||||||
|
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
|
Other comprehensive income (loss):
|
||||||||||||||||
|
Foreign currency translation adjustment
|
|
|
( |
) | ||||||||||||
|
Total other comprehensive income (loss)
|
|
|
( |
) | ||||||||||||
|
Comprehensive loss
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
|
Comprehensive loss attributable to noncontrolling interests
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
|
Comprehensive loss attributable to Roivant Sciences Ltd.
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ROIVANT SCIENCES LTD.
(unaudited, in thousands, except share data)
|
Shareholders’ Equity
|
||||||||||||||||||||||||||||
|
Additional
Paid-in
Capital
|
Accumulated
Other
Comprehensive
Loss
|
Accumulated
Deficit
|
Noncontrolling
Interests
|
Total
Shareholders’
Equity
|
||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||
|
Shares
|
Amount
|
|||||||||||||||||||||||||||
|
Balance at March 31, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||||||
|
Issuance of the Company’s common shares in connection with equity incentive plans and tax withholding payments
|
||||||||||||||||||||||||||||
|
Subsidiary stock options exercised
|
—
|
|
|
|
|
|
|
|||||||||||||||||||||
| Cash contributions to majority-owned subsidiaries |
— | ( |
) | |||||||||||||||||||||||||
| Dividend declared by subsidiary |
— | ( |
) | ( |
) | |||||||||||||||||||||||
|
Share-based compensation
|
—
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Foreign currency translation adjustment
|
—
|
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||
|
Net loss
|
—
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||
|
Balance at June 30, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||||||
| Issuance of the Company’s common shares, net of issuance costs | ||||||||||||||||||||||||||||
| Issuance of the Company’s common shares related to settlement of warrants | ||||||||||||||||||||||||||||
| Issuance of the Company’s common shares under employee stock purchase plan | ||||||||||||||||||||||||||||
| Issuance of the Company’s common shares in connection with equity incentive plans, net of forfeitures, and tax withholding payments |
||||||||||||||||||||||||||||
|
Deconsolidation of subsidiaries
|
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Subsidiary stock options exercised |
— | |||||||||||||||||||||||||||
| Cash contributions to majority-owned subsidiaries |
— | ( |
) | |||||||||||||||||||||||||
|
Share-based compensation
|
— | |||||||||||||||||||||||||||
|
Foreign currency translation adjustment
|
— | |||||||||||||||||||||||||||
|
Net loss
|
— | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||
|
Balance at September 30, 2023
|
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
|
Shareholders’ Equity
|
||||||||||||||||||||||||||||||||
|
Redeemable
Noncontrolling
Interest
|
|
Additional
Paid-in
Capital
|
Accumulated
Other
Comprehensive
Income
|
Accumulated
Deficit
|
Noncontrolling
Interests
|
Total
Shareholders’
Equity
|
||||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||
|
Shares
|
Amount
|
|||||||||||||||||||||||||||||||
|
Balance at March 31, 2022
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||||||||
|
Issuance of subsidiary common shares to the Company
|
—
|
|
|
(
|
)
|
|
|
|
|
|||||||||||||||||||||||
| Issuance of the Company’s common shares in connection with equity incentive plans and tax withholding payments |
—
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
| Issuance of the Company’s common shares related to settlement of transaction consideration |
— | |||||||||||||||||||||||||||||||
|
Share-based compensation
|
—
|
—
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Foreign currency translation adjustment
|
—
|
—
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||||||||
|
Net loss
|
—
|
—
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||
|
Balance at June 30, 2022
|
$
|
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||||||||
| Issuance of the Company’s common shares in connection with equity incentive plans |
— | |||||||||||||||||||||||||||||||
| Issuance of the Company’s common shares and other consideration for an acquisition |
— | |||||||||||||||||||||||||||||||
| Issuance of subsidiary common shares to the Company and cash contributions to majority-owned subsidiaries |
— | — | ( |
) | ||||||||||||||||||||||||||||
| Deconsolidation of subsidiary |
( |
) | — | |||||||||||||||||||||||||||||
|
Share-based compensation
|
— | — | ||||||||||||||||||||||||||||||
|
Foreign currency translation adjustment
|
— | — | ( |
) | ||||||||||||||||||||||||||||
|
Net loss
|
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
|
Balance at September 30, 2022
|
$ | $ | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ROIVANT SCIENCES LTD.
(unaudited, in thousands)
|
Six Months Ended September 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
|
Share-based compensation
|
|
|
||||||
|
Change in fair value of investments
|
|
|
||||||
|
Change in fair value of debt and liability instruments
|
|
|
||||||
|
Gain on deconsolidation of subsidiaries
|
( |
) | ( |
) | ||||
|
Depreciation and amortization
|
||||||||
|
Non-cash lease expense
|
||||||||
|
Other
|
|
|
||||||
|
Changes in assets and liabilities, net of effects from acquisition and divestiture:
|
||||||||
|
Other current assets
|
( |
) | ( |
) | ||||
|
Accounts payable
|
|
|
||||||
|
Accrued expenses
|
(
|
)
|
|
|||||
|
Operating lease liabilities
|
(
|
)
|
(
|
)
|
||||
|
Other
|
|
|
||||||
|
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
||||
|
Cash flows from investing activities:
|
||||||||
|
Milestone payments
|
( |
) | ||||||
|
Purchase of property and equipment
|
(
|
)
|
(
|
)
|
||||
|
Proceeds from sale of subsidiary interests
|
||||||||
|
Cash decrease upon deconsolidation of subsidiaries
|
( |
) | ( |
) | ||||
|
Other
|
||||||||
|
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from issuance of the Company’s common shares, net of issuance costs paid
|
||||||||
|
Proceeds from subsidiary debt financings, net of financing costs paid
|
|
|
||||||
|
Payment of subsidiary dividend
|
( |
) | ||||||
|
Repayment of debt by subsidiary
|
(
|
)
|
(
|
)
|
||||
|
Payment of offering costs and loan origination costs
|
|
(
|
)
|
|||||
|
Payments on principal portion of finance lease obligations
|
( |
) | ||||||
|
Proceeds from exercise of the Company’s and subsidiary stock options
|
||||||||
|
Taxes paid related to net settlement of equity awards
|
(
|
)
|
(
|
)
|
||||
|
Proceeds from issuance of the Company’s common shares under employee stock purchase plan
|
||||||||
|
Proceeds from exercise of the Company’s warrants
|
||||||||
|
Payment for redemptions of the Company’s warrants
|
( |
) | ||||||
|
Net cash provided by financing activities
|
|
|
||||||
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
( |
|||||||
|
Net change in cash, cash equivalents and restricted cash
|
(
|
)
|
(
|
)
|
||||
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
|
||||||
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
|
$
|
|
||||
|
Non-cash investing and financing activities:
|
||||||||
|
Cashless exercise of the Company’s warrants
|
$ | $ | ||||||
|
Issuance of the Company’s common shares and other consideration for an acquisition
|
$ | $ | ||||||
|
Other
|
$
|
|
$
|
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ROIVANT SCIENCES LTD.
(Unaudited)
Note 1—Description of Business and Liquidity
(A) Description of Business
Roivant Sciences Ltd. (inclusive of its consolidated subsidiaries, the “Company” or “RSL”) aims to improve health by rapidly delivering
innovative medicines and technologies to patients. The Company does this by building biotech and healthcare technology companies (“Vants”) and deploying technology to drive greater efficiency in research and development and commercialization. In
addition to biopharmaceutical subsidiaries, the Company also builds technology Vants focused on improving the process of developing and commercializing medicines. The Company was founded on April 7, 2014 as a Bermuda exempted limited company.
VTAMA® (tapinarof) was approved by the United States Food and Drug Administration (“FDA”) in May 2022 for the treatment of plaque psoriasis in
adult patients.
The Company has determined that it has one
On September 30, 2021, RSL completed its business combination (the “Business Combination”) with Montes Archimedes Acquisition Corp. (“MAAC”), a
special purpose acquisition company, and began trading on Nasdaq under the ticker symbol “ROIV.”
(B) Liquidity
The Company has incurred significant losses and negative cash flows from operations since its inception. As of September 30, 2023, the Company
had cash and cash equivalents of approximately $1.4 billion and its accumulated deficit was approximately $4.4 billion. For the six months ended September 30, 2023 and 2022, the Company incurred net losses of approximately $659.0 million and $669.7 million,
respectively. The Company has historically financed its operations primarily through the sale of equity securities, sale of subsidiary interests, debt financings and revenue generated from licensing and collaboration arrangements. Through its
subsidiary, Dermavant Sciences Ltd., the Company has launched its first commercial product, VTAMA, following approval by the FDA in May 2022.
The Company is subject to risks common to companies in the biopharmaceutical industry including, but not limited to, uncertainties related to
commercialization of products, regulatory approvals to market its product candidates, dependence on key products, dependence on third-party service providers, such as contract research organizations, and protection of intellectual property
rights. Management expects to incur additional losses in the future to fund its operations and conduct product research and development and recognizes the need to raise additional capital to fully implement its business plan.
The Company intends to raise such additional capital through the issuance of equity securities, debt financings or other sources in order to
further implement its business plan. However, if such financing is not available at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay or discontinue the development of its product candidates or
take other steps to conserve capital. The Company expects its existing cash and cash equivalents will be sufficient to fund its committed operating expenses and capital expenditure requirements for at least the next 12 months from the date of
issuance of these condensed consolidated financial statements.
Note 2—Summary of Significant Accounting Policies
(A) Basis of Presentation and Principles of Consolidation
The Company’s fiscal year ends on March 31, and its fiscal quarters end on June 30, September 30, and December 31.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States (“U.S. GAAP”) for interim financial information and follow the requirements of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, these unaudited condensed
consolidated financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements as certain footnotes or other financial information that are normally required by U.S. GAAP can be
condensed or omitted. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated 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, 2023 filed with the SEC. The unaudited condensed consolidated balance sheet at March 31, 2023 has been derived from the audited
consolidated financial statements at that date. In the opinion of management, the unaudited condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary to present fairly the financial
position of the Company and its results of operations and cash flows for the interim periods presented. Certain prior year amounts were reclassified to conform to current year presentation. Operating results for the six months ended September 30,
2023 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2024, for any other interim period, or for any other future year.
Any references in these notes to applicable accounting guidance are meant to refer to the authoritative U.S. GAAP as found in the Accounting
Standards Codification (‘‘ASC’’) and Accounting Standards Updates (‘‘ASU’’) of the Financial Accounting Standards Board (‘‘FASB’’). The unaudited condensed consolidated financial statements include the accounts of RSL and the subsidiaries in
which it has a controlling financial interest, most often through a majority voting interest. All intercompany balances and transactions have been eliminated in consolidation.
For consolidated entities where the Company owns or is exposed to less than 100% of the economics, the Company records net loss attributable to
noncontrolling interests in its unaudited condensed consolidated statements of operations equal to the percentage of common stock ownership interest retained in the respective operations by the noncontrolling parties. The Company presents
noncontrolling interests as a component of shareholders’ equity on its unaudited condensed consolidated balance sheets.
The Company accounts for changes in its ownership interest in its subsidiaries while control is retained as equity transactions. The carrying
amount of the noncontrolling interest is adjusted to reflect the change in RSL’s ownership interest in the subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest
is adjusted is recognized within shareholders’ equity attributable to RSL.
(B) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. The Company regularly evaluates estimates and assumptions related to assets, liabilities, costs, expenses, contingent liabilities, share-based compensation and research and
development costs. 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 that are not readily apparent from other sources. Actual results could differ from those estimates.
(C) Concentrations
Financial instruments that potentially subject the Company to concentration of credit risk include cash and cash equivalents. The Company
maintains 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.
The Company has long-lived assets in different geographic locations. As of September 30, 2023 and March 31, 2023, a majority of the Company’s
long-lived assets were located in the United States.
(D) 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 purchased with original maturities of three months or less to be cash equivalents.
Cash as reported in the condensed consolidated statements of cash flows includes the aggregate amounts of cash, cash equivalents, and restricted
cash as presented on the accompanying condensed consolidated balance sheets as follows (in thousands):
|
September 30, 2023
|
March 31, 2023
|
|||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
||||
|
Restricted cash (included in “Other current assets”)
|
|
|
||||||
|
Restricted cash (included in “Other assets”)
|
||||||||
|
Cash, cash equivalents and restricted cash
|
$
|
|
$
|
|
||||
(E) Contingencies
The Company may be, from time to time, a party to various disputes and claims arising from normal business activities. The Company continually
assesses any litigation or other claims it may confront to determine if an unfavorable outcome would lead to a probable loss or reasonably possible loss which could be estimated. The Company accrues for all contingencies at the earliest date at
which the Company deems it probable that a liability has been incurred and the amount of such liability can be reasonably estimated. If the estimate of a probable loss is a range and no amount within the range is more likely than another, the
Company accrues the minimum of the range. In the cases where the Company believes that a reasonably possible loss exists, the Company discloses the facts and circumstances of the litigation, including an estimable range, if possible.
(F) Investments
Investments in equity securities may be accounted for using (i) the fair value option, if elected, (ii) fair value through earnings if fair
value is readily determinable or (iii) for equity investments without readily determinable fair values, the measurement alternative to measure at cost adjusted for any impairment and observable price changes, as applicable. The election to use
the measurement alternative is made for each eligible investment.
The Company has elected the fair value option to account for certain investments over which the Company has significant influence. The Company
believes the fair value option best reflects the underlying economics of the investment. See Note 3, “Equity Method Investments.”
(G) 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 shares of common stock of Arbutus Biopharma Corporation (“Arbutus”); shares of common stock of
Heracles Parent, L.L.C., the parent entity of Datavant, (as defined and discussed in Note 3, “Equity Method Investments”); liability instruments issued, including warrant and earn-out shares liabilities issued in connection with the Company’s
business combination with MAAC (as discussed in Note 12, “Earn-Out Shares, Public Warrants and Private Placement Warrants”); its investments in other entities; cash and cash equivalents consisting of money market funds; accounts payable; and
long-term debt.
The shares of Arbutus common stock and
investments in common stock with a readily determinable fair value are classified as Level 1, and their fair value is determined based upon quoted market prices in an active market. The shares of common stock of Heracles Parent, L.L.C., the
parent entity of Datavant (as defined and discussed in Note 3, “Equity Method Investments”) and liability instruments issued, excluding the Public Warrants (as defined and discussed in Note 12, “Earn-Out Shares, Public Warrants and Private
Placement Warrants”), are classified as Level 3 within the fair value hierarchy as the assumptions and estimates used in the valuations are unobservable in the market. Prior to their settlement, the Public Warrants were publicly traded and
therefore were classified as Level 1 as the Public Warrants had a readily determinable fair value. Cash and accounts payable are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature.
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. The carrying value of long-term debt issued by Dermavant Sciences Ltd. (together with its wholly
owned subsidiaries, “Dermavant”), which is stated at amortized cost, approximates fair value based on current interest rates for similar types of borrowings and therefore is included in Level 2 of the fair value hierarchy. Long-term debt issued
by Dermavant for which the fair value option has been elected is included in Level 3 of the fair value hierarchy as the assumptions and estimates used in the valuation are unobservable in the market.
(H) Significant Accounting Policies
There were no significant changes to the Company’s significant accounting policies from those disclosed in the Company’s Form 10-K for the year
ended March 31, 2023.
(I) Recently Adopted Accounting Pronouncements
The Company did not adopt any material accounting pronouncements during the six months ended September 30, 2023.
(J) Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the
specified effective date. Unless otherwise disclosed above, the Company does not believe that the adoption of recently issued standards have or may have a material impact on its condensed consolidated financial statements and disclosures.
Note 3—Equity Method Investments
The Company maintains equity method investments in certain entities. As of September 30, 2023 and March 31, 2023, the most significant of these were our
investments in Arbutus and Datavant, which are accounted for using the fair value option.
The Company determined that it does not control these entities and as a result does not consolidate these entities. Due to the Company’s significant influence over operating and financial policies of
these entities, the entities are considered related parties of the Company.
Investment in Arbutus
The Company holds an investment in Arbutus in the form of 38,847,462 common shares of Arbutus. As of September 30, 2023, RSL held approximately 23 %
of issued and outstanding shares of Arbutus.
At September 30, 2023 and March 31, 2023, the aggregate fair value of the Company’s investment in Arbutus was $78.9 million and $117.7 million,
respectively. During the three and six months ended September 30, 2023, the Company
recognized unrealized losses of $10.5 million and $38.8 million on its investment in Arbutus, respectively, in the accompanying condensed consolidated statements of operations. During the
three and six months ended September 30, 2022, the Company recognized unrealized losses of $31.1 million and $41.6 million on its investment in Arbutus, respectively, in the accompanying condensed consolidated statements of operations. The fair value of the
Company’s investment was determined using the closing price of Arbutus’s common stock on September 30, 2023 and March 31, 2023 of $2.03
and $3.03 , respectively.
Investment in Datavant
In June 2021, Datavant and Heracles Parent, L.L.C. (referred to herein as “Ciox Parent” and, after the closing of the Datavant Merger (as defined below), “Datavant”), primarily through its wholly owned subsidiary CIOX
Health, LLC, entered into a definitive agreement to merge Datavant with and into a newly formed wholly owned subsidiary of Ciox Parent (the “Datavant Merger”). As of September 30, 2023, the Company’s minority equity interest represented
approximately 17 % of the outstanding Class A units in Ciox Parent. Ciox Parent’s capital structure includes several classes of
preferred units that, among other features, have liquidation preferences and conversion rights. Upon conversion of such preferred units into Class A units, the Company’s ownership interest would be diluted.
As of September 30, 2023 and March 31, 2023, the fair value of the Company’s investment was $164.3 million and $178.6 million, respectively. During the three and six months ended September 30, 2023, the Company recognized unrealized losses on its investment in Datavant
of $35.1 million and $14.3 million, respectively, in the
accompanying condensed consolidated statements of operations. During the three and six months ended September 30, 2022, the Company recognized unrealized losses on its investment of $21.9 million and $28.9 million, respectively, in the accompanying condensed consolidated statements of operations.
The fair value of the Company’s investment was determined using valuation models that incorporate significant unobservable inputs and is
classified as a Level 3 measurement within the fair value hierarchy. Refer to Note 13, “Fair Value Measurements” for more information.
Note 4—Intangible Assets
In July 2018, Dermavant acquired the worldwide rights (other than for China) with respect to certain intellectual property rights retained by
Welichem Biotech Inc. (“Welichem”) to VTAMA and related compounds from Glaxo Group Limited and GlaxoSmithKline Intellectual Property Development Ltd. (collectively, “GSK”) pursuant to an asset purchase agreement. GSK previously acquired rights to
a predecessor formulation from Welichem pursuant to an asset purchase agreement between GSK and Welichem entered into in May 2012. The Company evaluated the agreement and determined that the acquired assets did not meet the definition of a
business and thus the transaction was accounted for as an asset acquisition.
Following the FDA approval of VTAMA in May 2022, the Company became obligated to pay a regulatory milestone to GSK of £100.0 million (approximately $126
Additionally, the first sale of VTAMA in May 2022 resulted in the achievement of a milestone to Welichem Biotech Inc. of CAD$25.0 million (approximately $20
Both of the above milestones were capitalized as intangible assets upon achievement and are being amortized over their estimated useful lives.
The following table summarizes the Company’s recognized intangible assets:
|
Remaining Weighted
Average Estimated Useful Lives
(in years)
|
September 30, 2023
(in thousands)
|
||||||
|
Gross amount
|
|
$
|
|
||||
|
Less: accumulated amortization
|
(
|
)
|
|||||
|
Net book value
|
$
|
|
|||||
The Company’s
intangible assets are denominated in currencies other than U.S. dollar and therefore are subject to foreign currency movements.
Amortization expense was $2.4
million and $2.2 million for the three months ended September 30, 2023 and 2022, respectively, and $4.8 million and $2.9 million for the
six months ended September 30, 2023 and 2022, respectively. Amortization expense was recorded as part of “Cost of revenues” in the accompanying condensed consolidated statement of operations. Future amortization expense is approximately $4.7 million for the remainder of the year ended March 31, 2024, $9.3 98.7
million thereafter.
Note 5—Recent Transactions
| (A) |
Asset Acquisition
|
In July 2023, a
newly-formed subsidiary in-licensed certain intellectual property rights in exchange for a $14.0 million upfront cash payment. The
transaction was accounted for as an asset acquisition as the acquired assets did not meet the definition of a business. The acquired rights represent in-process research and development assets, which were determined to have no alternative future
use. Accordingly, the Company recorded $14.0
Additionally,
the newly-formed subsidiary agreed to pay up to $280 million of future development, regulatory, and commercial milestone payments and
tiered high-single digit sales-based royalties.
| (B) |
Deconsolidation of Subsidiaries
|
In July 2023, VantAI
Holdings, Inc. (“VantAI”), a wholly-owned subsidiary of the Company, completed a transaction pursuant to which SK, Inc. (“SK”) contributed $6.0
million to VantAI in exchange for preferred shares in VantAI (the “VantAI Preferred Financing”). In August 2023, the Company and SK Biopharmaceuticals Co., Ltd. (“SK Bio”), a subsidiary of SK, completed a transaction pursuant to which SK Bio
purchased all of the Company’s shares in Proteovant Sciences, Inc. (“Proteovant”) in exchange for $47.5 million (the “Proteovant Sale”).
As a result of changes in
governance and voting rights, the Company determined that it no longer held a controlling financial interest in VantAI. Accordingly, the Company deconsolidated VantAI as of July 2023. The Company recorded a $17.4
Upon deconsolidation, the
Company recorded its $9.0 million retained investment in VantAI based upon the fair value of the preferred shares held by the Company.
Due to the Company’s significant influence over the operating and financial policies of VantAI, the Company will account for its retained interest under the equity method of accounting.
Note 6—Certain Balance Sheet Components
(A) Other Current Assets
Other current assets at September 30, 2023 and March 31, 2023 consisted of the following (in thousands):
|
September 30, 2023
|
March 31, 2023
|
|||||||
|
Prepaid expenses
|
$
|
|
$
|
|
||||
|
Trade receivables, net
|
|
|
||||||
| Restricted cash | ||||||||
| Inventory |
||||||||
|
Income tax receivable
|
|
|
||||||
|
Other
|
|
|
||||||
|
Total other current assets
|
$
|
|
$
|
|
||||
(B) Accrued Expenses
Accrued expenses at September 30, 2023 and March 31, 2023 consisted of the following (in thousands):
|
September 30, 2023
|
March 31, 2023
|
|||||||
|
Research and development expenses
|
$
|
|
$
|
|
||||
|
Compensation-related expenses
|
|
|
||||||
| Sales allowances | ||||||||
|
Other expenses
|
|
|
||||||
|
Total accrued expenses
|
||||||||