|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
Not Applicable
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
||
|
|
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
|
|
☒
|
Smaller reporting company
|
||
Emerging growth company
|
Page
|
||
PART I—FINANCIAL INFORMATION
|
||
Item 1.
|
6
|
|
|
||
|
6
|
|
|
||
|
7
|
|
|
||
|
8
|
|
|
||
|
9
|
|
|
||
|
11 | |
|
||
|
12
|
|
|
||
Item 2.
|
32 | |
|
||
Item 3.
|
48 | |
|
||
Item 4.
|
49 |
|
|
||
PART II—OTHER INFORMATION
|
||
|
||
Item 1.
|
49 | |
|
||
Item 1A.
|
49 | |
|
||
Item 2.
|
114
|
|
|
||
Item 3.
|
114 | |
|
||
Item 4.
|
114 | |
|
||
Item 5.
|
114 | |
|
||
Item 6.
|
115 | |
116
|
• |
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 may never achieve or maintain profitability.
|
• |
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.
|
• |
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.
|
• |
We may not be successful in our efforts to acquire, in-license or discover new product candidates.
|
• |
We face risks associated with the allocation of capital and personnel across our businesses.
|
• |
We face risks associated with the Vant structure.
|
• |
The global pandemic resulting from the outbreak of the novel strain of coronavirus, SARS-CoV-2, which causes COVID-19, could adversely impact our business, including
the marketing of our products and our ongoing clinical trials and preclinical studies.
|
• |
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.
|
• |
Our approach to the discovery and development of product candidates from our small molecule discovery engine is unproven, which makes it difficult to predict the
time, cost of development and likelihood of successfully developing any product candidates from these platforms.
|
• |
Certain of our product candidates are novel, complex and difficult to manufacture.
|
• |
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.
|
• |
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.
|
• |
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.
|
• |
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.
|
• |
We will need to expand our organization and may experience difficulties in managing this growth, which could disrupt operations.
|
• |
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.
|
• |
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.
|
• |
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.
|
• |
If our performance does not meet market expectations, the price of our securities may decline.
|
• |
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.
|
• |
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.
|
• |
Anti-takeover provisions in our memorandum of association, bye-laws and 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.
|
• |
Our largest shareholders and certain members of our management own a significant percentage of our Common Shares and will be able to exert significant control over
matters subject to shareholder approval.
|
• |
our limited operating history and risks involved in biopharmaceutical product development;
|
• |
our limited experience as a commercial-stage company and ability to successfully commercialize VTAMA® (tapinarof);
|
• |
our ability to raise additional capital to fund our business on acceptable terms or at all;
|
• |
the receipt of proceeds from the sale of the Myovant Top-Up Shares (as defined below) to Sumitomo (as defined below) in connection with the previously announced acquisition of Myovant Sciences Ltd. by Sumitomo, expected to close in the
first quarter of calendar year 2023;
|
• |
the fact that we will likely incur significant operating losses for the foreseeable future;
|
• |
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;
|
• |
our ability to acquire, in-license or discover new product candidates;
|
• |
our Vant structure and the potential that we may fail to capitalize on certain development opportunities;
|
• |
clinical trials and preclinical studies, which are very expensive, time-consuming, difficult to design and implement and involve uncertain outcomes;
|
• |
the unproven nature of our approach to the discovery and development of product candidates from our small molecule discovery engine;
|
• |
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;
|
• |
difficulties we may face in enrolling and retaining patients in clinical trials and/or clinical development activities;
|
• |
the results of our clinical trials not supporting our proposed claims for a product candidate;
|
• |
changes in interim, top-line and/or preliminary data from our clinical trials changing as more data becoming available or being delayed due to audit and verification
process;
|
• |
changes in product manufacturing or formulation that could lead to the incurrence of costs or delays;
|
• |
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;
|
• |
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;
|
• |
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;
|
• |
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;
|
• |
our ability to effectively manage growth and to attract and retain key personnel;
|
• |
any business, legal, regulatory, political, operational, financial and economic risks associated with conducting business globally;
|
• |
our ability to obtain and maintain patent and other intellectual property protection for our technology, products and product candidates;
|
• |
the inadequacy of patent terms and their scope to protect our competitive position;
|
• |
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;
|
• |
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;
|
• |
the fact that our largest shareholders (and certain members of our management team) own a significant percentage of our stock and will be able to exert significant
control over matters subject to shareholder approval;
|
• |
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;
|
• |
changes in applicable laws or regulations;
|
• |
the possibility that we may be adversely affected by other economic, business and/or competitive factors; and
|
• |
any other risks and uncertainties, including those described under Part II, Item 1A. “Risk Factors.”
|
September 30, 2022
|
March 31, 2022
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash
|
|
|
||||||
Other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Property and equipment, net
|
|
|
||||||
Operating lease right-of-use assets
|
|
|
||||||
Restricted cash, net of current portion
|
|
|
||||||
Investments measured at fair value
|
|
|
||||||
Intangible assets, net
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
Liabilities, Redeemable Noncontrolling Interest and Shareholders’ Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
|
$
|
|
||||
Accrued expenses
|
|
|
||||||
Operating lease liabilities
|
|
|
||||||
Current portion of long-term debt (includes $
|
|
|
||||||
Deferred revenue
|
|
|
||||||
Other current liabilities
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Liability instruments measured at fair value
|
|
|
||||||
Operating lease liabilities, noncurrent
|
|
|
||||||
Long-term debt, net of current portion (includes $
|
|
|
||||||
Deferred revenue, noncurrent
|
|
|
||||||
Other liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies (Note 10)
|
||||||||
Redeemable noncontrolling interest
|
|
|
||||||
Shareholders’ equity:
|
||||||||
Common shares, par value $
|
|
|
||||||
Additional paid-in capital
|
|
|||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Accumulated other comprehensive income (loss)
|
|
(
|
)
|
|||||
Shareholders’ equity attributable to Roivant Sciences Ltd.
|
|
|
||||||
Noncontrolling interests
|
|
|
||||||
Total shareholders’ equity
|
|
|
||||||
Total liabilities, redeemable noncontrolling interest and shareholders’ equity
|
$
|
|
$
|
|
Three Months Ended September 30,
|
Six Months Ended September 30,
|
|||||||||||||||
2022
|
2021
|
2022 |
2021 |
|||||||||||||
Revenue, net
|
$
|
|
$
|
|
$ | $ | ||||||||||
Operating expenses:
|
||||||||||||||||
Cost of revenues
|
|
|
||||||||||||||
Research and development (includes $
|
|
|
||||||||||||||
Acquired in-process research and development
|
|
|
||||||||||||||
Selling, general and administrative (includes $
|
|
|
||||||||||||||
Total operating expenses
|
|
|
||||||||||||||
Loss from operations
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Change in fair value of investments
|
|
(
|
)
|
( |
) | |||||||||||
Gain on sale of investment
|
( |
) | ( |
) | ||||||||||||
Change in fair value of debt and liability instruments
|
(
|
)
|
|
|||||||||||||
Gain on termination of Sumitomo Options
|
|
|
( |
) | ||||||||||||
Gain on deconsolidation of subsidiary
|
( |
) | ( |
) | ||||||||||||
Other expense, net
|
|
|
||||||||||||||
Loss before income taxes
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Income tax expense
|
|
|
||||||||||||||
Net loss
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Net loss attributable to noncontrolling interests
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Net loss attributable to Roivant Sciences Ltd.
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
Net loss per common share—basic and diluted(1)
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
Weighted average shares outstanding—basic and diluted(1)
|
|
|
(1)
|
|
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022 |
2021 |
|||||||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) | ||||
Other comprehensive income:
|
||||||||||||||||
Foreign currency translation adjustment
|
|
|
||||||||||||||
Total other comprehensive income
|
|
|
||||||||||||||
Comprehensive loss
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Comprehensive loss attributable to noncontrolling interests
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Comprehensive loss attributable to Roivant Sciences Ltd.
|
$
|
(
|
)
|
$
|
(
|
)
|
$ | ( |
) | $ | ( |
) |
Shareholders’ Equity
|
||||||||||||||||||||||||||||||||
Redeemable
Noncontrolling
Interest
|
Common Stock
|
Additional
Paid-in
Capital
|
Accumulated
Other
Comprehensive
Income
|
Accumulated
Deficit
|
Noncontrolling
Interests
|
Total
Shareholders’
Equity
|
||||||||||||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||||||||||||||
Balance at March 31, 2022
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||||||||
Issuance of subsidiary common shares to the Company
|
—
|
|
|
(
|
)
|
|
|
|
|
|||||||||||||||||||||||
Stock options exercised and equity awards vested and settled, net of tax withholding
|
—
|
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||||
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 subsidiary common shares to the Company
|
— |
( |
) | |||||||||||||||||||||||||||||
Deconsolidation of subsidiary
|
( |
) | — |
— | — | — | — | — | — | |||||||||||||||||||||||
Equity awards vested and settled
|
— |
|||||||||||||||||||||||||||||||
Issuance of the Company’s common shares and other consideration for an acquisition
|
— |
|||||||||||||||||||||||||||||||
Cash contributions to majority-owned subsidiaries
|
— |
— |
( |
) | ||||||||||||||||||||||||||||
Share-based compensation
|
— |
— |
||||||||||||||||||||||||||||||
Foreign currency translation adjustment
|
— |
— |
( |
) | ||||||||||||||||||||||||||||
Net loss
|
— |
— |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Balance at September 30, 2022
|
$ |
— |
$ | $ | $ | $ | ( |
) | $ | $ |
Shareholders’ Equity(1)
|
||||||||||||||||||||||||||||||||||||
Redeemable
Noncontrolling
Interest
|
Common Stock
|
Additional
Paid-in
Capital
|
Subscription
Receivable
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Accumulated
Deficit
|
Noncontrolling
Interests
|
Total
Shareholders’
Equity
|
|||||||||||||||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||||||||||||||||||
Balance at March 31, 2021
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||||||||||
Issuance of subsidiary warrants
|
—
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Cash contribution to majority-owned subsidiaries
|
—
|
—
|
|
(
|
)
|
|
|
|
|
|
||||||||||||||||||||||||||
Share-based compensation
|
—
|
—
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Foreign currency translation adjustment
|
—
|
—
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|||||||||||||||||||||||||
Net loss
|
—
|
—
|
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||
Balance at June 30, 2021
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||||||||||
Issuance of the Company’s common shares upon closing of Business Combination and PIPE Financing, net of issuance costs
|
— |
|||||||||||||||||||||||||||||||||||
Issuance of the Company’s common shares related to settlement of transaction consideration
|
— |
|||||||||||||||||||||||||||||||||||
Issuance of subsidiary preferred shares
|
— |
— |
||||||||||||||||||||||||||||||||||
Issuance of subsidiary common and preferred shares to the Company
|
— |
— |
( |
) | ||||||||||||||||||||||||||||||||
Payment of subscription receivable
|
— |
— |
( |
) | ||||||||||||||||||||||||||||||||
Cash contribution to majority-owned subsidiaries
|
— |
— |
( |
) | ||||||||||||||||||||||||||||||||
Share-based compensation
|
— |
— |
||||||||||||||||||||||||||||||||||
Repurchase of equity awards
|
— |
— |
( |
) | ( |
) | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment
|
— |
— |
||||||||||||||||||||||||||||||||||
Net loss
|
— |
— |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
Balance at September 30, 2021
|
$ |
$ |
$ | $ | $ | $ | ( |
) | $ | $ |
(1)
|
|
Six Months Ended September 30,
|
||||||||
2022
|
2021
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Non-cash acquired in-process research and development
|
||||||||
Share-based compensation
|
|
|
||||||
Change in fair value of investments
|
|
(
|
)
|
|||||
Gain on sale of investment
|
( |
) | ||||||
Change in fair value of debt and liability instruments
|
|
|
||||||
Gain on deconsolidation of subsidiary
|
( |
) | ||||||
Gain on termination of Sumitomo Options
|
|
(
|
)
|
|||||
Depreciation and amortization
|
||||||||
Non-cash lease expense
|
||||||||
Other
|
|
|
||||||
Changes in assets and liabilities, net of effects from acquisition and divestiture:
|
||||||||
Accounts payable
|
|
|
||||||
Accrued expenses
|
|
|
||||||
Operating lease liabilities
|
(
|
)
|
(
|
)
|
||||
Deferred revenue
|
(
|
)
|
(
|
)
|
||||
Other
|
(
|
)
|
|
|||||
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Cash decrease upon deconsolidation of subsidiary
|
( |
) | ||||||
Proceeds from sale of investment
|
||||||||
Milestone payments
|
( |
) | ||||||
Purchase of property and equipment
|
(
|
)
|
(
|
)
|
||||
Net cash (used in) provided by investing activities
|
(
|
)
|
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds from Business Combination and PIPE Financing
|
||||||||
Proceeds from payment of subscription receivable
|
||||||||
Proceeds from subsidiary debt financings, net of financing costs paid
|
|
|
||||||
Repayment of debt by subsidiary
|
(
|
)
|
(
|
)
|
||||
Payment of offering and loan origination costs
|
(
|
)
|
(
|
)
|
||||
Repurchase of equity awards
|
( |
) | ||||||
Taxes paid related to net settlement of equity awards
|
(
|
)
|
|
|||||
Net cash provided by financing activities
|
|
|
||||||
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:
|
||||||||
Offering costs included in accounts payable and accrued expenses
|
$
|
|
$
|
|
||||
Issuance of the Company’s common shares and other consideration for an acquisition
|
$
|
|
$
|
|
||||
Other
|
$
|
|
$
|
|
September 30, 2022
|
March 31, 2022
|
|||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash
|
|
|
||||||
Cash, cash equivalents and restricted cash
|
$
|
|
$
|
|
•
|
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.
|
•
|
Licenses of intellectual property: If the licenses to intellectual property are determined to be distinct from the other performance obligations identified in the
arrangement, the Company recognizes revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are not
distinct from other promises, the Company applies judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time,
the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the related revenue
recognition accordingly.
|
•
|
Milestone payments: At the inception of each arrangement that includes research, development or regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative standalone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price on a cumulative catch-up basis in earnings in the period of the adjustment. |
•
|
Royalties and commercial milestone payments: For arrangements that include sales-based royalties, including commercial milestone payments based on a pre-specified level of sales, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Achievement of these royalties and commercial milestones may solely depend upon performance of the licensee. |
a.
|
Prompt Pay and Cash Pay Discounts: The Company generally provides invoice discounts on product sales to its customers for prompt payment and/or cash payment. The Company estimates the amount of such discounts that will be utilized and deducts the amount from its gross product revenues and accounts receivable at the time such revenues are recognized. |
b.
|
Customer Fees: The Company pays fees to its customers for account management, data management, and other administrative services. To the extent the services received are distinct from sales of products to the customer, the Company records these payments in selling, general and administrative expenses. |
c.
|
Chargebacks: Chargebacks are discounts that occur when contracted customers purchase directly from a wholesaler or specialty distributor. Contracted customers, which currently consist primarily of public health service institutions, federal government entities, pharmaceutical benefit managers, and health maintenance organizations, generally purchase the product at a discounted price. The wholesaler or specialty distributor, in turn, charges back to the Company the difference between the price initially paid by the wholesaler or specialty distributor and the discounted price paid to the wholesaler or specialty distributor by the contracted customer. The allowance for chargebacks is based on actual chargebacks received and an estimate of sales to contracted customers. |
d.
|
Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program and the Medicare Part D prescription drug benefit as well as contracted discounts with pharmaceutical benefit managers and health maintenance organizations. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements with payers or statutory requirements pertaining to Medicaid and Medicare benefit providers. The allowance for rebates is based on contractual or statutory discount rates, estimated payer mix, and expected utilization. The Company’s estimates for expected utilization of rebates are based on historical data received from wholesalers, specialty distributors, and pharmacies since launch, as well as analog data from similar products. The Company monitors sales trends and adjusts the allowance on a regular basis to reflect the most recent rebate experience. The Company’s liability for these rebates consists of invoices received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period. |
e.
|
Co-payment Assistance: The Company offers co-payment assistance to patients. Co-payment assistance is accrued based on an estimate of the number of co-payment assistance claims and the cost per claim that the Company expects to receive associated with product that has been recognized as revenue but remains in the distribution channel inventories at the end of each reporting period. |
f.
|
Product Returns: Consistent with industry practice, the Company offers its customers limited product return rights for damages, shipment errors, and expiring product; provided that the return is within a specified period around the product expiration date as set forth in the applicable individual distribution or customer agreement. The Company does not allow product returns for product that has been dispensed to a patient. In arriving at its estimate for product returns, the Company considers historical product returns, the underlying product demand, and industry specific data. |