# Roivant Sciences Ltd. (ROIV) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Roivant Sciences Ltd.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1635088/000119312522183362/d307489d10k.htm
Accession: 0001193125-22-183362
Filing date: 2022-06-28
Report date: 2022-03-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/ROIV/
All MD&A years: /company/ROIV/mda/
Next year: /company/ROIV/mda/fy2023/ (FY 2023)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of Roivant’s financial condition and results of operations should be read in conjunction with Roivant’s consolidated financial statements and notes to those statements included elsewhere in this Annual Report on Form
10-K.
Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Roivant’s actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. Please see “Forward-Looking Statements” and “Risk Factors” in this Annual Report on Form
10-K.
Our fiscal year ends on March 31 and our fiscal quarters end on June 30, September 30 and December 31.

Overview

We are building the next-generation “big pharma” company, organized to harness modern technologies and computational tools as well as the entrepreneurial spirit of nimble biotechnology companies at scale. Our mission is to improve the delivery of healthcare to patients by treating every inefficiency as an opportunity.

We are a diverse team of experienced drug developers, scientists, physicians, company builders, data scientists and engineers, biopharma investors, physicists and business development professionals dedicated to improving the lives of patients. At Roivant, we combine our team’s extensive experience and multi-disciplinary expertise with innovative technologies to identify and advance potentially transformative medicines.

We deploy a hypothesis-driven approach to identify novel or clinically-validated targets and biological pathways in areas of high unmet medical need. We then seek to acquire,
in-license
or discover promising drug candidates against those targets or pathways. Our small molecule discovery engine is powered by leading computational physics and machine learning (“ML”) capabilities for in silico drug design.

We develop drugs and drug candidates in subsidiary companies we call “Vants” with a distinct approach to sourcing talent, aligning incentives and deploying technology. Each of our Vant teams is built with deep relevant expertise to promote successful execution of our development strategy. Our Vants continue to benefit from the support of the Roivant platform and technologies that are built to address inefficiencies in the drug discovery, development and commercialization process.

Our agile Vant model has allowed us to rapidly add capabilities in diverse therapeutic areas, including immunology, dermatology and oncology, and modalities, including biologics, topicals and bifunctional small molecules. The Vant model also enables a modular approach to the monetization of therapies we advance through development, allowing us to pursue commercialization of some products independently, while selectively establishing partnerships for other Vants or divesting of the Vants entirely.

Since our inception in 2014, we have focused substantially all of our efforts and financial resources on acquiring and developing our product candidates and expanding our platform and technologies. For the years ended March 31, 2022 and 2021, we incurred net losses of $924.1 million and $900.2 million, respectively. As of March 31, 2022, we had cash and cash equivalents of approximately $2.1 billion and an accumulated deficit of approximately $2.8 billion. Through March 31, 2022, we had not generated any revenue from the sale of our product candidates. Through our subsidiary Dermavant Sciences Ltd., we have launched our first commercial product, VTAMA
®
(tapinarof) cream, following approval by the FDA in May 2022. Through March 31, 2022, our revenue, primarily generated through license agreements as well as from subscription and service-based fees, has not been significant. Our operations to date have been financed primarily through the sale of equity securities, sale of subsidiary interests, debt financings and revenue generated from licensing and collaboration arrangements.

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Recent Developments

Dermavant

In May 2022, VTAMA cream was approved by the FDA as the first and only
FDA-approved
steroid-free topical medication in its class for the treatment of plaque psoriasis in adult patients.

Following the approval of VTAMA cream by the FDA in May 2022, Dermavant Sciences Ltd. (together with its wholly owned subsidiaries, “Dermavant”) received $160.0 million in June 2022 pursuant to the terms of the revenue interest purchase and sale agreement (the “RIPSA”) as described in Note 7, “Long-Term Debt and Loan Commitment” of our audited financial statements.

Also, as a result of FDA approval, Dermavant achieved a regulatory milestone to GSK of £100.0 million (approximately $126 million on the date of achievement), which will be paid within 70 calendar days of FDA approval. Additionally, the first sale of VTAMA cream in May 2022 resulted in the achievement of a milestone to Welichem Biotech Inc. of CAD$25.0 million (approximately $20 million on the date of achievement), which will be paid within 60 calendar days of the invoice date. Dermavant intends to primarily use the RIPSA proceeds for the payment of these obligations.

Roivant

We have implemented a company-wide cost optimization and pipeline reprioritization initiative to reduce our expected operating expenses and preserve our capital resources. As part of this initiative, we have discontinued the development of several programs, including ARU-1801, LSVT-1701, DMVT-502,
DMVT-503,

DMVT-504
and

CVT-TCR-01,

to focus our capital on the potentially most valuable and meaningful opportunities for patients in our pipeline, including our programs at newly launched Priovant. We elected to wind down the development of ARU-1801 after considering the future development costs of the program, the current market environment, and the clinical and commercial profile of the product candidate.

Impact of
COVID-19

The
COVID-19
pandemic continues to present global public health and economic challenges. Although some of our clinical development timelines have been impacted by delays related to the
COVID-19
pandemic, we have not experienced material financial impact on our business and operations as a result of the
COVID-19
pandemic. However, the impact on our future results will largely depend on future developments related to
COVID-19,
which are highly uncertain and cannot be predicted with confidence, such as the emergence of new variants, the ultimate duration and spread of the outbreak, the continuing impact of the
COVID-19
pandemic on financial markets and the global economy, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain, treat, and prevent the disease, including the availability and effectiveness of vaccines.

For additional information about risks and uncertainties related to the
COVID-19
pandemic that may impact our business, financial condition and results of operations, see the section titled “Risk Factors” included elsewhere in this Annual Report on Form
10-K.

Components of Results of Operations

Revenue, net

Through March 31, 2022, we have not generated any revenues from the sale of our product candidates. Our revenue through March 31, 2022 primarily includes the recognition of upfront payments received in connection with license agreements. Revenue is also generated by subscription and service-based fees. Our revenue recognized from inception through March 31, 2022 has not been significant.

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With the approval of VTAMA cream for the treatment of plaque psoriasis in adult patients by the FDA in May 2022, we began to recognize product revenues after our initial product launch.

Cost of revenues

Through March 31, 2022, our cost of revenues primarily relates to subscription and service-based revenue recognized for the use of technology developed and consists primarily of employee, hosting, and third-party data costs. Our cost of revenues through March 31, 2022 has not been significant.

With the approval of VTAMA cream for the treatment of plaque psoriasis in adult patients by the FDA in May 2022, we began to recognize cost of product revenues after our initial product launch.

Research and development expenses

Research and development expenses consist mainly of costs incurred in connection with the discovery and development of our product candidates. Research and development expenses primarily include the following:

[[GREPCENT_TABLE]]
[["","\u2022","","Program-specific costs, including direct third-party costs, which include expenses incurred under agreements with contract research organizations (\u201cCROs\u201d) and contract manufacturing organizations (\u201cCMOs\u201d), manufacturing costs in connection with producing materials for use in conducting nonclinical and clinical studies, the cost of consultants who assist with the development of our product candidates on a program-specific basis, investigator grants, sponsored research, and any other third-party expenses directly attributable to the development of our product candidates."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","Unallocated internal costs, including:"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","employee-related expenses, such as salaries, share-based compensation, and benefits, for research and development personnel; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","other expenses that are not allocated to a specific program."]]
[[/GREPCENT_TABLE]]

Research and development activities will continue to be central to our business model. We anticipate that our research and development expenses will increase for the foreseeable future as we advance our product candidates through preclinical studies and clinical trials, as well as acquire new product candidates. In addition, we expect our research and development expenses to increase in the future, including as a result of our small molecule discovery engine (“Roivant Discovery”), comprising advanced computational physics and machine learning capabilities, integrated with an
in-house
wet lab facility. Research and development expenses will also be driven by the number of drug candidates from Roivant Discovery that we advance through preclinical studies and clinical trials. We expect higher employee-related expenses, including higher share-based compensation expenses, as well as higher consulting costs as we hire additional resources to support increasing development activity.

The duration, costs and timing of preclinical studies and clinical trials of our product candidates will depend on a variety of factors that include, but are not limited to, the following:

[[GREPCENT_TABLE]]
[["","\u2022","","the scope, rate of progress, expense and results of our preclinical development activities, any future clinical trials of our product candidates, and other research and development activities that we may conduct;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","the number and scope of preclinical and clinical programs we decide to pursue;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","the uncertainties in clinical trial design and patient enrollment or drop out or discontinuation rates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","the number of doses that patients receive;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","the countries in which the trials are conducted;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","our ability to secure and leverage adequate CRO support for the conduct of clinical trials;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","our ability to establish an appropriate safety and efficacy profile for our product candidates;"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u2022","","the timing, receipt and terms of any approvals from applicable regulatory authorities;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","the potential additional safety monitoring or other studies requested by regulatory agencies;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","the significant and changing government regulation and regulatory guidance;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","our ability to establish clinical and commercial manufacturing capabilities, or make arrangements with third-party manufacturers in order to ensure that we or our third-party manufacturers are able to make product successfully;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","the impact of any business interruptions to our operations due to the COVID-19 pandemic; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","our ability to maintain a continued acceptable safety profile of our product candidates following approval of our product candidates."]]
[[/GREPCENT_TABLE]]

The successful development of our product candidates is highly uncertain, and we cannot reasonably estimate the costs that will be necessary to complete the remainder of the development of our product candidates. In addition, the probability of success for our product candidates will depend on numerous factors, including competition, manufacturing capability and commercial viability.

Acquired
in-process
research and development expenses

For the year ended March 31, 2022, we began reporting acquired
in-process
research and development (“IPR&D”) expense as a separate line item in our consolidated statements of operations. Acquired IPR&D expenses include consideration for the purchase of IPR&D through asset acquisitions and license agreements as well as payments made in connection with asset acquisitions and license agreements upon the achievement of development milestones. These expenses were previously recorded in “Research and development” on the consolidated statements of operations. Prior periods have been revised to conform to the current period presentation.

Consideration for the purchase of IPR&D through asset acquisitions and license agreements includes cash upfront payments, shares and other liability instruments issued, and fair value of future contingent consideration payments.

General and administrative expenses

General and administrative expenses consist primarily of employee-related expenses, such as salaries, share-based compensation, and benefits, for general and administrative personnel, including those responsible for the identification and acquisition or
in-license
of new drug candidates as well as for overseeing Vant operations and facilitating the use of our platform and technologies at Vants. General and administrative expenses also consist of legal and accounting fees, consulting services and other operating costs relating to corporate matters and daily operations. Additionally, general and administrative expenses include costs incurred relating to the identification, acquisition or
in-license
and technology transfer of promising drug candidates along with costs incurred relating to the integration of new technologies.

We expect expenses to increase in future periods as we continue to expand our sales and marketing infrastructure and general administrative functions. These increases will likely include salaries, sales incentive compensation, share-based compensation and travel expenses associated with our sales force, which began promoting VTAMA cream in the United States following approval by the FDA in May 2022, as well as expected costs associated with the further build out of our commercial operations functions. We anticipate these expenses to further increase if any of our other current or future product candidates receives regulatory approval in the United States or another jurisdiction.

Change in fair value of investments

Change in fair value of investments includes the unrealized loss (gain) on equity investments in publicly-traded companies, including Sio Gene Therapies Inc. (“Sio”) and Arbutus Biopharma Corporation (“Arbutus”) as

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well as our equity investment in Heracles Parent, L.L.C., the parent entity of the Datavant business (“Datavant”), following Datavant’s merger with a wholly-owned subsidiary of Heracles Parent, L.L.C., the parent company of CIOX Health, (the “Datavant Merger”) in July 2021 at which point our minority equity interest in Datavant became subject to the equity method of accounting. We have elected the fair value option to account for these investments.

Gain on sale of investment

Gain on sale of investment resulted from the Datavant Merger in July 2021. Prior to the Datavant Merger, our investment in Datavant was accounted for using the measurement alternative to fair value. At closing of the Datavant Merger, we received approximately $320 million in cash and a minority equity interest in the combined company, which became subject to the equity method of accounting. We recognized a gain as a result of this transaction.

Change in fair value of debt and liability instruments

Change in fair value of debt and liability instruments primarily includes the unrealized (gain) loss relating to the measurement and recognition of fair value on a recurring basis of certain liabilities, including debt issued by a wholly-owned subsidiary of Dermavant Sciences Ltd. to NovaQuest
Co-Investment
Fund VIII, L.P. (the “NovaQuest Facility”), and other liability instruments, including warrant and
earn-out
share liabilities issued in connection with our business combination with Montes Archimedes Acquisition Corp. (“MAAC”) as well as options granted to Sumitomo Dainippon Pharma Co., Ltd. (“Sumitomo”) to purchase our ownership interests in certain subsidiaries (the “Sumitomo Options”) before the termination of those options in June 2021.

Gain on termination of Sumitomo Options

Gain on termination of Sumitomo Options resulted from the completion of transactions contemplated by an Asset Purchase Agreement entered into with Sumitomo and its subsidiary Sumitomo Pharmaceuticals (Suzhou) Co., Ltd. (“SPC”) in May 2021. The transactions contemplated by the Asset Purchase Agreement closed in June 2021. Pursuant to the Asset Purchase Agreement: (i) Sumitomo terminated all of its existing options to acquire our ownership interest in certain subsidiaries; (ii) we transferred and assigned to SPC all of our intellectual property, development and commercialization rights for (a) lefamulin in Mainland China, Taiwan, Hong Kong, and Macau (collectively “Greater China”), (b) vibegron in Mainland China, (c) rodatristat ethyl in Greater China and South Korea and
(d) RVT-802
in Greater China and South Korea; (iii) Sumitomo agreed to pay us $5.0 million in cash; and (iv) Sumitomo entered into an agreement with us to pursue future collaborations with Genevant Sciences Ltd. (“Genevant”). We received the cash payment, net of certain withholding taxes, in August 2021.

Gain on deconsolidation of subsidiary and consolidation of unconsolidated entity

Gain on deconsolidation of subsidiary resulted from the determination that we no longer had a controlling financial interest in certain subsidiaries. Gain on consolidation of unconsolidated entity resulted from the remeasurement of our previously held interest in Genevant following the consolidation of Genevant as of July 2020.

Other expense, net

Other expense, net consists of interest expense resulting from interest accrued on long-term debt and the amortization of debt discount and issuance costs, losses from our equity method investment prior to consolidation in July 2020, interest income on our cash and cash equivalents, and other miscellaneous (income) expense.

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Income tax expense

Income tax expense is recorded for the jurisdictions in which we do business. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when, after consideration of all positive and negative evidence, it is not more likely than not that our deferred tax assets will be realizable. When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

Net loss attributable to noncontrolling interests

Net loss attributable to noncontrolling interests consists of the portion of net loss of those consolidated entities that is not allocated to us. Changes in the amount of net loss attributable to noncontrolling interests are directly impacted by the net loss of our consolidated entities and changes in ownership percentages.

Results of Operations

Comparison of the years ended March 31, 2022 and 2021

The following table sets forth our results of operations for the years ended March 31, 2022 and 2021:

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021","","","Change"],["","","(in thousands)"],["Revenue, net","","$","55,286","","","$","23,795","","","$","31,491"],["Operating expenses:"],["Cost of revenues","","","8,966","","","","2,057","","","","6,909"],["Research and development","","","483,035","","","","236,626","","","","246,409"],["Acquired in-process research and development","","","139,894","","","","596,132","","","","(456,238",")"],["General and administrative","","","775,033","","","","259,878","","","","515,155"],["Total operating expenses","","","1,406,928","","","","1,094,693","","","","312,235"],["Loss from operations","","","(1,351,642",")","","","(1,070,898",")","","","(280,744",")"],["Change in fair value of investments","","","87,291","","","","(95,533",")","","","182,824"],["Gain on sale of investment","","","(443,754",")","","","\u2014","","","","(443,754",")"],["Change in fair value of debt and liability instruments","","","(3,354",")","","","29,845","","","","(33,199",")"],["Gain on termination of Sumitomo Options","","","(66,472",")","","","\u2014","","","","(66,472",")"],["Gain on deconsolidation of subsidiary and consolidation of unconsolidated entity","","","(5,041",")","","","(115,364",")","","","110,323"],["Other expense, net","","","3,435","","","","8,701","","","","(5,266",")"],["Loss before income taxes","","","(923,747",")","","","(898,547",")","","","(25,200",")"],["Income tax expense","","","369","","","","1,686","","","","(1,317",")"],["Net loss","","","(924,116",")","","","(900,233",")","","","(23,883",")"],["Net loss attributable to noncontrolling interests","","","(78,854",")","","","(90,999",")","","","12,145"],["Net loss attributable to Roivant Sciences Ltd.","","$","(845,262",")","","$","(809,234",")","","$","(36,028",")"]]
[[/GREPCENT_TABLE]]

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Variance analysis for years ended March 31, 2022 and 2021

Revenue, net

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021","","","Change"],["","","(in thousands)"],["Revenue, net","","$","55,286","","","$","23,795","","","$","31,491"]]
[[/GREPCENT_TABLE]]

Revenue, net increased by $31.5 million to $55.3 million for the year ended March 31, 2022 compared to $23.8 million for the year ended March 31, 2021. The increase was primarily related to payments received in connection with license agreements and the license of technology. Additionally, we recognized revenue relating to the sales of clinical product as well as milestone income at Dermavant. Revenue generated was not significant in either period presented.

Cost of revenues

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021","","","Change"],["","","(in thousands)"],["Cost of revenues","","$","8,966","","","$","2,057","","","$","6,909"]]
[[/GREPCENT_TABLE]]

Cost of revenues increased by $6.9 million to $9.0 million for the year ended March 31, 2022 compared to $2.1 million for the year ended March 31, 2021, consistent with increased revenue. Cost of revenues was not significant in either period presented.

Research and development expenses

For the years ended March 31, 2022 and 2021, our research and development expenses consisted of the following:

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021","","","Change"],["","","(in thousands)"],["Program-specific costs:"],["Batoclimab","","$","67,181","","","$","49,236","","","$","17,945"],["Tapinarof","","","64,496","","","","34,002","","","","30,494"],["Brepocitinib","","","24,890","","","","\u2014","","","","24,890"],["ARU-1801","","","23,312","","","","24,347","","","","(1,035",")"],["AFVT-2101","","","12,657","","","","3,782","","","","8,875"],["ARU-2801","","","12,031","","","","784","","","","11,247"],["LSVT-1701","","","11,067","","","","3,383","","","","7,684"],["Namilumab","","","8,745","","","","820","","","","7,925"],["Other program-specific costs","","","60,660","","","","45,558","","","","15,102"],["Total program-specific costs","","","285,039","","","","161,912","","","","123,127"],["Unallocated internal costs:"],["Share-based compensation","","","63,735","","","","22,637","","","","41,098"],["Personnel-related expenses","","","103,827","","","","45,646","","","","58,181"],["Other expenses","","","30,434","","","","6,431","","","","24,003"],["Total research and development expenses","","$","483,035","","","$","236,626","","","$","246,409"]]
[[/GREPCENT_TABLE]]

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Research and development expenses increased by $246.4 million to $483.0 million for the year ended March 31, 2022 compared to $236.6 million for the year ended March 31, 2021, primarily due to increases in program-specific costs of $123.1 million, personnel-related expenses of $58.2 million, and share-based compensation of $41.1 million.

The increase of $123.1 million in program-specific costs largely reflects the progression of our programs and drug discovery. Program-specific costs for Dermavant’s tapinarof program increased by $30.5 million, largely resulting from purchases of clinical product as we prepared for commercial launch and incurred costs associated with our Phase 3 clinical program in atopic dermatitis. Program specific costs for Priovant Therapeutics, Inc.’s (“Priovant”) brepocitinib program were $24.9 million for the year ended March 31, 2022, reflecting costs incurred since the acquisition of brepocitinib in September 2021. Program-specific costs for Immunovant’s batoclimab program increased by $17.9 million, primarily reflecting activities to advance the clinical development of batoclimab in current and potentially new indications.

The increase of $58.2 million in personnel-related expenses was primarily driven by an increase in headcount to support the progression of our programs and drug discovery.

The increase of $41.1 million in share-based compensation expense was primarily due to the achievement of the liquidity event vesting condition for certain equity instruments upon the closing of the Business Combination in September 2021, resulting in the recognition of a
one-time

catch-up
expense of $22.9 million relating to cumulative service rendered between the grant date of the respective awards and completion of the Business Combination and continued recognition of expense over the requisite service periods. Historically, we did not recognize share-based compensation expense related to these equity instruments as the liquidity event requirement had not been met and was not deemed probable of being met.

Acquired
in-process
research and development expenses

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021","","","Change"],["","","(in thousands)"],["Consideration for the purchase of IPR&D","","$","97,412","","","$","591,916","","","$","(494,504",")"],["Development milestone payments","","","42,482","","","","4,216","","","","38,266"],["Total acquired in-process research and development expenses","","$","139,894","","","$","596,132","","","$","(456,238",")"]]
[[/GREPCENT_TABLE]]

Acquired
in-process
research and development expenses decreased by $456.2 million to $139.9 million for the year ended March 31, 2022 compared to $596.1 million for the year ended March 31, 2021. The decrease was primarily due to higher consideration for the purchase of IPR&D during the year ended March 31, 2021 as a result of the following: consideration of $399.6 million attributed to IPR&D relating to the acquisition of the business of Silicon Therapeutics; consideration of $116.5 million relating to the stock purchase agreement to acquire Oncopia; $41.4 million attributed to IPR&D as part of the consolidation of Genevant, which was previously accounted for as an equity method investment; and consideration relating to the licensing and strategic collaboration agreement with Affimed N.V. During the year ended March 31, 2022, acquired
in-process
research and development expenses included consideration for the purchase of IPR&D of $82.1 million relating to the acquisition of brepocitinib by Priovant and $14.1 million relating to a license agreement entered by Hemavant Sciences GmbH with Eisai Co., Ltd. Additionally, acquired
in-process
research and development expenses for year ended March 31, 2022 included a
one-time
milestone expense of CAD$50.0 million ($39.3 million) due to the achievement of a development milestone relating to Dermavant’s tapinarof program.

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General and administrative expenses

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021","","","Change"],["","","(in thousands)"],["General and administrative","","$","775,033","","","$","259,878","","","$","515,155"]]
[[/GREPCENT_TABLE]]

General and administrative expenses increased by $515.2 million to $775.0 million for the year ended March 31, 2022 compared to $259.9 million for the year ended March 31, 2021. The increase was primarily due to increases in share-based compensation expense of $438.9 million primarily as a result of the achievement of the liquidity event vesting condition for certain equity instruments upon the closing of the Business Combination in September 2021, resulting in the recognition of a
one-time

catch-up
expense of $350.0 million relating to cumulative service rendered between the grant date of the respective awards and completion of the Business Combination and continued recognition of expense over the requisite service periods. Historically, we did not recognize share-based compensation expense related to these equity instruments as the liquidity event requirement had not been met and was not deemed probable of being met. Additionally, general and administrative expenses for Dermavant have increased as we prepared for commercial launch.

Change in fair value of investments

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021","","","Change"],["","","(in thousands)"],["Change in fair value of investments","","$","87,291","","","$","(95,533",")","","$","182,824"]]
[[/GREPCENT_TABLE]]

Change in fair value of investments was an unrealized loss of $87.3 million and unrealized gain of $95.5 million for the years ended March 31, 2022 and 2021, respectively. The change of $182.8 million was primarily driven by changes in the public share prices of Arbutus and Sio as well as the change in fair value of our investment in Datavant following the completion of the Datavant Merger in July 2021.

Gain on sale of investment

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021","","","Change"],["","","(in thousands)"],["Gain on sale of investment","","$","(443,754",")","","$","\u2014","","","$","(443,754",")"]]
[[/GREPCENT_TABLE]]

Gain on sale of investment was $443.8 million for the year ended March 31, 2022 due to the Datavant Merger in July 2021 at which point we received approximately $320 million in cash and a minority equity stake in the combined company. See “Components of Results of Operations—Gain on sale of investment” above for additional information.

Change in fair value of debt and liability instruments

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021","","","Change"],["","","(in thousands)"],["Change in fair value of debt and liability instruments","","$","(3,354",")","","$","29,845","","","$","(33,199",")"]]
[[/GREPCENT_TABLE]]

Change in fair value of debt and liability instruments was an unrealized gain of $3.4 million and unrealized loss of $29.8 million for the years ended March 31, 2022 and 2021, respectively. Change in fair value of debt and liability instruments for the year ended March 31, 2022 primarily consisted of an unrealized gain of $30.8 million

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relating to the warrant and
earn-out
share liabilities issued as part of the Business Combination, partially offset by an unrealized loss of $27.3 million relating to the NovaQuest facility, which was largely due to the passage of time and increased probabilities of success as a result of advancement in the stage of development of the product candidate. Change in fair value of debt and liability instruments for the year ended March 31, 2021 primarily consisted of an unrealized loss of $61.0 million relating to the NovaQuest Facility, partially offset by an unrealized gain of $33.5 million relating to the Sumitomo Options.

Gain on termination of Sumitomo Options

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021","","","Change"],["","","(in thousands)"],["Gain on termination of Sumitomo Options","","$","(66,472",")","","$","\u2014","","","$","(66,472",")"]]
[[/GREPCENT_TABLE]]

Gain on termination of Sumitomo Options was $66.5 million for the year ended March 31, 2022 due to the completion of transactions contemplated by the Asset Purchase Agreement entered into with Sumitomo and SPC. See “Components of Results of Operations—Gain on termination of Sumitomo Options” above for additional information.

Gain on deconsolidation of subsidiary and consolidation of unconsolidated entity

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021","","","Change"],["","","(in thousands)"],["Gain on deconsolidation of subsidiary and consolidation of unconsolidated entity","","$","(5,041",")","","$","(115,364",")","","$","110,323"]]
[[/GREPCENT_TABLE]]

Gain on deconsolidation of subsidiary and consolidation of unconsolidated entity was $5.0 million and $115.4 million for the years ended March 31, 2022 and 2021, respectively. The gain of $5.0 million for the year ended March 31, 2021 resulted from the deconsolidation of a subsidiary. Gain on deconsolidation of subsidiary and consolidation of unconsolidated entity for the year ended March 31, 2021 primarily related to a gain of $86.5 million on the deconsolidation of Datavant in April 2020 and a gain of $28.8 million resulting from the remeasurement of our previously held interest in Genevant upon its consolidation in July 2020.

Liquidity and Capital Resources

For the years ended March 31, 2022 and 2021, we incurred net losses of $924.1 million and $900.2 million, respectively. As of March 31, 2022, we had cash and cash equivalents of approximately $2.1 billion and our accumulated deficit was approximately $2.8 billion. Through March 31, 2022, we have not generated any revenues from the sale of our product candidates. Through our subsidiary Dermavant, we have launched our first commercial product, VTAMA cream, following approval by the FDA in May 2022. Our revenue through March 31, 2022, primarily generated through license agreements as well as from subscription and service-based fees, has not been significant.

Our short-term and long-term liquidity requirements as of March 31, 2022 included:

[[GREPCENT_TABLE]]
[["","\u2022","","Contractual payments related to our long-term debt (see Note 7, \u201cLong-Term Debt and Loan Commitment\u201d of our audited financial statements);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","obligations under our operating leases (see Note 12, \u201cLeases\u201d of our audited financial statements);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","certain commitments to Palantir Technologies Inc. (\u201cPalantir\u201d) totaling $30.0 million related to a master subscription agreement entered in May 2021 for access to Palantir\u2019s proprietary software for a five-year period; and"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u2022","","certain commitments to Samsung Biologics Co., Ltd. (\u201cSamsung\u201d) pursuant to a Product Service Agreement entered between Immunovant and Samsung by which Samsung will manufacture and supply Immunovant with batoclimab drug substance for commercial sale and perform other manufacturing-related services with respect to batoclimab. The minimum purchase commitment related to this agreement is estimated to be approximately $36.0 million."]]
[[/GREPCENT_TABLE]]

Additionally, we have certain payment obligations under various asset acquisition and license agreements. Under these agreements we are required to make milestone payments upon successful completion and achievement of certain development, regulatory and commercial milestones. The payment obligations under the asset acquisition and license agreements are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones, and we will be required to make milestone payments and royalty payments in connection with the sale of products developed under these agreements.

In May 2022, VTAMA (tapinarof) cream was approved by the FDA as the first and only
FDA-approved
steroid-free topical medication in its class for the treatment of plaque psoriasis in adult patients. As a result of FDA approval, Dermavant achieved a regulatory milestone to GSK of £100.0 million (approximately $126 million on the date of achievement), which will be paid within 70 calendar days of FDA approval. Additionally, the first sale of VTAMA cream in May 2022 resulted in the achievement of a milestone to Welichem Biotech Inc. of CAD$25.0 million (approximately $20 million on the date of achievement), which will be paid within 60 calendar days of the invoice date. Dermavant intends to primarily use the RIPSA proceeds for the payment of these obligations.

Apart from the above mentioned regulatory milestones related to VTAMA (tapinarof) cream, the payment obligations under our asset acquisition and license agreements are contingent upon future events and the amount, timing, and likelihood of such payments are not know.

We enter into agreements in the normal course of business with CROs and other vendors for clinical trials and with vendors for preclinical studies and other services and products for operating purposes, which are generally cancelable upon written notice.

We expect our existing cash and cash equivalents will be sufficient to fund our committed operating expenses and capital expenditure requirements for at least the next twelve months based on current operating plans and financial forecasts. However, we have based this estimate on assumptions that may prove to be wrong, which may require us to use our capital resources sooner than expected. See “Forward-Looking Statements” and “Risk Factors” in this Annual Report on Form
10-K.

Our operations to date have been financed primarily through the sale of equity securities, sale of subsidiary interests, debt financings and revenue generated from licensing and collaboration arrangements.

RSL Equity Financing Transactions

Since inception, we have completed multiple equity financing transactions, including the following:

In December 2019, in connection with the Sumitomo Transaction, we raised net proceeds of approximately $999.2 million in connection with the sale of our common shares to Sumitomo.

In September 2021, we completed our Business Combination with MAAC, a special purpose acquisition company, as well as concurrent PIPE Financing. In connection with the Business Combination and PIPE Financing, we received approximately $213.4 million in cash at closing.

On February 14, 2022, we entered into a committed equity facility (the “Facility”) with an affiliate of Cantor Fitzgerald & Co. (“Cantor”). Under the terms of the Facility, Cantor has committed to purchase up to an aggregate of $250.0 million in our common shares from time to time at our request, subject to certain limitations and the satisfaction of certain conditions. Any sales of our common shares to Cantor under the Facility will be made at 99% of the volume-weighted average price of our common shares on Nasdaq on a given trading day. In

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consideration for entry into the Facility, we paid Cantor an upfront commitment fee in the form of 145,986 common shares. As of March 31, 2022, $250.0 million of our common shares remained available for sale under the Facility.

Sumitomo Transaction

In December 2019, we closed the Sumitomo Transaction, including the transfer of our ownership interest in five Vants—Myovant Sciences Ltd., Urovant Sciences Ltd., Enzyvant Therapeutics Ltd., Altavant Sciences Ltd., and Spirovant Sciences Ltd.—to Sumitovant Biopharma Ltd. (“Sumitovant”), a wholly-owned subsidiary of Sumitomo. In addition, in connection with the Sumitomo Transaction, we (i) granted Sumitomo options to purchase all, or in the case of Dermavant, 75%, of our ownership interests in six other subsidiaries and (ii) provided Sumitomo and Sumitovant with certain rights over and access to our proprietary technology platforms, DrugOme and Digital Innovation. In exchange for these components of the Sumitomo Transaction, we received approximately $1.9 billion in cash, which was in addition to the approximately $999.2 million from the sale of our common shares to Sumitomo as discussed above.

In June 2021, we completed a transaction with Sumitomo pursuant to which Sumitomo terminated its existing options to acquire our equity interests in certain of our subsidiaries. See “Components of Results of Operations—Gain on termination of Sumitomo Options” above for additional information.

Consolidated Vant Equity Financing Transactions

Since inception, we have completed multiple Vant equity financing transactions, including the following:

Immunovant

In December 2019, Immunovant raised $111.0 million (including $5.1 million related to common shares purchased by us) through a business combination with Health Sciences Acquisition Corporation, a special purpose acquisition company.

Additionally, during the years ended March 31, 2021 and 2020, Immunovant issued shares of common stock for an aggregate net proceeds of $384.9 million (including an aggregate of $27.5 million of shares of common stock purchased by us) in private financings, underwritten public offerings, and warrant exercises.

Proteovant

In December 2020, following Proteovant Sciences, Inc’s (“Proteovant”) acquisition of Oncopia in November 2020, SK, Inc. (formerly known as SK Holdings Co., Ltd.) (“SK”) entered into a subscription agreement (the “Subscription Agreement”) pursuant to which SK agreed to make a $200.0 million equity investment in Proteovant, representing an ownership interest of 40.0% on the closing date. In January 2021, in accordance with the terms of the Subscription Agreement, SK made the first payment of $100.0 million to Proteovant. In July 2021, Proteovant collected the subscription receivable relating to the second $100.0 million payment due under the SK Subscription Agreement.

Consolidated Vant Debt Financings

Since inception, we have completed multiple Vant debt financings, including the following:

Dermavant

In May 2019, Dermavant entered into a loan and security agreement (the “Hercules Loan Agreement”) with Hercules, pursuant to which Dermavant borrowed an aggregate of $20.0 million. In May 2021, all amounts outstanding under the Hercules Loan Agreement were repaid using the proceeds from the $40.0 million senior secured credit facility entered into by Dermavant in May 2021, and Dermavant terminated the Hercules Loan Agreement.

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Following the approval of VTAMA cream by the FDA in May 2022, Dermavant received $160.0 million in June 2022 pursuant to the terms of the revenue interest purchase and sale agreement entered with XYQ Luxco, NovaQuest
Co-Investment
Fund XVII, L.P., an affiliate of NovaQuest Capital Management, LLC, and MAM Tapir Lender, LLC, an affiliate of Marathon Asset Management, L.P., together with U.S. Bank National Association, as collateral agent. Under the terms of the RIPSA, the Purchasers procured a capped single-digit revenue interest in net sales of tapinarof for all dermatological indications in the United States, up to a cap of $344.0 million, in exchange for $160.0 million in committed funding to be paid to Dermavant, conditional based on the approval of tapinarof by the FDA. As described above, Dermavant intends to primarily use the RIPSA proceeds for the payment of certain
one-time
milestone obligations that became payable upon the approval and commercialization of VTAMA (tapinarof) cream for the treatment of plaque psoriasis in adult patients in the United States.

Other

Datavant

In July 2021, we received approximately $320 million in cash as a result of the Datavant Merger.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we advance the discovery efforts, preclinical activities, clinical trials and potential commercialization of our product candidates. Additionally, we expect to incur significant commercialization expenses with respect to VTAMA cream. Our operating results, including our net losses, may fluctuate significantly from

quarter-to-quarter

and

year-to-year,

depending on the timing of our planned clinical trials, our expenditures on other research and development activities and our commercialization efforts. We anticipate that our expenses will increase substantially as we:

[[GREPCENT_TABLE]]
[["","\u2022","","fund preclinical studies and clinical trials for our product candidates, which we are pursuing or may choose to pursue in the future;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","fund the manufacturing of drug substance and drug product of our product candidates in development;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","seek to identify, acquire, develop and commercialize additional product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","invest in activities related to the discovery of novel drugs and advancement of our internal programs;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","integrate acquired technologies into a comprehensive regulatory and product development strategy;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","maintain, expand and protect our intellectual property portfolio;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","hire scientific, clinical, quality control and administrative personnel;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","add operational, financial and management information systems and personnel, including personnel to support our drug development efforts;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","achieve milestones under our agreements with third parties that will require us to make substantial payments to those parties;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","seek regulatory approvals for any product candidates that successfully complete clinical trials;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","build out our sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize VTAMA and any drug candidates for which we may obtain regulatory approval; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","operate as a public company."]]
[[/GREPCENT_TABLE]]

We expect to continue to finance our cash needs through a combination of our cash on hand and future equity offerings, debt financings, sales of subsidiaries, and collaborations, strategic alliances or marketing, distribution, licensing or similar arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of

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these securities may include liquidation or other preferences that adversely affect your rights as a common shareholder. Any agreements for future debt or preferred equity financings, if available, may involve covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution, licensing or similar arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. Adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of our product candidates, grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves or potentially discontinue operations.

Cash Flows

The following table sets forth a summary of our cash flows for the years ended March 31, 2022 and 2021:

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2022","","","2021"],["","","(in thousands)"],["Net cash used in operating activities","","$","(677,729",")","","$","(552,138",")"],["Net cash provided by (used in) investing activities","","$","303,295","","","$","(31,702",")"],["Net cash provided by financing activities","","$","306,792","","","$","456,264"]]
[[/GREPCENT_TABLE]]

Operating Activities

Cash flow from operating activities represents the cash receipts and disbursements related to all of our activities other than investing and financing activities. Cash flow from operating activities is derived from adjusting our net loss for
non-cash
items and changes in working capital.

For the year ended March 31, 2022, cash used in operating activities increased by $125.6 million to $677.7 million compared to the year ended March 31, 2021. This increase was primarily driven by an increase in cash required to fund operations, particularly as a result of the progression of Vant programs and payments made for a
one-time
milestone expense and purchases of clinical product as we prepared for a commercial launch of VTAMA cream and incurred costs associated with our Phase 3 clinical program in atopic dermatitis at Dermavant. Additionally, in November 2021, we made a $50.0 million cash payment related to the previously-disclosed $100.0 million second tranche of consideration due in connection with the acquisition of Silicon Therapeutics, LLC. The remaining consideration was settled by the issuance of 6,348,057 of our common shares.

Investing Activities

Cash flow from investing activities includes cash used for acquisitions, net of cash acquired; proceeds from investments; dispositions, net of cash disposed; capital expenditures; and purchases of equity securities and other investments.

For the year ended March 31, 2022, cash flow from investing activities changed by $335.0 million to net cash provided by investing activities of $303.3 million from net cash used in investing activities of $31.7 million for the year ended March 31, 2021. This change in cash flow from investing activities is primarily due to approximately $320 million in cash we received as a result of the Datavant Merger.

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Financing Activities

For the year ended March 31, 2022, cash provided by financing activities decreased by $149.5 million to $306.8 million compared to the year ended March 31, 2021. During the year ended March 31, 2022, proceeds were generated by the completion of our Business Combination and PIPE financing in September 2021, payment of the subscription receivable due to Proteovant by SK in July 2021, and the senior secured credit facility entered into by Dermavant and certain of its subsidiaries with XYQ Luxco, as lender, and U.S. Bank National Association, as collateral agent, partially offset by cash used to repay all amounts outstanding under a previously existing loan and security agreement with Hercules Capital, Inc. During the year ended March 31, 2021, cash provided by financing activities was primarily driven by the issuance of equity by our majority-owned subsidiaries, Immunovant and Proteovant.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingencies as of the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. In accordance with U.S. GAAP, we evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, or experience. Changes in estimates and assumptions are reflected in reported results in the period in which they become known.

We define our critical accounting policies as those under U.S. GAAP that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles.

While our significant accounting policies are described in more detail in Note 2, “Summary of Significant Accounting Policies” in our consolidated financial statements included elsewhere in this Annual Report on Form
10-K,
we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred.

We accrue expense for preclinical studies and clinical trial activities performed by vendors based upon estimates of the proportion of work completed. We determine such estimates by reviewing contracts, vendor agreements and purchase orders, and through discussions with our internal personnel and external service providers as to the progress or stage of completion and the agreed-upon fee to be paid for such services. However, actual costs and timing of preclinical studies and clinical trials are highly uncertain, subject to risks, and may change depending upon a number of factors, including our clinical development plan.

We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, the accrual is adjusted accordingly. Nonrefundable advance payments for goods and services are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

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Share-Based Compensation

We recognize compensation costs related to share-based awards granted to employees, directors, and consultants based on the estimated fair value of the awards on the date of grant. The grant date fair value of the stock-based awards is recognized over the requisite service period, which is generally the vesting period of the respective awards. We may grant awards with graded-vesting features. When such awards have only service vesting requirements, we elected to record share-based compensation expense on a straight-line basis. If awards with graded-vesting features contain performance or market conditions, then we record share-based compensation expense using the accelerated attribution method.

We estimate the fair value of stock options using the Black-Scholes option-pricing model, which requires assumptions, including the fair value of our common shares prior to our initial public offering, volatility, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options, and our expected dividend yield. Certain assumptions used in our Black-Scholes option-pricing model represent management’s best estimates and involve a number of variables, uncertainties and assumptions and the application of management’s judgment, as they are inherently subjective. If any assumptions change, our stock-based compensation expense could be materially different in the future.

These subjective assumptions are estimated as follows:

Fair value of common share

—Prior to the closing of the Business Combination, as a privately held company, we estimated the fair value of the shares of common stock underlying our share-based awards on each grant date. To determine the fair value of our common shares underlying option grants, we considered, among other things, valuations of our common share prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The estimation of the fair value of the common shares considered factors including the following:

[[GREPCENT_TABLE]]
[["","\u2022","","the prices of our common shares sold to investors in arm\u2019s length transactions;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","the estimated present value of our future cash flows;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","our business, financial condition and results of operations;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","our forecasted operating performance;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","the illiquid nature of our common shares;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","industry information such as market size and growth;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","market capitalization of comparable companies and the estimated value of transactions such companies have engaged in; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","","macroeconomic conditions."]]
[[/GREPCENT_TABLE]]

We apply a similar methodology to estimate the fair value of the shares of common stock underlying share-based awards issued by our privately held Vants. Following the closing of the Company’s business combination with MAAC, our common shares became publicly traded and we began determining the fair value of each common share underlying share-based awards based on the closing price of our common shares as reported by Nasdaq on the date of grant. Therefore, it will not be necessary to determine the fair value of the new stock-based award pursuant to the methodology described above.

Expected term

—We have generally elected to use the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option (generally 10 years).

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Expected volatility

—Prior to the closing of the Business Combination, we were a privately held company and did not have any trading history for our common shares; accordingly, the expected volatility was estimated based on the average volatility for comparable publicly traded biotechnology companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle or area of specialty. We apply similar methodology to estimate the expected volatility at our privately held Vants. Because we do not have an extended trading history for our shares of common stock since the closing of the Business Combination, the method used to estimate the expected volatility remained unchanged.

Risk-free interest rate

—The risk-free rate assumption is based on the U.S. Treasury instruments with maturities similar to the expected term of our stock options at the time of the grant.

Expected dividend yield

—We have not issued any dividends in our history and do not expect to issue dividends over the life of the options; therefore, we have estimated the dividend yield to be zero.

Recently Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, “Summary of Significant Accounting Policies” in our consolidated financial statements included elsewhere in this Annual Report on Form
10-K.

Implications of Being an Emerging Growth Company and Smaller Reporting Company

We are an “emerging growth company” within the meaning of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may take advantage of certain exemptions from various public company reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, certain requirements related to the disclosure of executive compensation in this Annual Report on Form
10-K
and in our periodic reports and proxy statements, and the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments. We have also taken advantage of the ability to provide reduced disclosure of financial information in this Annual Report on Form
10-K,
such as being permitted to include only two years of audited financial information and two years of selected financial information in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure. We may take advantage of these exemptions until we are no longer an emerging growth company. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. However, because we have taken advantage of certain reduced reporting requirements, the information contained herein may be different from the information you receive from other public companies in which you hold shares.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the first sale of Roivant common shares pursuant to an effective registration statement or (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time), and (2) the date on which (x) we are deemed to be a large accelerated filer, which means the market value of Roivant common shares that are held by
non-affiliates
exceeds $700 million as of the prior September 30th, or (y) the date on which we have issued more than $1.0 billion in nonconvertible debt during the prior three-year period.

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Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation
S-K.
Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common shares held by
non-affiliates
exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common shares held by
non-affiliates
exceeds $700 million as of the end of that year’s second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies more difficult.