# Roivant Sciences Ltd. (ROIV) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Roivant Sciences Ltd.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1635088/000114036124028145/ef20026301_10k.htm
Accession: 0001140361-24-028145
Filing date: 2024-05-30
Report date: 2024-03-31
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/
Previous year: /company/ROIV/mda/fy2023/ (FY 2023)
Next year: /company/ROIV/mda/fy2025/ (FY 2025)

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

Roivant is a commercial-stage biopharmaceutical company that aims to improve the lives of patients by accelerating the development and commercialization of medicines that matter. Today, Roivant’s
pipeline is concentrated in inflammation and immunology and includes VTAMA, a novel topical approved for the treatment of psoriasis and in development for the treatment of atopic dermatitis; IMVT-1402 and batoclimab, fully human monoclonal
antibodies targeting the neonatal Fc receptor (“FcRn”) in development across several IgG-mediated autoimmune indications; and brepocitinib, a potent small molecule inhibitor of TYK2 and JAK1 for the treatment of dermatomyositis and non-infectious
uveitis, in addition to several other therapies in various stages of clinical development. We advance our pipeline by creating nimble subsidiaries or “Vants” to develop and commercialize our medicines and technologies. Beyond therapeutics,
Roivant also incubates discovery-stage companies and health technology startups complementary to its biopharmaceutical business.

Components of Results of Operations

Product revenue, net

With the FDA approval of VTAMA for the treatment of plaque psoriasis in adult patients and our initial product launch in May 2022, we began to recognize product revenues. We record product
revenue net of estimated chargebacks, discounts, rebates, returns, and other allowances associated with the respective sales.

License, milestone and other revenue

License, milestone and other revenue includes the recognition of payments received in connection with license agreements as well as revenue generated by subscription
and service-based fees.

Cost of revenues

We began to recognize cost of product revenues after the initial product launch of VTAMA in May 2022. Cost of product revenues includes the cost of producing and distributing inventories related
to product revenue during the respective period, including manufacturing, freight, and indirect overhead costs. Additionally, milestone payments made in connection with regulatory approvals and sales-based milestones are capitalized and amortized
to cost of revenue over the remaining useful life of the asset. Our cost of revenues also 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.

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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]]
[["","\u25e6","employee-related expenses, such as salaries, share-based compensation, and benefits, for research and development personnel; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25e6","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 and our recently in-licensed assets through preclinical studies and clinical trials, as well as acquire or discover new product candidates. We expect higher employee-related expenses, including 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]]

[[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 or other epidemics; 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.

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Acquired in-process research and development expenses

Acquired in-process research and development (“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.

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

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses consist primarily of employee-related expenses, such as salaries, share-based compensation, sales incentive compensation, and benefits,
for employees engaged in SG&A activities. SG&A employees include those responsible for the identification and acquisition or in-license of new drug candidates as well as for managing Vant operations and facilitating the use of our
platform and technologies at the Vants. SG&A expenses also consist of marketing programs, advertising, legal and accounting fees, consulting services, and other operating costs relating to corporate matters and daily operations.

We expect SG&A 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 in the U.S. 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 U.S. or another jurisdiction.

Gain on sale of Telavant net assets

Gain on sale of Telavant net assets represents the gain resulting from the sale of our entire equity interest in our majority-owned subsidiary, Telavant Holdings, Inc. (“Telavant”), to Roche
Holdings, Inc. (“Roche”) in December 2023 (the “Roche Transaction”). Prior to the Roche Transaction, we held 75% of the issued and outstanding shares of common stock and preferred stock of Telavant, and Pfizer Inc. owned the remaining 25%, in
each case on an as-converted basis. At closing, we received approximately $5.2 billion in cash. We are also eligible to receive an additional one-time milestone payment of approximately $110 million if the milestone payment condition is
satisfied. Refer to Note 6, “Recent Transactions” of our financial statements for further information regarding the Roche Transaction.

Change in fair value of investments

Change in fair value of investments primarily includes the unrealized loss on equity investments in publicly-traded companies, including Arbutus Biopharma Corporation (“Arbutus”), as well as our
equity investment in Heracles Parent, L.L.C. (“Datavant”). We have elected the fair value option to account for these investments.

Change in fair value of debt and liability instruments

Change in fair value of debt and liability instruments primarily includes the 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. (“Dermavant”) to NovaQuest Co-Investment Fund VIII, L.P. (the “NovaQuest Facility”), and other liability instruments, including warrant liabilities, prior to their redemption,
and earn-out share liabilities issued in connection with our business combination (the “Business Combination”) with Montes Archimedes Acquisition Corp. (“MAAC”), a special purpose acquisition company. Refer to Note 15, “Earn-Out Shares, Public
Warrants and Private Placement Warrants” of our financial statements for further information regarding the redemption of our warrants.

Gain on deconsolidation of subsidiaries

Gain on deconsolidation of subsidiaries resulted from the determination that we no longer had a controlling financial interest in certain subsidiaries.

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Interest income

Interest income consists of interest earned on our cash equivalents.

Interest expense

Interest expense results from interest accrued on long-term debt and the amortization of debt discount and issuance costs.

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.

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Results of Operations

Comparison of the years ended March 31, 2024 and 2023

The following table sets forth our results of operations for the years ended March 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Revenues:"],["Product revenue, net","","$","75,057","","","$","28,011","","","$","47,046"],["License, milestone and other revenue","","","49,738","","","","33,269","","","","16,469"],["Revenue, net","","","124,795","","","","61,280","","","$","63,515"],["Operating expenses:"],["Cost of revenues","","","15,560","","","","13,128","","","","2,432"],["Research and development","","","501,736","","","","525,215","","","","(23,479",")"],["Acquired in-process research and development","","","26,450","","","","97,749","","","","(71,299",")"],["Selling, general and administrative","","","687,443","","","","600,506","","","","86,937"],["Total operating expenses","","","1,231,189","","","","1,236,598","","","","(5,409",")"],["Gain on sale of Telavant net assets","","","5,348,410","","","","\u2014","","","","5,348,410"],["Income (loss) from operations","","","4,242,016","","","","(1,175,318",")","","","5,417,334"],["Change in fair value of investments","","","47,973","","","","20,815","","","","27,158"],["Change in fair value of debt and liability instruments","","","78,943","","","","78,001","","","","942"],["Gain on deconsolidation of subsidiaries","","","(32,772",")","","","(29,276",")","","","(3,496",")"],["Interest income","","","(146,425",")","","","(32,184",")","","","(114,241",")"],["Interest expense","","","34,778","","","","27,968","","","","6,810"],["Other expense (income), net","","","6,089","","","","(15,808",")","","","21,897"],["Income (loss) from continuing operations before income taxes","","","4,253,430","","","","(1,224,834",")","","","5,478,264"],["Income tax expense","","","22,224","","","","5,190","","","","17,034"],["Income (loss) from continuing operations, net of tax","","","4,231,206","","","","(1,230,024",")","","","5,461,230"],["Income from discontinued operations, net of tax","","","\u2014","","","","114,561","","","","(114,561",")"],["Net income (loss)","","","4,231,206","","","","(1,115,463",")","","","5,346,669"],["Net loss attributable to noncontrolling interests","","","(117,720",")","","","(106,433",")","","","(11,287",")"],["Net income (loss) attributable to Roivant Sciences Ltd.","","$","4,348,926","","","$","(1,009,030",")","","$","5,357,956"]]
[[/GREPCENT_TABLE]]

Variance analysis for years ended March 31, 2024 and 2023

Product revenue, net

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Product revenue, net","","$","75,057","","","$","28,011","","","$","47,046"]]
[[/GREPCENT_TABLE]]

Product revenue, net increased by $47.0 million to $75.1 million for the year ended March 31, 2024, compared to $28.0 million for the year ended March 31, 2023, primarily due to
higher units sold. Product revenue, net consists of net product revenues from VTAMA sales, following the approval of VTAMA for the treatment of plaque psoriasis in adult patients by the FDA in May 2022.

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License, milestone and other revenue

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["License, milestone and other revenue","","$","49,738","","","$","33,269","","","$","16,469"]]
[[/GREPCENT_TABLE]]

License, milestone and other revenue increased by $16.5 million to $49.7 million for the year ended March 31, 2024, compared to $33.3 million for the year ended March 31, 2023.
The increase was primarily driven by $15.0 million of revenue relating to milestone income at Dermavant pursuant to a collaboration and license agreement with Japan Tobacco Inc. during the year ended March 31,
2024.

Cost of revenues

For the years ended March 31, 2024 and 2023, our cost of revenues consisted of the following:

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Cost of product and other revenues","","$","5,928","","","$","5,660","","","$","268"],["Amortization of intangible assets","","","9,632","","","","7,468","","","","2,164"],["Cost of revenues","","$","15,560","","","$","13,128","","","$","2,432"]]
[[/GREPCENT_TABLE]]

Cost of revenues increased by $2.4 million to $15.6 million for the year ended March 31, 2024, compared to $13.1 million for the year ended March 31, 2023. During the year ended March 31,
2024 and 2023, cost of revenues included $3.4 million and $1.8 million, respectively, of costs relating to VTAMA sales. Cost of revenues additionally included amortization expense recognized in
connection with milestones capitalized following the FDA approval of VTAMA in May 2022.

Research and development expenses

For the years ended March 31, 2024 and 2023, our research and development expenses consisted of the
following:

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023(1)","","","Change"],["","","(in thousands)"],["Program-specific costs:"],["Batoclimab(1)","","$","74,265","","","$","78,477","","","$","(4,212",")"],["IMVT-1402(1)","","","43,102","","","","10,270","","","","32,832"],["Brepocitinib","","","38,563","","","","38,627","","","","(64",")"],["RVT-3101","","","35,129","","","","7,559","","","","27,570"],["Tapinarof","","","34,256","","","","45,201","","","","(10,945",")"],["Namilumab","","","13,236","","","","11,757","","","","1,479"],["RVT-2001","","","10,132","","","","16,075","","","","(5,943",")"],["Other development and discovery programs","","","39,767","","","","122,877","","","","(83,110",")"],["Total program-specific costs","","","288,450","","","","330,843","","","","(42,393",")"],["Unallocated internal costs:"],["Share-based compensation","","","34,595","","","","30,914","","","","3,681"],["Personnel-related expenses","","","136,425","","","","131,908","","","","4,517"],["Other expenses","","","42,266","","","","31,550","","","","10,716"],["Total research and development expenses","","$","501,736","","","$","525,215","","","$","(23,479",")"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Certain prior period amounts have been reclassified to conform to current period presentation."]]
[[/GREPCENT_TABLE]]

Research and development expenses decreased by $23.5 million to $501.7 million for the year ended March 31, 2024, compared to $525.2 million for the year ended March 31, 2023, primarily due to a decrease in
program-specific costs of $42.4 million, partially offset by increases in other expenses of $10.7 million, personnel-related expenses of $4.5 million, and share-based compensation of $3.7 million.

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The decrease of $42.4 million in program-specific costs was primarily driven by a decrease of $83.1 million
in other development and discovery program expense, which in part resulted from the deconsolidation of Proteovant Sciences, Inc. (“Proteovant”) in August 2023 along with the reprioritization of certain programs and drug discovery efforts. This
decrease was partially offset by increases of $32.8 million relating to IMVT-1402 and $27.6 million relating to RVT-3101, which was acquired in November 2022.
The rights to further develop and manufacture RVT-3101 were sold to Roche in December 2023.

Acquired in-process research and development expenses

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Consideration for the purchase of IPR&D","","$","13,950","","","$","87,749","","","$","(73,799",")"],["Development milestone payments","","","12,500","","","","10,000","","","","2,500"],["Total acquired in-process research and development expenses","","$","26,450","","","$","97,749","","","$","(71,299",")"]]
[[/GREPCENT_TABLE]]

Acquired in-process research and development expenses decreased by $71.3 million to $26.5 million for the
year ended March 31, 2024, compared to $97.7 million for the year ended March 31, 2023. The decrease was primarily
due to higher consideration for the purchase of IPR&D during the year ended March 31, 2023 as a result of consideration for the purchase of IPR&D of $87.7 million relating to the acquisition of
RVT-3101 in November 2022 and the achievement of a development milestone relating to batoclimab, which resulted in a one-time milestone expense of $10.0 million. Acquired in-process research and development expenses for the year ended March 31, 2024 was driven by $14.0 million of consideration for the purchase of IPR&D relating to an asset acquisition completed by a newly-formed subsidiary and $12.5 million relating to the achievement
of development and regulatory milestones for batoclimab.

Selling, general and administrative expenses

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Selling, general and administrative","","$","687,443","","","$","600,506","","","$","86,937"]]
[[/GREPCENT_TABLE]]

Selling, general and administrative expenses increased by $86.9 million to $687.4 million for the year ended
March 31, 2024, compared to $600.5 million for the year ended March 31, 2023. The increase was primarily due to an
increase in selling, general and administrative expenses of $55.7 million at Dermavant as a result of the progression of the commercial launch of VTAMA and an increase in personnel-related expenses of $25.1 million, primarily as a result of a
special one-time cash retention bonus award granted to employees.

Gain on sale of Telavant net assets

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Gain on sale of Telavant net assets","","$","5,348,410","","","$","\u2014","","","$","5,348,410"]]
[[/GREPCENT_TABLE]]

Gain on sale of Telavant net assets was approximately $5.3 billion for the year ended March 31, 2024 and
resulted from the sale of our entire equity interest in Telavant to Roche in December 2023. At closing, we received approximately $5.2 billion in cash for our pro rata portion of the consideration. Additionally, we derecognized the carrying
amount of noncontrolling interest in Telavant of $87.5 million and transferred net liabilities of $26.5 million. This resulted in a gain of approximately $5.3 billion. Refer to Note 6, “Recent
Transactions” of our audited financial statements for further information regarding the Roche Transaction.

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Change in fair value of investments

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Change in fair value of investments","","$","47,973","","","$","20,815","","","$","27,158"]]
[[/GREPCENT_TABLE]]

Change in fair value of investments were unrealized losses of $48.0 million and $20.8 million for the years
ended March 31, 2024 and 2023, respectively. The change of $27.2 million was primarily driven by changes in the public share prices of our equity investments,
including Arbutus, as well as the change in fair value of our investment in Datavant.

Change in fair value of debt and liability instruments

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Change in fair value of debt and liability instruments","","$","78,943","","","$","78,001","","","$","942"]]
[[/GREPCENT_TABLE]]

Change in fair value of debt and liability instruments were losses of $78.9 million and $78.0 million for the
years ended March 31, 2024 and 2023, respectively. Change in fair value of debt and liability instruments for the year ended March

31, 2024 primarily consisted of a loss of $46.1 million relating to the warrant and earn-out share liabilities issued as part of the Business Combination and a loss of $32.1 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, 2023 primarily consisted of a loss of $59.6 million relating to the NovaQuest facility, which was primarily due to the impact of VTAMA approval in psoriasis, and a loss of $24.1 million relating to the warrant
and earn-out share liabilities issued as part of the Business Combination.

Gain on deconsolidation of subsidiaries

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Gain on deconsolidation of subsidiaries","","$","(32,772",")","","$","(29,276",")","","$","(3,496",")"]]
[[/GREPCENT_TABLE]]

Gain on deconsolidation of subsidiaries was $32.8 million for the year ended March 31, 2024 and resulted from
the deconsolidation of certain subsidiaries, including VantAI Holdings, Inc. (“VantAI”) in July 2023 and Proteovant in August 2023.

Gain on deconsolidation of subsidiaries was $29.3 million for the year ended March 31, 2023 and resulted from
the deconsolidation of certain subsidiaries in November 2022 and July 2022.

Interest income

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Interest income","","$","(146,425",")","","$","(32,184",")","","$","(114,241",")"]]
[[/GREPCENT_TABLE]]

Interest income increased by $114.2 million to $146.4 million for the year ended March 31, 2024, compared to $32.2 million for the year ended March 31, 2023. This increase is primarily due to higher cash balances in our
interest-bearing cash accounts as well as higher interest rates.

Interest expense

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Interest expense","","$","34,778","","","$","27,968","","","$","6,810"]]
[[/GREPCENT_TABLE]]

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Interest expense increased by $6.8 million to $34.8 million for the year ended March 31, 2024, compared to $28.0 million for the year ended March 31, 2023. The increase primarily resulted from Dermavant’s revenue interest
purchase and sale agreement (the “RIPSA”), pursuant to which funding of $160.0 million was received in June 2022 following the approval of VTAMA by the FDA in May 2022.

Income from discontinued operations, net of tax

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023","","","Change"],["","","(in thousands)"],["Income from discontinued operations, net of tax","","$","\u2014","","","$","114,561","","","$","(114,561",")"]]
[[/GREPCENT_TABLE]]

Income from discontinued operations, net of tax was $114.6 million for the year ended March 31, 2023 and
resulted from the gain on sale of common shares of Myovant Sciences Ltd. (the “Myovant Top-Up Shares”) after Sumitovant Biopharma Ltd.’s (“Sumitovant”) acquisition of Myovant Sciences Ltd. (“Myovant”) in March 2023. We were entitled to the
Myovant Top-Up Shares pursuant to the December 2019 transaction with Sumitomo Pharma Co., Ltd. (the “Sumitomo Transaction”) that included, among other things, the transfer of our ownership interest in five Vants to Sumitovant. The Sumitomo
Transaction was presented as discontinued operations during the year ending March 31, 2020, and the right to receive the Myovant Top-Up Shares was treated as a contingent consideration upon a sale of the business and accounted for as a gain
contingency. Refer to Note 9, “Discontinued Operations” of our audited financial statements for additional information.

Liquidity and Capital Resources

For the years ended March 31, 2024 and 2023, we had income from continuing operations of approximately $4.2 billion and incurred a loss from continuing operations of approximately $1.2 billion, respectively. As of March 31, 2024,
we had cash and cash equivalents of approximately $6.5 billion and our retained earnings was approximately $576.2 million. Through our subsidiary Dermavant, we launched our first commercial product, VTAMA, following approval by the FDA in May
2022. We began generating product revenue, net from sales of VTAMA in the U.S. in May 2022. We also have generated revenue through license agreements as well as from subscription and service-based fees.

Our short-term and long-term liquidity requirements as of March 31, 2024 included:

[[GREPCENT_TABLE]]
[["","\u2022","contractual payments related to our long-term debt (see Note 8, \u201cLong-Term Debt\u201d and Note 18, \u201cSubsequent Events\u201d of our audited financial statements);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","obligations under our leases (see Note 13, \u201cLeases\u201d of our audited financial statements);"]]
[[/GREPCENT_TABLE]]

[[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. Immunovant had the right to terminate the PSA with 30 days\u2019 written notice to Samsung, exercisable no later than January 2024, in the event Immunovant decided to stop all development of, and all attempts to obtain regulatory approval for, batoclimab; subject to payment to Samsung of non-cancelable service fees and costs incurred by Samsung for all batches of batoclimab scheduled to be manufactured during the two-year period following such termination. Because efforts to develop and obtain regulatory approval for batoclimab remain ongoing, Immunovant did not exercise that early termination right and it has lapsed. As a result, Immunovant has an additional minimum obligation to purchase additional batches of batoclimab in the four-year period of 2026 through 2029. As of March 31, 2024, the remaining minimum purchase commitment related to this agreement was estimated to be approximately $46.2 million; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","certain commitments to GSK pursuant to a commercial supply agreement entered between Dermavant and GSK. In conjunction with Dermavant\u2019s entry into the GSK Agreement in 2018, Dermavant entered into a clinical supply agreement pursuant to which GSK would provide a supply of tapinarof and clinical product at an agreed upon price during our clinical trials. In April 2019, Dermavant entered into a commercial supply agreement with GSK to continue to provide certain quantities of tapinarof and commercial product at agreed upon minimum quantities and prices. The commercial supply agreement commenced in April 2022 upon completion of certain quality and regulatory conditions. In July 2022, Dermavant and GSK amended the terms of the clinical supply and commercial supply agreements which released GSK of certain commitments to supply tapinarof and released Dermavant of certain commitments to purchase tapinarof in exchange for a supplementary fee. Other supply and purchase commitments under the agreements remain in effect. In addition, Dermavant and Thermo Fisher Scientific (\u201cTFS\u201d) entered into a Commercial Manufacturing and Supply Agreement for which TFS agreed to provide a supply of tapinarof to Dermavant at an agreed upon price. The agreements discussed above require Dermavant to purchase certain quantities of inventory over a period of five years. The minimum purchase commitment related to these agreements was estimated to be approximately $33.3 million."]]
[[/GREPCENT_TABLE]]

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The above purchase commitments do not represent all of our anticipated purchases, but instead represent only the contractually obligated minimum purchases or firm commitments of non-cancelable
minimum amounts.

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 the amount, timing, and likelihood of such payments are not known. We will also be required to make milestone payments and royalty payments in connection with the sale of products developed
under these agreements.

Potential material future milestone payments as of March 31, 2024 pursuant to certain key asset acquisition and license
agreements are as follows:

[[GREPCENT_TABLE]]
[["","\u2022","VTAMA/tapinarof (Dermavant): up to CAD$75.0 million in remaining commercial milestones to Welichem Biotech Inc., with CAD$35.0 million payable upon VTAMA first U.S. commercial sale for atopic dermatitis and the remainder payable as first commercial sales are achieved in various countries outside of the U.S. Additional milestones are owed to NovaQuest pursuant to the NovaQuest Agreement. Refer to Note 8, \u201cLong-Term Debt\u201d and Note 18, \"Subsequent Events\" of our audited financials for further information."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Anti-FcRn franchise (Immunovant): up to a maximum of $420.0 million to HanAll Biopharma Co., Ltd. upon the achievement of certain development, regulatory and sales milestone events."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Brepocitinib (Priovant Therapeutics, Inc.): mid tens-of-millions sales milestone payment to Pfizer if aggregate net sales in a given year exceed a mid-hundred-of-millions amount."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Namilumab (Kinevant Ltd.): up to approximately $40 million to the prior shareholders of Izana Biosciences Limited upon the achievement of certain milestones."]]
[[/GREPCENT_TABLE]]

Royalties are also due on net sales pursuant to these agreements. The Company has further commitments not reflected above
relating to other asset acquisition and license agreements entered and expects to enter into additional asset acquisition and license agreements in the future, which may require upfront payments and long-term commitments of capital resources.

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.

Our board of directors has authorized a common share repurchase program, allowing for repurchases of common shares in an aggregate amount of up to $1.5 billion (excluding fees and expenses). The
repurchase program is funded by available cash and cash equivalents on hand and does not have an expiration date. Pursuant to the share repurchase program, on April 2, 2024, we entered into a share repurchase agreement with Sumitomo to repurchase
all 71,251,083 common shares held by Sumitomo at a purchase price per share of $9.10, for an aggregate purchase price of approximately $648.4 million. The repurchase transaction with Sumitomo was completed on April 2, 2024.

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, together with Sumitomo Pharma Co., Ltd. (“Sumitomo”), we completed the transactions contemplated by the transaction agreement by and between us and Sumitomo, dated as of October
31, 2019. In connection with the Sumitomo Transaction, we raised net proceeds of approximately $999.2 million due to 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 entered into subscription agreements with certain investors, whereby we
issued 22,000,000 of our common shares at $10.00 per share for an aggregate purchase price of $220.0 million (the “PIPE Financing”). In connection with the Business Combination and PIPE Financing, we received approximately $213.4 million in cash
at closing.

In September 2022, we entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) to sell our common shares having an aggregate offering price of up to $400.0
million from time to time through an “at-the-market” equity offering program under which Cowen acts as our agent (the “ATM Facility”). As of March 31, 2024, we had $400.0 million of remaining capacity available under the ATM Facility.

In November 2022, we completed an underwritten primary and secondary public offering of 30,000,000 of our common shares at a price to the public of $5.00 per share. Of these common shares,
20,000,000 were sold by us and 10,000,000 were sold by certain selling shareholders. Net proceeds to us were approximately $94.7 million after deducting underwriting discounts and commissions and offering expenses. We did not receive any proceeds
from the sale of common shares by the selling shareholders in the offering.

In February 2023, we completed an underwritten public offering of 30,666,665 of our common shares (including 3,999,999 common shares issued and sold upon the full exercise of the underwriters’
option to purchase additional shares) at a price to the public of $7.50 per share. Net proceeds to us were approximately $216.9 million after deducting underwriting discounts and commissions and offering expenses.

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In September 2023, we entered into common share purchase and sale agreements with certain institutional investors, pursuant to which we sold an aggregate
of 19,600,685 of our common shares at a purchase price of $10.21 per share. Net proceeds to us were approximately $199.8 million after deducting offering expenses.

Sumitomo Transaction

In December 2019, we closed the Sumitomo Transaction, including the transfer of our ownership interest in five Vants – Myovant, Urovant Sciences Ltd., Enzyvant Therapeutics Ltd., Altavant
Sciences Ltd., and Spirovant Sciences Ltd. – to 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.

In October 2022, Myovant entered into an agreement with Sumitovant, its majority shareholder, under which Sumitovant would acquire the remaining shares of Myovant not already owned by Sumitovant
at a price of $27.00 per share in a cash transaction (the “Myovant Transaction”). The acquisition of Myovant by Sumitovant was completed in March 2023. In connection with the closing of the Myovant Transaction, we received approximately $114.6
million in March 2023 for the sale of the Myovant Top-Up Shares. Refer to Note 9, “Discontinued Operations” of our audited financial statements 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.

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.

In October 2022, Immunovant completed an underwritten public offering of 12,500,000 shares of its common stock (including 416,667 shares of common stock purchased by us) at a price to the public
of $6.00 per share, for net proceeds to Immunovant of approximately $70.2 million after deducting underwriting discounts and commissions and offering expenses.

In October 2023, Immunovant completed an underwritten public offering of 8,475,500 shares of its common stock (including 1,526,316 shares of common stock purchased by us on the same terms as
other investors in the offering and the full exercise of the underwriters’ option to purchase 1,105,500 additional shares of common stock) at a price to the public of $38.00 per share. Concurrent with the public offering, we purchased 4,473,684
shares of Immunovant’s common stock in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended, at the same price per share as investors in the public offering of $38.00 per share. The net proceeds
to Immunovant were approximately $466.7 million after deducting underwriting discounts and commissions, placement agent fees and offering expenses.

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 (the "Credit Facility") entered into by Dermavant with XYQ Luxco S.A.R.L (“XYQ Luxco”), as lender, and
U.S. Bank National Association, as collateral agent, in May 2021, and Dermavant terminated the Hercules Loan Agreement.

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Following the approval of VTAMA by the FDA in May 2022, Dermavant received $160.0 million in June 2022 pursuant to the terms of the RIPSA 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, Dermavant
is obligated to pay royalties based on a capped single-digit revenue interest in net sales of tapinarof for all dermatological indications in the U.S., up to a cap of $344.0 million, in exchange for the $160.0 million in committed funding to be
paid to Dermavant, conditioned on the approval of tapinarof by the FDA, which was achieved in May 2022. Dermavant used the RIPSA proceeds primarily for the milestone obligations to GSK, which was achieved upon FDA approval, and Welichem Biotech
Inc., which was achieved upon the first sale of VTAMA.

On May 24, 2024, Dermavant entered into amendments to (i) the NovaQuest Agreement, (ii) the Credit Facility, and (iii)
the RIPSA. Refer to Note 18, “Subsequent Events” of our audited consolidated financial statements for details regarding the amendments.

Other

Datavant

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

Proteovant

In August 2023, we completed a transaction with SK Biopharmaceuticals Co., Ltd. (“SK Bio”), a subsidiary of SK, Inc., pursuant to which SK Bio purchased all of our shares in Proteovant in
exchange for $47.5 million.

Telavant

In December 2023, we completed the sale of our entire equity interest in our majority-owned subsidiary, Telavant, to Roche. The Roche Transaction was made pursuant to a Stock Purchase Agreement
dated October 22, 2023 among us, Telavant, Pfizer Inc. (“Pfizer”), and Roche. Telavant was jointly formed by us and Pfizer in November 2022 to develop and commercialize RVT-3101, an anti-TL1A antibody in development for ulcerative colitis (“UC”)
and Crohn’s disease, in the U.S. and Japan. Prior to the Roche Transaction, we held 75% of the issued and outstanding shares of common stock and preferred stock of Telavant, and Pfizer owned the remaining 25%, in each case on an as-converted
basis.

Pursuant to the Stock Purchase Agreement, Roche acquired all of the issued and outstanding shares of capital stock of Telavant in exchange for approximately $7.1 billion in cash at the closing of
the Roche Transaction and a one-time milestone payment of $150 million in cash payable upon the initiation of a Phase 3 trial in UC. The $7.1 billion in closing consideration was paid to all of Telavant’s equity holders, including holders of
restricted stock units, on a pro rata basis relative to their ownership of Telavant prior to the closing of the Roche Transaction, and this same treatment will be applied to the one-time milestone payment. We received an upfront payment of
approximately $5.2 billion in cash as our pro rata portion of the consideration upon closing of the Roche Transaction. Additionally, we are eligible to receive approximately $110 million for our pro rata portion of the one-time milestone payment
if the milestone payment condition is satisfied.

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. 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]]

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[[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]]

In the future, we may require significant additional capital to continue our operations, pursue business opportunities or strategic transactions, or respond to challenges, competition or
unforeseen circumstances. Until such time, if ever, that we can generate substantial revenues, we may finance future cash needs through a combination of equity offerings, debt financings, strategic alliances and license and development agreements
or other collaborations at Roivant and the Vants. To the extent that we raise additional capital by issuing equity securities at Roivant or the Vants, our existing shareholders’ ownership, or our ownership in the Vants, may experience substantial
dilution, and the terms of these securities may include liquidation or other preferences that could harm the rights of our shareholders. Additionally, 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. If we raise additional funds through collaborations, strategic alliances or marketing,
distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our products and product candidates, future revenue streams, research programs or technologies or grant licenses on terms that may not be
favorable to us. The foregoing restrictions associated with potential sources of additional capital may make it more difficult for us to raise additional capital or to pursue business opportunities, including potential acquisitions.

If adequate funds are not available to us, we may be required to forego potential in-licensing or acquisition opportunities, delay, limit or terminate one or more development or discovery
programs, scale back marketing efforts for our current and future products or be unable to expand operations or otherwise capitalize on business opportunities, which could materially affect our business, prospects, financial condition and results
of operations.

Finally, as part of our ongoing business strategy we regularly evaluate new acquisition and in-licensing opportunities as well as our capital structure. We may from time to time use our existing
cash to fund such opportunities or to retire outstanding debt obligations or to return capital to shareholders though share repurchases or the issuance of cash dividends on our common shares to optimize our capital structure. See “Risk Factors—Risks Related to Our Business and Industry—We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management” for more
information.

Cash Flows

The following table sets forth a summary of our cash flows for the years ended March 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","","Years Ended March 31,"],["","","2024","","","2023"],["","","(in thousands)"],["Net cash used in operating activities","","$","(765,268",")","","$","(843,393",")"],["Net cash provided by (used in) investing activities","","$","5,203,623","","","$","(44,269",")"],["Net cash provided by financing activities","","$","419,364","","","$","499,462"]]
[[/GREPCENT_TABLE]]

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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, 2024, cash used in operating activities decreased by $78.1 million to $765.3 million compared to the year ended March 31, 2023 due
to greater cash requirements to fund operations during the year ended March 31, 2023.

Investing Activities

Cash flow from investing activities includes proceeds from sale of Telavant net assets, milestone payments, cash decreases upon deconsolidation of subsidiaries, proceeds from sale of subsidiary
interests and other equity interests, and purchase of property and equipment.

For the year ended March 31, 2024, cash flow from investing activities changed by $5.2 billion to net cash
provided by investing activities of $5.2 billion from net cash used in investing activities of $44.3 million for the year ended March 31, 2023. This change in cash flow from investing activities is primarily due to proceeds received upon closing of the Roche Transaction during the year ended March 31, 2024.

Financing Activities

For the year ended March 31, 2024, cash provided by financing activities decreased by $80.1 million to $419.4 million compared to the year ended March 31, 2023. During the year ended March 31, 2024, net proceeds were
primarily generated by the issuance of common shares of our majority-owned subsidiary Immunovant as well as the issuance of our common shares pursuant to purchase and sale agreements entered with certain institutional investors. During the year
ended March 31, 2023, proceeds were generated by funding pursuant to the terms of the RIPSA following the approval of VTAMA by the FDA in May 2022 as well as net proceeds from the issuance of our common
shares and the common shares of our majority-owned subsidiary Immunovant.

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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.

Product Revenue Reserves

We recognize revenue when the customer obtains control of the product, which occurs at a point in time, either upon shipment or delivery to the customer. Revenues from product sales are recorded
at the net sales price, which includes estimates of variable consideration for which reserves are established that result from (a) invoice discounts for prompt payment and specialty distributor and specialty pharmacy service fees, (b) government
and private payer rebates, chargebacks, discounts and fees, (c) performance rebates and administrative fees, (d) product returns and (e) costs of co-pay assistance programs for patients. We establish reserves based on these gross-to-net
adjustments, which are based on amounts earned or to be claimed on the related sale and are classified as reductions of accounts receivable (if the amount is payable to the customer) or accrued expenses and other current liabilities (if the
amount is payable to a party other than a customer). Where appropriate, we utilize the expected value method to determine the appropriate amount for estimates of variable consideration. The estimates of reserves established for variable
consideration reflect current contractual and statutory requirements, our historical experience, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The amount of variable consideration that
is included in the transaction price may be constrained and is included in net product revenues only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future
period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results vary from our estimates, we adjust these estimates in the period such change in estimate becomes known, which could affect net product
revenue and earnings in the period of the adjustment.

We make significant estimates and judgments that materially affect our recognition of net product revenue. Claims by third-party payors for rebates, chargebacks and discounts may be submitted to
us significantly after the related sales, potentially resulting in adjustments in the period in which the new information becomes known. We will adjust our estimates based on new information, including information regarding actual rebates,
chargebacks and discounts for our products, as it becomes available.

The following table provides a summary of activity with respect to our sales allowances and accruals (in thousands):

[[GREPCENT_TABLE]]
[["","","March 31, 2024","","","March 31, 2023"],["Sales return, rebate, and discounts balances, beginning of year","","$","(20,794",")","","$","\u2014"],["Reduction of gross sales","","","(207,372",")","","","(129,717",")"],["Cash payments","","","199,151","","","","108,923"],["Sales return, rebate and discounts balances, end of year","","$","(29,015",")","","$","(20,794",")"]]
[[/GREPCENT_TABLE]]

Accrued Research and Development Expenses, Including Clinical Trial Accruals

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. We record accruals for estimated costs of
research and development activities, including preclinical studies, clinical trials, and contract manufacturing, conducted by third-party service providers. Our process for determining such estimates includes reviewing open contracts, vendor
agreements, and purchase orders; communicating with our internal personnel and external service providers to understand the progress or stage of completion of services performed on our behalf; and estimating the associated costs for these
services when we have not yet been invoiced. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time.

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We recognize expenses related to clinical trials based on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage clinical
trials on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract. This may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the
level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on various factors, including the successful enrollment of patients and the completion of clinical trial milestones. The
majority of our service providers invoice us in arrears based on a pre-determined schedule or when contractual milestones are met. In making these estimates, we consider various factors, including status and timing of services performed, the
number of patients enrolled, and the rate of patient enrollment. If the actual timing of the performance of services or the level of effort varies from our estimate, the accrual or prepaid expense is adjusted accordingly.

Other examples of estimated accrued research and development expenses include fees paid to:

[[GREPCENT_TABLE]]
[["","a.","investigative sites in connection with clinical trials\u037e"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","b.","vendors in connection with preclinical and clinical development activities\u037e and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","c.","CMOs in connection with the production of product and clinical trial materials."]]
[[/GREPCENT_TABLE]]

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status
and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, we have not experienced significant changes in our estimates of accrued research and development
expenses after a reporting period.

Valuation of Investment in Datavant

We hold an equity method investment in Datavant, which is a privately-held company. We do not consolidate Datavant as we do not have a controlling financial interest. Our investment in Datavant
is subject to the equity method of accounting, and we have elected the fair value option to continuously remeasure the investment to fair value each reporting period with changes in fair value reflected
in earnings. We have engaged an independent valuation specialist to determine the fair value as of each reporting date.

The fair value of our investment in Datavant uses significant unobservable inputs and is therefore classified as a Level 3 financial instrument. The estimate of fair value for this investment was
determined using the income approach and implementation of the option pricing method (“OPM”). The OPM allows for the allocation of a company’s equity value among the various equity capital owners (preferred and common
shareholders). The OPM uses the preferred shareholders’ liquidation preferences, participation rights, dividend policy, and conversion rights to determine how proceeds from a liquidity event shall be distributed among the various ownership
classes at a future date.

Recently Adopted Accounting Pronouncements

We did not adopt any material accounting pronouncements during the year ended March 31, 2024.